Australia hospitality sector faces high business closure rates

Australia’s hospitality sector is experiencing a high rate of business closures, with 12.03 per cent of cafes, restaurants, and takeaway businesses closing in the past year. This rate is nearly double the national average for all business sectors, according to the July Business Risk Index from CreditorWatch.

Financial indicators suggest further instability may lie ahead. Hospitality businesses are reporting trade payment defaults at a rate of 1.15 per cent, which is nearly four times the national average of 0.31 per cent. Additionally, 10.21 per cent of businesses in the sector have payments overdue by 60 days or more, compared to a national average of 5.36 per cent.

CreditorWatch CEO Patrick Coghlan noted that these defaults and arrears serve as early warning signs of financial stress. The sector is currently facing significant pressure from rising costs related to energy, rent, food, beverages, and labor, compounded by reduced consumer discretionary spending due to cost-of-living pressures.