The economic outlook is improving but remains a challenge
Annual CPI inflation was 3.6% in the March 2024 quarter, lower than the 4.1% annual rise in the previous quarter. This marks the fifth consecutive quarter of lower annual inflation since the peak of 7.8% in the December 2022 quarter. Despite this hopeful outlook, the lingering inflation has imposed significant costs on the economy, particularly straining business budgets across various sectors, including the hospitality industry.
Recruitment and Retention continues to cause pain in Hospitality
Recruitment, retention, and staff turnover have always been critical issues in the hospitality industry, but they have become even more pressing. High turnover rates are costly, encompassing not just the expenses of hiring, onboarding, and training new employees but also the impact on customer service and the additional pressure on existing staff during transitions.
Energy Costs and Efficiency also hurting businesses
With global energy prices surging, reducing energy usage has become a crucial priority for pub and bar operators aiming to control costs. Significant increases in electricity, gas, and oil prices are squeezing margins for businesses. Pubs, as heavy energy consumers operating primarily at night, often find renewable energy options impractical. Owners are looking into simpler solutions such as training staff on energy-saving practices, such as turning off equipment when not in use and promptly reporting maintenance issues, which can enhance overall energy efficiency. As well, switching to energy-efficient LED lighting, which uses less power and has a longer lifespan, can significantly reduce electricity consumption for venues.
The Federal Budget introduces some small relief to operators.
The new federal budget from Australia does include measures that could help hospitality venues mitigate some of the pressures they face. Here’s how these measures can be beneficial:
- $325 Energy Rebates: This measure will provide relief to over one million small businesses, including those in the hospitality sector, by helping to offset the rising costs of energy. This can be particularly beneficial for venues with high energy consumption, such as restaurants and bars, reducing their operational expenses.
- Apprentice Employer Incentives: The replacement of some funding for chef apprenticeships is a positive step for hospitality venues that rely on trained chefs. Although this may not extend to traineeships, it still supports the training and retention of skilled chefs, which is crucial for maintaining high standards in the hospitality industry.
- $265.1 Million for Apprentices and Trainees: The allocation of these funds over four years will enhance the Phase Two Incentive System payments, thereby increasing support for apprentices and their employers in priority occupations. This could include hospitality-related apprenticeships, offering financial incentives that encourage venues to hire and train new staff, addressing workforce shortages, and ensuring a steady supply of skilled labor.
Introducing opportunities for navigating cost pressures and save money
In response to these challenges, many venues are implementing strategic measures. At Quantaco our Client Directors, all Chartered Accountants with years of experience, share mechanisms they are seeing take effect across the industry:
Maximising buying power to help with navigating cost pressures:
“Centralising procurement across multiple sites enables our clients to achieve better economies of scale. This approach allows venues to negotiate more favourable deals with suppliers for food, beverages, and utilities, including energy, ultimately reducing costs and enhancing operational efficiency.” – Jude Low, Client Director at Quantaco
Get access to comprehensive, detailed insights
It’s critical to have access to insights on the performance of the business as close to real time as possible, waiting for weeks after the month to understand the financial performance is too late.
“Implementing monthly financial reporting and meticulously reviewing line items allows venues to set and adhere to tight budgets. This rigorous approach ensures financial discipline and better financial health through monthly, quarterly, and yearly reporting periods.”
Utilising Efficient Rostering Channels
“By leveraging historical data and accurately forecasting peak business trends, our clients can optimise staff scheduling. This has been particularly beneficial for venue front-of-house staff, ensuring wage cost efficiency and improving overall service quality”. James Reading, Client Director at Quantaco
For more insights on unlocking staffing potential, explore our resources on Salesline.
Budgeting – ‘what gets measured gets managed’ –
Effective budgeting is crucial for financial stability and growth. Start by analysing the current year’s financial performance to identify strengths and areas for improvement. This informs realistic goal-setting. “Identifying growth opportunities that align with your business strategy, such as new revenue streams or improved efficiency, is essential for success. Setting financial targets, like wage and gross profit (GP) percentages, helps maintain discipline and track progress.”
As well as “Considering the impact of public holidays and seasonality on demand allows for better planning and resource allocation. We help our clients Benchmark against anonymised industry peers, which provides valuable insights into best practices and areas needing improvement.”
Hold those who contribute to account
Often the financial performance of an operation is limited to those most senior in the operation, excluding those who are actively contributing. While there are often reasons for not having full disclosure on all the financial metrics, it is critical that those who contribute the most to achieving the targets are included in the conversation.
“We encourage our clients to include a broad management team in the financial discussions, often the GM can make the biggest difference in hitting targets so by excluding them from the conversation, it gives them excuses as to why they failed to achieve the desired metric.”
How Quantaco Can Help
At Quantaco, we offer a comprehensive platform, proven over the years to help hospitality operators with navigating cost pressures and improve their profitability by mitigating costs and optimise their operations:
- An accounting platform like no other, with an ecosystem of inter-connected systems we ensure your team are set up for operational excellence allowing the seamless flow of data delivering continuous reporting on performance.
- Granular Reporting: With a comprehensive accounting platform that goes beyond your typical ‘off the self’ solution we are able to provide detailed reporting that allows us to drill down to provide very comprehensive reporting on a range of costs and revenue centres.
- Accurate and Timely Information: Our data-driven approach ensures that you stay ahead of trends, enabling better operational performance by understanding the factors driving costs.
- Experienced Client Directors: Having access to a highly skilled team led by a dedicated Client Director provides you with an extension to your own team. And with their insights across the industry they are well placed to help you with effective strategies and to improved operational performance.
By leveraging these strategies and solutions, hospitality businesses can better navigate the current economic challenges and position themselves for sustained success.
