Quantaco’s latest Hospitality Industry Update shows growth during the second quarter of FY24, with total weekly sales increasing by three per cent and food sales up 17 per cent compared to Q2FY23.
Based on the median results from a broad range of industry participants, the industry saw a one per cent EBITDAR increase. This was achieved despite an increase in wages as a percentage of sales, with wages now making up 20 per cent of sales, as opposed to 19 per cent in the same period in FY23.
Considering the inflationary pressures Australia has been facing, this increase in profit may indicate that inflation peaked in December 2022. However, Mitch Stone, Quantaco’s executive director, noted that there are other factors influencing the hospitality industry than those mentioned in the report.
“It’s crucial to recognise the nuanced dynamics that have shaped our industry landscape. While our EBITDAR reflects a modest one per cent increase for the quarter, what the broader report doesn’t mention is a substantial decline in industry-wide profits. This decline can be directly attributed to a notable 1.25 per cent surge in interest rates, marked by five separate hikes from January 2023 to December 2023,” he said.
Food sales have increased the most out of all sectors, netting $29,000 in average weekly sales. This bucks recent sales trends, which saw gross profit declines in previous quarters and a decrease in sales in October 2022. This profit increase may reflect an increase in patronage but may also be affected by an increase in prices in response to inflationary pressures.
“The ripple effect of inflationary pressures persisting throughout the 2023 calendar year has been a defining factor in our industry’s trajectory. To navigate these cost challenges, nearly all venues, with a few exceptions, implemented price increases across their food and beverage offerings. While our report captures the resultant sales increase, it is imperative to acknowledge that this growth is not solely indicative of price adjustments; there is tangible expansion in volume, particularly in food sales, when compared to the same quarter last year,” Stone said.
Additionally, there was an increase in beverage sales, which grew nine per cent in Q2FY24 and demonstrated a sharper increase in sales from November to December 2023 than in 2022.
Gross beverage profits remain stable at 64 per cent, a contrast to the decline seen during the previous periods. The earlier decline may indicate that beverage sales during those periods were primarily driven by discounts or promotions. Additionally, despite general wage increases, there was no increase in wages as a percentage of beverage sales, remaining at 22 per cent. This suggests that sales increases have been achieved without the need for an increase in staff.
Stone attributed this to the continued adoption of technology, which has improved staff efficiency.
“A positive trend in our industry is the increasing reliance on technology and the use of data to enhance operational efficiency. Many clients are leveraging technology tools to closely monitor critical aspects such as wages, cost of goods, portion control, and wastage in both food and beverage operations. The impact of technology adoption is evident in its positive influence on mitigating the most significant operational costs in running a pub, specifically wages and product/stock management,” he said.
Unlike the generally positive results in other revenue sectors, gaming results have been mixed, with an 11 per cent increase in turnover contrasted by a sharp revenue decline in November. The November decline mirrors the pattern of previous years but is more pronounced than in FY23 and comes amid a climate of inconsistent gaming performance during FY24.
Though the Q2FY24 report is generally positive, the hospitality industry still faces economic challenges.
“In summary, while our EBITDAR shows resilience in the face of challenges, it is crucial to contextualise our performance within the broader industry context,” Stone said.
“The intricate interplay of interest rate hikes, inflation, and technological advancements highlight the need for strategic agility and adaptability as we navigate the evolving landscape of the hospitality sector.”
Download the report here.