Industry insights on what the end of JobKeeper means for hospitality

The current state of play

According to ATO figures released by the Government, more than 1.5 million workers were receiving JobKeeper payments at the end of 2020, less the 520,000 employees and 2.13 million staff who had been receiving the subsidy when it began in March and were no longer recipients.

Sectors heavily reliant on JobKeeper have been the hardest hit by COVID restrictions. Accommodation, hospitality, and smaller businesses within these sectors such as cafés, bars and restaurants, have been particularly strained under social distancing rules, staying COVID-safe and making ends meet on less than full capacity.

Data analysed by the Australia Institute found jobs in 'accommodation and food service' fell 11.2% from February to November 2020 and 31.4% of jobs were lost from February to May.

“Unsurprisingly, the industries most impacted in the early months of the pandemic were those which depend on direct customer contact: hospitality, arts and recreation, personal services, transportation and retail,” the report said.

Labour and trade unions are calling for JobKeeper to extend beyond the March deadline, including Head of ACTU, Sally McManus, who suggested the scheme should continue until the pandemic is brought under control.

Industry body Business SA (South Australian Employers' Chamber of Commerce ) has called for state and federal governments to consider alternative forms of safety nets for business owners and employees whose livelihoods lie in the balance.

The Restaurant and Caterers Association has proposed ‘Hospokeeper’ to the Government as a means to support those hardest hit. Treasurer Josh Frydenberg has so far ruled out any relief alternative, stating JobKeeper was a temporary and targeted measure.

Moneyman Peter Switzer wrote in Switzer Daily, “It's one thing for a business to fail because the owner has difficulties making an idea work, but it's another when the Government makes you unprofitable to reduce viral infections and deaths.”

The full impact on the hospitality sector will be realised post-March when JobKeeper disappears. However, economic analysts are hopeful of a full recovery and say the early signs are strong.

One such sector rolling with the punches is the pub sector. Danielle Richardson at Laundy Hotels says the fall out on the hospitality sector when JobKeeper ends depends on where the venues are located.

“If you are inner-city or city-based, then it is going to have a bigger impact because pubs would still be relying on JobKeeper. If you are suburban or regional, you are probably not on JobKeeper at this stage, and you should feel less of an impact," Richardson says.

Industry groups: Australian Hotels Association & Tourism Association of Australia

CEO of Australian Hotels Association (AHA), Stephen Ferguson says that throughout the COVID crisis, the Australian Hotels Association has been in close talks with the Federal Government, regularly updating it on the industry's need for short-term relief and medium-term stimulus.

He said: “There’s no doubt JobKeeper has been the most important lifeline for business and workers during the pandemic. As the government is considering how to wind up the economy-wide JobKeeper scheme, and replace it with more targeted, temporary measures with a clear exit strategy, the AHA and Tourism Association of Australia (TAA) have both consistently been updating Treasury with financial data relating to the state of the hotel industry.

“It is clear the Sydney and Melbourne CBDs, plus areas like Far North Queensland are still suffering - as well as other small pockets from time-to-time. At the same time, it is also clear other areas are booming, for example the regional wine regions in close proximity to CBDs.”

He says the AHA and TAA are pressing claims for continued support in heavily impacted areas. In the last three months, five major metropolitan regions have been shut down directly affecting the lives of more than 15 million Australians.

A study by the South Australian Centre for Economic Studies that examined the South Australia’s December lockdown found over 100,000 days of work and $100 million in revenue were lost.

Ferguson asserts that it is clear the pandemic, and its effect on the hospitality and accommodation industry, is not over yet and further short-term relief is needed on a case-by-case basis. The AHA has also been prosecuting the need for medium term stimulus.

“We recommend the Federal Government enable taxpayers who carry on a business, for the next three years, be allowed to claim a tax deduction and GST inputs on accommodation, meal entertainment and beverages (excluding alcohol), together with allowing a credit for related GST and not requiring any FBT for the business owner or their employees,” he said.  

To back their claims, AHA recently engaged EY who found exempting FBT for three years would positively impact GDP by at least $239m and create a minimum of 1,703 jobs.

From an accommodation perspective TAA CEO Michael Johnson says, “TAA thanks the Government for JobKeeper, as it has been our lifeline, and understand that it needs to come to an end. However, for those CBD hotels in cities like Sydney and Melbourne, which through no fault of their own, have not been able to recover, there still needs to be targeted support to ensure they are still there to support the national recovery when international borders finally re-open. Without targeted support we will see a substantial drain on resources as redundancies will be imminent.”

Pubs: Suburbs vs City - Danielle Richardson, Laundy Hotels

Richardson says in the case of Laundy Hotels’ CBD venues, the problem is patronage is not there, so the challenge is one of staffing.

“For those venues depending on JobKeeper right now, it will have a massive impact. I think the smaller venue that is 30 per cent down is not going to be able to put their staff back on because the trade is not there. I would suggest inner-city, and CBD venues are going to struggle to roster their full pre-Covid staff quota,” she says.

She says the industry is tracking reasonably well, all things considered, but the patron spread has shifted so staffing demands have changed. More people are visiting their local pub in the suburbs instead of travelling to the CBD. The knock-on effect of less workers in the CBD having a drink after work: they are now enjoying knock-off drinks at the local after working from home.

Richardson says the problem with staffing is that the young hospitality worker demographic wants to live and work in the inner-city for lifestyle, but job opportunities are thin on the ground compared to the new demand in the ‘burbs.

Then there is the issue of consumer confidence. Richardson says it goes in waves along with the outbreaks. The long lunches are gone, the corporate functions aren't happening, the events have stopped.

She says that in some of their bigger venues, ood and beverage revenue is probably catching up to pre-Covid levels, but there is zero revenue from functions.

“We need to stay optimistic that we can only go up from here,” says Richardson.

"We are starting to see people coming back out. The kicker will be when the Government lets people stand up, and we don't need to keep asking people to stay seated. The opportunity for us to go to the next level of normality will come with that next stage of easing restrictions.

"What we know as Australians in pubs is standing around with mates having a few drinks and not being told to sit down constantly."

The other significant long-term challenge for the on-premise triggered by Covid is home consumption. Latest figures released by the supermarkets indicate consumers are drinking at home, a trend that may continue to put a strain on the on-premise industry.

“What has been a positive outcome for us is we have had to rethink what we do and what we offer as venues. We have stepped up the offer in the suburbs. Some of our suburban pubs such as the Oxford Hotel (pictured above) in Drummoyne and the Red Lion (pictured below) in Rozelle now attract a new and younger demographic who would usually have gone out in the city.

"As a response, we have accelerated our cocktail offering, invested in training, improved our food and entertainment offering and are doing what the CBD venues would be doing because that has been demanded of us in the suburbs."

"It’s a good alternative to going to the CBD. There is more destination occurring in suburbia now than before Covid.”