New figures from CreditorWatch reveal one in 10 hospitality businesses in Australia shut down over the past year, but more positive data for April 2025 shows insolvencies have started to plateau.
The report identifies the foodservice sector as one of the worst hit in the country, as well as construction. Pressure on the hospitality industry, including rising costs and decreased consumer demand, saw 9.6 per of businesses in the sector close permanently between April 2024 and April 2025.
The states to experience the highest rates of closures were South Australia (10.8 per cent), Queensland (10 per cent), and Victoria (9.9 per cent).
It is thought the two recent interest rate cuts will provide some much needed respite for small businesses like coffee shops.
CreditorWatch CEO Patrick Coghlan believes hospitality businesses are particularly vulnerable in several key areas.
“First, and most significantly, they are exposed to the vagaries of discretionary spending,” he says. “So, when households feel the pinch from interest rate rises and price increases, they typically spend less at places like cafes, restaurants, bars and pubs. The increase in people working from home has also had an impact, mainly in outlets in CBD areas,” he says.
“On top of that you have the business cost increases in areas such as wages, electricity, insurance, and food and alcohol.
“You also have to remember that most hospitality outlets are small businesses, so they usually don’t have the cash buffers to get them through hard times that large businesses often do. I really feel for them – it’s tough right now. There are many businesses out there barely hanging on.”
Ryan Spellman, former owner of Spellmans’ Social in Adelaide, recently sold his business due to the cost-of-living-crisis and increased competition from other hospitality venues.
“We are in the fortunate position that we were able to sell the business and pass it on, but there are a lot of other local horror stories of café owners who have spent a lot of money on a venue and can’t get out of a lease,” he says.
“We started Spellman’s Social in 2021 and have created a great community here. We were attracting new customers and welcomed back regulars, but the average spend was dropping while all the running costs were doubling. At the same time, restaurant and pub groups in Adelaide were diversifying, serving coffee, grab-and-go food items, and cakes in the day and staying open into the evening.”
