Bankwest Future of Business: Focus on Hospitality 2018
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Bankwest Future of Business: Focus on Hospitality 2018
Contents
Key insights 4
Focus on Hospitality 5
Industry overview 6
What's driving industry
growth? 7
Spotlight on Australia 8
Spotlight on Western
Australia 9
What does the future hold? 10
What challenges does the
industry face? 11
Where do the
opportunities lie? 11
Forecasted industry growth 12
3 3
Key insights
Foreword
Understanding factors impacting your industry, nights3. Growing interest in the home sharing
and how other businesses in your industry are start-up is being driven by a preference for
performing, can be a great gauge for how your accommodation outside of hotel districts, bi-
business is tracking. directional reviews and availability during peak
periods. Airbnb last year contributed $1.6 billion
The Bankwest Future of Business: Focus on to Australia’s GDP, supporting more than 14,000
Hospitality Report is designed to give you a jobs and indirectly contributing $602 million to
snapshot of the current and expected future the national economy.
state of your industry, which could help you
plan and spark ideas. The report covers Australia’s restaurant industry is also facing
Australia’s hospitality sector, providing insight disruption from a growing number of food
on accommodation (hotels), pubs, cafes and delivery services and applications. The
restaurants, summarising trends based on restaurants, bars and pub sector recorded
statistics from IBIS World, the Australian Bureau negative growth of -0.4% and -1.9% respectively
of Statistics and other reputable sources. in 2017 as lower wage growth and discretionary
spending impacts operators in the industry
This year’s report found hotels and and puts the brakes on the number of new
resorts remain Australia’s preferred type establishments entering the market4. Western
of accommodation, with Australian and Australia and Queensland were hit hardest
international travellers driving the $7.9 as the mining resource sector pivoted from
billion dollar industry. Overseas visitors are development to exploration.
increasingly turning to Australia for holidays
with arrivals increasing by 7.1% in the year to The evolution of Australia’s pubs from watering
November 20171. The lower exchange rate is holes to gastronomy destinations is seeing
also encouraging domestic travellers to look for publicans draw a growing proportion of
travel destinations in their own backyard, with revenue from food and increasingly market
domestic overnight visits increasing by 7.2% themselves as an alternative to restaurants.
and expenditure increasing by 6.9% Sales of premium food both in WA and
across Australia2. nationally improved profit margins in 2017,
with continued demand for high-quality and
Airbnb continues to grow as a major diverse menu options likely to boost revenue
competitor in the accommodation sector, for owners of gourmet pubs and bars.
housing 2.1 million guests over 3.7 million
4 1 Tourism Australia 2017 3 Deloitte 2017
2 Tourism Australia 2017 4 IBIS 2017
Focus on Hospitality
Hospitality experienced good returns in the five years to June 2017. Projected growth remains
positive despite a national lull in wage growth and discretionary income.
Sector revenue and growth
Revenue Annual growth (2012 - 2017)
Hotels and resorts $7.9bn 2.7% Growth in new cafes and
Restaurant $20.2bn 4.8% restaurants across WA rose slightly
in 2016, up 4.0% compared to 2015.
Cafes and coffee shops $8.1bn 6.1%
The number of new pubs, taverns
Pubs, bars (and nightclubs) $17.2bn 1.6% and bars also rose year-on-year by
1.8%. In the accommodation sector,
Source: IBIS 2017
developments soared with 18 new
National snapshot hotels completed (1,937 rooms)
since 2012, and an additional
eight hotels (1,409 rooms) under
90,284 889,400 construction and due to be
complete by late 20186.
businesses employees
WA's 2016 industry performance5
New cafes & restaurants New pubs, taverns & bars Hotels & resorts
2015: 227 2015: 15 18 completed hotels
2016: 135 2016: 11 8 under construction
Accounting for 8.8% of national Accounting for 10.2% of national Accounting for 13.8% of national
hospitality establishments establishments establishments
5 ABS, IBIS 2017 6 Tourism Council WA 2017 5
At a glance Industry overview
Restaurants Profits in Australia’s accommodation industry continue to improve from 2014 lows, however within
food and beverage services, profits are being squeezed as the industry remains one the most
competitive in the nation.
26% Premium
39% Accommodation and food services account for 2.5% of Australia’s real gross value at $38.7bn.
Mid-range
35% Low cost dining Profit 2016 Producer Price Index (PPI) 2017
Cafes & coffee shops
21% $5.8bn
Coffee 10.1%
$5.3bn
51% Food
28%
Other beverages
$2.4bn
Pubs, bars & night clubs $1.8bn 2.5%
6% Liquor for consumption
8% on-premises
Gaming & wagering facilities
43%
21% Accommodation Cafes, restaurants &
Liquor for consumption Accommodation Food & beverage services
(13.4% profit margin) (6.5% profit margin) (year to June 2017) takeaway services
off-premises (year to June 2017)
22%
Meals & non-alcoholic
beverages
2015 2016
Other products & services
Hotels & resorts Source: ABS 8155 Source: ABS 6427
14% Five & four star
accommodation
20% 46%
Food & beverages
20% Other accommodation Holidays, visiting friends and visiting relatives are the top three drivers of
Other products & services international visitors to Australia.
Source: IBIS 2017
6
6
What’s driving industry growth?
Australia’s ‘foodie culture’ is expected to underpin revenue growth in the restaurants
industry in the next five years to 2022. The Australian dollar’s low value is likely to continue
stimulating inbound tourist growth, which is expected to boost demand for accommodation.
What are the winning restaraunts, bars and pubs doing better?
Premium quality Focusing on Evolving menus to Offers to encourage
and diverse food customer service be more 'gourmet' mid-week customers
options
Pubs are increasingly marketing themselves as an alternative to restaurants by evolving menus to
become gastronomy destinations. Greater menu sophistication is driving an increasing proportion
of revenue from food rather than drinks. Profit margins in premium food sales improved in 2016-
2017 both in WA and nationally, with rising interest in high-quality food expected to boost revenue
for gourmet food venues.
Forecast industry value added (2017-2022)
2017-2018 2018-2019 2019-2020 2020-2021 2021-2022
Billions ($) 5.3 5.4 5.4 5.5 5.6
Source: IBIS 2017
7Spotlight on Australia Accommodation
Food delivery services are creating competition for the restaurant industry – yet also introducing Airbnb continues to generate competition
some restaurants, bars and pubs to new customers through the home delivery method, without within the accommodation market
the hassle of managing a complex delivery network. by lowering entry prices. The service,
however, is activating local communities
Hospitality’s fastest growing competitors: by distributing visitors across districts -
helping local business outside popular
tourist areas.
Sluggish wage growth is impacting
discretionary spending throughout
hospitality. However, revenue per available
Uber Eats Menulog Deliveroo room (RevPAR) nationally rose in the year
to September 2017 accompanied by an
Since Australia’s adoption of Uber Eats, time poor customers are spending more of their food increase in occupancy rates.
budget on takeaway options with food orders forecast to rise from $1.5 billion in 2017 to $4.2
billion in 20257.
While Australians’ preference for convenience is driving the trend, the Australian Hotels National RevPAR 2.3%
Association has warned high commissions online food delivery services can artificially inflate
prices for customers and make the new technology unviable.
National occupancy rate 0.7%
Pubs and bars
The Craft Beer Production industry has flourished in the last five years, due to a shift towards Average daily rate (ADR) 1.6%
premium beers and growing emphasis on quality across liquor retailing:
National wages 2.0%
9.7% $486.3m Source: Savills Australia's Hotels market report 2017
annual growth revenue
The strong growth in craft beer, contrasted with per capita beer consumption declining by 10.0%
in the five years to June 2017, has sparked interest from international conglomerates who have
been purchasing craft breweries.
8 7 Morgan Stanley, 2018Accommodation Spotlight on Western Australia
While the number of both international Overnight visitors and spend by WA tourism area, 2017
and domestic visitors to WA is down 0.7%,
consumer expenditure is up 2.9% in the
Yearly spend
year to September 2017. 2017 spend ($m) % International % Domestic
increase
Visitor nights Australia's Coral Coast 737 -8.7% 8.1% 91.9%
4.3%
Experience Perth 4,163 9.1% 19.8% 80.2%
Australia's South West 1,663 4.5% 5.5% 94.5%
Visits for purpose of
business
10.9% Australia's Golden
468 -3.7% 4.8% 95.2%
Outback
Source: Tourism WA
Australia's North West 844 -32.6% 5.2% 94.8%
The WA State Government allocated $2m
Source: Tourism WA
in the State Budget to help fill empty
rooms in Perth.
The WA hotel industry mounted a campaign against Airbnb after it was found the application now
accounts for an estimated 25% of WA’s room capacity.
Pubs, bars and restaurants
The economic downturn is prompting innovation and collaboration among restaurant and bar
operators in Perth.
“Thursday like it’s Friday”, Many Perth hot spots The State Government’s
a $400,000 marketing have undergone 2017 liquor licencing
campaign launched by refurbishments to reform has helped
prominent restaurant compete with the rise of facilitate the development
and bar operators the small bar. of new small bars
to reinvigorate the CBD. throughout Perth.
9
9What does the future hold? WA tourism
Despite a $35 million decrease in Tourism Australia funding over the next four years, the
Australian tourism industry will benefit from the development of the Western Sydney Airport.
Western Australia's hospitality industry will be boosted by the introduction of direct flights from
push
Perth to London, as well as the trialling of direct flights from Shanghai to Perth.
Despite the projected growth in visitors,
WA’s cooling tourism market in recent years,
International visitor nights Domestic visitor nights driven by the shift from mining investment
(in millions) increase (in millions) increase to production, has sparked new initiatives to
counter the lowest occupancy and room rates
in nearly a decade:
4 8
8.9% 1.0%
Tourism WA will run five
59 87
9.7% 3.1%
interstate and international
31 43
9.3% 0.6% marketing campaigns
12 22
9.0% 2.7%
99 99
9.0% 0.9%
5 7
12.2% 3.3% Partnerships with low-cost
South East Asian airlines and a
74 66 Chinese travel agency to ramp
4 11
7.1% 0.7%
9.5% 0.8% up “Just Another Day in WA”
advertisements on online travel
booking sites
Visitor nights (millions) Increase
WA NT QLD NSW ACT TAS VIC SA
Numbers 74 13 146 198 12 15 140 34
Percentage % 4.1 3.5 5.7 4.8 7.0 3.0 4.0 4.8
Source: Tourism Research Australia
Forecasts show strong national growth projections with the ACT and QLD
expected to see the largest increase in both domestic and international visitors.
10What challenges does the Where do the
industry face? opportunitites
Perth was the only market in Australia to report a double-digit RevPAR (Revenue Per Available
Room) decline in the year to August 2017, and suffered the largest fall in occupancy rate of
lie?
any capital city8.
Growth in number of international
visitors from Malaysia, Singapore,
the USA and China to Western
Australia exceeds the national
13.3% decline in
RevPAR 6.1% decline in
occupancy rate
growth rate
Asia is forecast to have the fastest
growing middle-class population
in the next 10 years, with an
influx of international travellers
likely to boost tourism to popular
Nationally, the industry faces a number of challenges as a result of broader economic conditions destinations in WA
and shifting consumer preferences.
Capitalise on consumers’ busy
lives and higher workloads by
providing convenience, such as
Lower disposable Diners overlooking Steady forecasted food delivery services, to time-
income and premium restaurants growth increases poor customers
consumer sentiment, for mid-tier options competition as more
with eating out and avoiding high establishments
perceived as a margin items such as vie for consumers’
“luxury” experience entrees, desserts attention
and beverages
8 STR Global, 2017 11Forecasted industry growth
International and domestic visitor nights are expected to grow at 5.6% and 3.1% respectively,
bolstering growth across hotels and resorts. In addition, our growing ‘foodie’ culture, and focus
on quality food is driving revenue growth across bars and restaurants.
Projected revenue growth (2017-2022)
Projected revenue growth (2017-2022)
Hotels and resorts 11.6%
Restaurants 2.9%
WA records the lowest year-on-
Cafes and coffee shops 4.8% year wage growth in the year to
Pubs, bars (and nightclubs) 5.3% September 2017, however the
Source: IBIS 2017
Treasury predicts future wage
growth will more than double to
3.0% in 20219.
Australian Wage Price Index
Index Wage growth by state (2017)
New South Wales 126.8 2.1%
Victoria 127.4 2.0%
Queensland 127 2.0%
South Australia 127.5 2.1%
Western Australia 127.7 1.3%
Tasmania 127.6 2.2%
Northern Territory 127.8 1.9%
Australian Capital Territory 125.5 1.9%
Australia 127.1 2.0%
Source: WA Treasury, 2017
12 9 WA Treasury, 2017 1213
Sources
Australian Bureau of Statistics 8155.0 (May 2017), Australian McGregor, W. Pubs, Bars and Nightclubs in Australia, IBISWorld,
Industry, 2015-16, Mining operations, available at: July 2017
http://www.abs.gov.au/AUSSTATS/abs@.nsf/
DetailsPage/8155.02015-16 Savills release Australia’s Hotels market report March 2017, The
Hotel Conversation, March 2017
Australian Bureau of Statistics (October 2017), Producer Price
Index Australia, Sep 2017, Table 20, available at: Tourism Council, Perth Hotel Development Report 2017 as at
http://www.abs.gov.au/AUSSTATS/abs@.nsf/ April 2017, 2017
DetailsPage/6427.0Sep%202017
Vuong, B. Restaurants in Australia, IBISWorld, October 2017
Australian Bureau of Statistics (February 2017) Counts of
Australian Businesses including Entries and Exits Jun 2012- Jun Vuong, B. Cafes and Coffee Shops in Australia, IBISWorld,
2016, Table 1, available at: October 2017
http://www.abs.gov.au/AUSSTATS/abs@.nsf/
DetailsPage/8165.0Jun%202012%20to%20Jun%202016 Wilkinson, J. Perth hotels get urgent marketing funds as
occupancy rates dive to 67 per cent, Hotel Management,
Australian Government- Australian Trade and Investment August 2017
Commission, Why Australia Benchmark Report 2017, 2017
Australian Government Austrade, Tourism Research Australia,
International Tourism Statistics, Canberra, 2017
Australian Bureau of Statistics 6345.0 (November 2017), Wage
Price Index Australia, Sep 2017, available at: http://www.abs.
gov.au/AUSSTATS/abs@.nsf/DetailsPage/6345.0Sep%202017
Angus, C. Slow wage growth, Parliament NSW, August 2017
Bankwest Curtin Economics Centre, The Impact of Airbnb on
WA’s tourism industry, October 2017
Craft Beer Production in Australia, IBISWorld, September 2017
Cloutman, N. Hotels and resorts in Australia, IBISWorld,
February 2017
Economic effects of Airbnb in Australia, Airbnb Australia,
Deloitte, 2017
14At Bankwest, we know
that Business Banking
is about more than just
financial solutions.
We provide banking solutions to many of Australia’s leading
businesses, including those in hospitality. Whether you require
straightforward banking or a more customised solution, our team
of experienced banking specialists can help.
Speak to one of our Business Banking
Specialists today. Call us on 13 7000.
15
15The information contained in this report is of a general nature and is not intended to be nor should be considered as professional advice. You should not act on the basis of anything contained in this report without first obtaining specific professional advice. To the extent permitted by law, Bankwest, a division of Commonwealth Bank of Australia ABN 48 123 123 124 AFSL/Australian credit licence 234945, its related bodies corporate, employees and contractors accepts no liability or responsibility to any persons for any loss which may be incurred or suffered as a result of acting on or refraining from acting as a result of anything contained in this report. 16
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