Australia’s hospitality industry beckons travellers and locals, from sun-drenched beaches and vibrant cities to world-class wineries and ancient outback landscapes. But behind the scenes lies a dynamic and ever-changing business sector. If you are a business owner in the hospitality industry, staying informed is now more important than ever.
This article delves into the key statistics, challenges, and trends shaping the hospitality industry in 2024. We’ll explore how factors like rising costs, digital transformation, and sustainability are impacting businesses and what the future holds for this vital sector of the Australian economy.
How the hospitality industry rose to prominence
The hospitality industry’s rise can be traced back to the development of travel and the concept of welcoming guests. In ancient civilisations, people offered basic shelter and food to travellers for a fee. These early “inns” were the foundation for what would become the hospitality industry.
With advancements in transportation, like stagecoaches and ships, travel became more accessible. This created a demand for more sophisticated lodging options beyond basic inns and triggered a focus on creating luxury experiences. The 18th and 19th centuries welcomed the emergence of hotels, offering basic amenities and more high-class accommodations, meals, and services.
The 20th century saw a boom in the hospitality industry, fuelled by the rise of automobiles, aeroplanes, and mass tourism. Technological advancements like telephones and reservation systems further streamlined travel and accommodation. Hotel chains emerged, offering consistent quality and service across different locations. This made travel planning more accessible and more predictable for guests.
The rise of the internet revolutionised the industry. Online travel agencies (OTAs) and booking platforms made it easier for travellers to research, compare, and book accommodations, further increasing demand and competition within the hospitality sector.
Today’s travellers seek unique experiences beyond just a place to stay. The hospitality industry is adapting by offering themed accommodations, personalised services, and a focus on local culture and sustainability.
Hospitality industry in Australia
Australia’s hospitality industry boasts a rich history intertwined with the nation’s development and its unique geographical landscape. For millennia, Aboriginal and Torres Strait Islander peoples practised a strong tradition of welcoming and sharing resources with travellers, cultivating an inherent sense of hospitality in the nation. Following European settlers’ arrival, basic taverns and inns were established for travellers.
Fast forward to the future, the industry saw surges of growth through the discovery of gold, recognition of Australia’s unique landscapes, and globalisation. Australia became a popular destination for all kinds of travellers, leading to the growth of hostels and specialised adventure tourism experiences.
The digital age transformed the industry. Online booking platforms and travel websites empowered travellers and increased competition within the hospitality sector.
6 statistics to understand the Australian hospitality industry in 2024
1. The annual revenue for cafes, restaurants, and takeaways is more than 4x compared to hotels and resorts
According to industry reports, the annual revenue for cafes, restaurants, and takeaway establishments in Australia nearly hit $64 billion in 2023. This is a significant figure compared to the estimated $13.3 billion market size of the hotels and resorts industry in the same year. This data suggests that everyday dining experiences currently generate a larger portion of the Australian hospitality industry’s revenue compared to accommodation.
Although smaller currently, the projected revenue for hotels and resorts suggests potential for growth in this segment. This could be due to factors like increased tourism or a rise in domestic travel spending.
This data provides a snapshot of the financial landscape within the Australian hospitality industry, highlighting the current dominance of everyday dining and the potential for growth in the hotels and resorts segment.
2. The hotel & resort industry market size declined by 1.1%
In 2024, IBISWorld reported a 1.1% decline in the market size of Australia’s hotel and resort industry over the past five years. This decline means that the total revenue generated by this sector has been shrinking, suggesting a potential struggle to attract guests and generate income.
This could be due to several factors, including:
- The rise of alternative accommodation options like Airbnb might be impacting traditional hotels
- Geopolitical conflicts that may be deterring international tourism
- High inflation and rising costs of living could be affecting Australians’ discretionary spending on travel and accommodation.
The decline might be uniform across some regions. Some areas might be experiencing growth.
3. Hospitality is a top sector struggling with staff shortages
In 2024, the Australian Bureau of Statistics (ABS) data confirmed that hospitality was the industry most affected by staff shortages in the previous year. This indicates a widespread issue across various hospitality segments, from restaurants and cafes to hotels and resorts.
Several factors might be contributing to the staff shortages:
- Low wages: Hospitality jobs are often known for lower wages compared to other industries. This can make it challenging to attract and retain qualified staff.
- Long hours and unpredictable schedules: Many hospitality roles involve long hours, split shifts, and weekends, which might not be attractive to potential employees seeking work-life balance.
- Lack of career progression opportunities: Some hospitality positions might be seen as offering limited career advancement opportunities, leading to employee turnover.
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4. Household spending on hospitality rose from 2% to 3.4%
Household spending on hospitality rose from 2.0% (Dec 2023) to 3.4% (Jan 2024). The slight rise in overall spending in the hospitality industry suggests a potential rise in consumer confidence and willingness to spend. While the 2022 period saw a 20% decrease in fine dining restaurant bookings, Gen X and Millennials increased spending on hospitality services by 46% and 38%, respectively.
While overall hospitality spending has increased, Australians might be more selective about where and how they spend their money. The rise in spending by Gen X and Millennials suggests these age groups prioritising dining out despite economic challenges. Younger generations and those nearing retirement may be feeling the financial strain more.
5. 80% of hotel bookings are done online, 59% for restaurant reservations
Over 80% of hotel bookings in Australia are done online, while 59% of Australians use online platforms to book restaurant tables. The rise of online booking platforms has revolutionised the way Australians access hospitality services. These platforms offer convenience, price comparison tools, and a wider selection of options compared to traditional methods.
Hotels and restaurants now need a user-friendly website with clear booking options or optimised listings on booking platforms. Still, only 33% of hospitality staff have technology experience. This means a large portion of the workforce might need more skills to effectively utilise the various technologies increasingly adopted by the hospitality industry.
6. 92% of customers trust online restaurant reviews
A study reported that 92% of consumers overall trust online reviews when making dining decisions. Similarly, Australians use social media to research restaurants before dining, according to Yelp. This indicates that negative experiences shared online or minimal social media presence can damage an establishment’s reputation and deter potential customers.
Positive experiences shared by friends and family can be highly influential to consumers, more Australians considering word-of-month recommendations important to their decision making. Understanding the importance of diner interaction allows hospitality businesses to focus on customer service training, monitor their online presence, and engage with customers on social media.
Current challenges of the hospitality industry
With shifts in annual revenue, market size, and consumer spending, Australian hospitality faces several significant challenges.
Cost of living
The most prominent challenge is the change in the cost of living, with inflation and rising costs for essentials like groceries and utilities leaving Australians with less disposable income for activities like dining out and travel. Consumers might be cutting back on frequency or opting for more budget-friendly alternatives. Consumers might prioritise value-driven experiences over fine dining.
Reduced customer spending directly translates to lower revenue for hospitality businesses. Businesses themselves face rising costs for food, beverages, energy, and other operational expenses. These two challenges combined can put a significant strain on profitability.
Staff shortages
Low wages, long hours, unpredictable schedules, and limited career advancement opportunities contribute to the strain of the hospitality workforce. Staff shortages can make it difficult for businesses to operate efficiently and meet customer demand for high-quality service. As a reaction, businesses might need to offer higher wages or incentives to attract staff, impacting their bottom line.
There are several approaches to remedying this challenge, but it will vary depending on the business. Improved wages and benefits, training and development programmes, and a more positive work culture can foster deeper satisfaction among professionals in the hospitality industry.
Digital skills gap
As indicated by a study from the Torrens University in 2023, many hospitality workers lack the necessary skills to effectively use technologies related to the industry. These technologies can include online booking systems, mobile payment options, hospitality payroll and accounting, and digital marketing tools.
Traditionally, the industry relied less on technology, leading to a workforce with less exposure to digital tools. The recent surge in technology adoption within the industry might have outpaced the workforce’s ability to adapt, and business owners may not be prioritising those particular skill sets.
More efficient operations and customer satisfaction can lead to lower revenue and profitability and limit business growth. Establishments that adapt may need help to compete with those who embrace it effectively.
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Trends in the hospitality industry to watch
Here’s a breakdown of the biggest trends driving the Australian hospitality industry in 2024.
Digital transformation
Digital transformation involves integrating technology into various aspects of operations to enhance customer experience, streamline processes, and gain a competitive edge. Technology can personalise the customer journey, from online booking and contactless cheque-in to mobile ordering and service requests. This improves convenience and satisfaction.
Automation of tasks, such as reservations, inventory management, payroll processing, and timesheets and rosters, frees up staff time to focus on guest interaction and service delivery. Improving these operations can lead to cost savings for businesses, while offering a more modern and efficient experience for customers and staff alike.
Contactless payments
Contactless payments or tap-to-pay create a smoother and faster guest experience. Guests and customers can pay for meals, drinks, accommodation, or activities with a simple tap or wave of their card or mobile device, eliminating the need to carry cash or wait in line for traditional payment processing. This approach also minimises physical contact with payment terminals, promoting hygiene and reducing the risk of germ transmission.
Faster transaction processing through contactless payments reduces cash flow management issues and waiting times, freeing up staff for other tasks and leading to increased operational efficiency.
The rise of “bleisure”
“Bleisure” travel is a portmanteau of “business” and “leisure” travel. It’s a growing trend where people extend work trips into mini-vacations by tacking on a few days before or after their business commitments. Hospitality businesses can cater to this trend by offering special packages for bleisure travellers, including weekend deals or extended stay discounts. Provide amenities that cater to these travellers, such as co-working spaces and on-site fitness centres.
Value-driven experiences
The rising cost of living is prompting consumers to seek value for money when dining out or going on a holiday. This means that hospitality businesses are continuously adjusting their offerings through affordable menu options, delivery and takeaway services, or unique activity-based experiences.
Shifting dietary preferences
This trend has prompted the rise of specialty food restaurants, especially as growing numbers of Australians are adopting plant-based diets. Among hotels and resorts, establishments have begun offering health and wellness packages and menus to cater to their diverse lifestyles. Nowadays, it’s common to see menus mark vegan, vegetarian, and allergen-friendly ioptions.
Changes in public holiday spending
Public holiday spending on dining seems to be declining, except for Easter Sunday. During these periods, businesses may need to offer special promotions or events during these periods to attract customers. Alternative revenue streams such as takeaway and catering services have also been popular options for restaurants.
Prioritising sustainability
Consumers are increasingly choosing businesses that prioritise sustainability. Sustainable practices minimise the industry’s environmental impact, including reducing energy and water consumption, waste generation, and pollution. Offering eco-friendly options can attract customers and enhance a business’s brand and image.
Implementing sustainable practises can lead to cost savings in the long run. This might include reduced energy bills through efficient appliances or minimising water waste with low-flow faucets.
The future of hospitality in Australia
The Australian hospitality industry in 2024 is a dynamic environment. By understanding these trends and adapting their strategies, businesses can navigate the challenges, cater to changing consumer preferences, and thrive in a competitive landscape. Remember, staying informed, embracing innovation, and investing in your staff will be key to success.
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