One in 11 Australian hospitality businesses are set to close in the next 12 months, as customers continue to tighten their belts and cut down on non-essentials.
The new numbers come amid a substantial fall in the average value of business invoices which credit reporting bureau CreditorWatch said had dropped 49.9 per cent in the year to June, 2024.
It reflects a drop in order values as businesses wind back inventory in the face of higher prices and dwindling demand.
And the business failure rate for the hospitality industry is forecast to increase from 7.5 per cent to 9.1 per cent in the year ahead.
This is well above the forecast for arts and recreation services (5.7 per cent), and transport, postal and warehousing (5.5 per cent).
The average failure forecast across all industries is 5.1 per cent.
CreditorWatch said hospitality’s significantly higher failure rate forecast was due to its reliance on discretionary spending from customers.
This has dried up with Australians having less spare cash in recent years, due to increases in mortgages, rents, power bills, and other essentials.
CreditorWatch CEO Patrick Coghlan said conditions were becoming truly dire for Australian businesses.
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“The combination of declining order values and increasing payment defaults is a major concern as it indicates more businesses are experiencing both cost and demand pressures,” he says.
“With another rate increase becoming increasingly likely, we expect both metrics to deteriorate even further.”