Author
Mitch BallChief of Insolvency Operations & ASIC Registered Liquidator
(02) 9220 7117
Identifying the warning signs and when to seek help
Despite international borders opening in February, the tourism and hospitality industry is still struggling to return to business as usual. Labour shortages are one of the biggest impediments to getting back on their feet.
While domestic visitors are returning and taking holidays, international visitors have been slow to return. According to the Australian Bureau of Statistics, the number of short-term overseas visitors in May 22 was still 65 per cent lower than pre-pandemic levels of May 2019. However, the number has increased since May 2021. Most overseas visitors arrived from New Zealand (20%), while Australia’s two most important tourism markets, China and Japan, are still in their infancy with opening international travel back up.
Traditionally the tourism market has relied heavily on overseas working holiday-makers such as backpackers for their workforce, but delays in visa approvals have hampered success.
Global inflation is not helping
And now, with higher-than-expected inflation, particularly in the US and most major European economies, global financial conditions are becoming tighter, which could impact the discretionary spending of potential future tourists.
It’s not just Australian Tourism suffering, with other markets similarly struggling to attract staff. However, some markets have found innovative ways to make jobs more attractive. For example, Spain has embraced digital technology to hire and train and generally increased digitisation at the front and back ends of their business. Where tourism has traditionally been a face-to-face industry, Spanish tourism companies are embracing hybrid work (work from home) options for roles in social media management, event planning, accounting, marketing and public relations, customer support, and virtual concierge services.
Australian Government Assistance
In Australia, the NSW Government offers free tourism and hospitality courses to cover the staff shortfall, recognising the need to backfill those jobs urgently.
In late April, the Federal Government announced an industry-specific labour agreement for accommodation and hospitality providers. It was designed to give Australia a competitive edge as we open up again to visitors and address the departure of hospitality staff due to COVID lockdowns and closed borders. It is a formal agreement between the Australian Government and eligible employers allowing the recruitment of overseas workers in occupations that do not qualify under standard migration programmes.
Roles that Accommodation providers can now recruit from overseas include Café or Restaurant Manager, Hotel or Motel Manager, Hotel Service Manager, Accommodation and Hospitality Manager, Cook, Chef, and Pastry Cook. However, the visas are not fast-tracked and will still take months to apply for and fill roles. The Tourism Industry has asked for more help from the new Federal Government, with a spokesperson for Immigration Minister Andrew Giles confirming the Government is unlikely to pull the trigger until it holds its Jobs and Skills Summit in early September.
In the meantime, that leaves the tourism industry still seeking a path to recovery, with reduced customers and often reduced operating hours due to staff shortfalls. In many cases, it could be too late for some.
Warning signs your Tourism business needs help.
Tourism and hospitality companies should undertake a business health check to identify the key warning signs they may need to seek the help of a financial adviser specialising in distressed businesses. By seeking help early, an adviser can help them to identify if there are strategies to keep trading while the market recovers.
Decreasing sales – For many tourism businesses decreasing sales have been prevalent since the pandemic began.
Ongoing Business losses – If your business has been trading at a loss for two years or more, review and streamline or cut any low or non-performing investments or processes. A professional can help you to identify where your business could make further savings.
Unable to pay tax debts – It’s not unusual to use money set aside for tax to meet wages and supply costs (it’s also not encouraged). Tax debt can incur interest and penalties, making the situation worse. You can try to negotiate a repayment plan with the ATO to avoid any penalties.
Unable to meet Superannuation contributions – If you cannot pay superannuation, the outstanding amount will become ATO debt under the Superannuation Guarantee Act. It will accrue interest and penalties with the ATO and could see directors of the company personally liable for failure to pay.
Debt, demands and no access to credit – If you are unable to get access to credit, extend your existing lines of credit, are in receipt of payment demands, or have suppliers insisting you pay COD only, it’s time to speak to an insolvency expert who may be able to identify alternative payment arrangements to give you some breathing space, or free up some cash to continue trading.
Speaking to a financial adviser or insolvency expert doesn’t necessarily mean the end of your business. If you seek advice early enough, it may mean a restructure that will enable you to keep trading until the tourism sector picks up pace again.
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