Pubs across Australia have been faced with many challenges during the covid-19 pandemic, as they try to remain profitable and abide by the governments social distancing rules.
Data from Australian Bureau of Statistics illustrates that more than a third of Australian’s working in accommodation and food services lost work between March and April 2020. The Treasury estimated in May last year that over 441,000 jobs would be lost in the hospitality industry.
Pubs were forced to suddenly close down in March 2020, upon reopening many pubs found it difficult to pay off debts that were accumulated during the lockdown. Litres of beer kegs that were unable to be poured went to waste and became stale and undrinkable by the time restrictions were eased and their venues were able to re-open. After being closed pubs lost even more money as a result of still having to pay rent, electricity, TV subscriptions and staff costs.
Craig Dangar from C&D Restructure & Taxation Advisory says that “the biggest problem for pubs during lockdown was the continuing costs of occupancy during the periods where the doors were not open. Refrigeration, air conditioning and heating all needed to be run, in order to keep them in operating condition, these also needed to be maintained and managed during this time. The loss of stock was significant, and whilst there was a relaxing of licensing to allow items to be sold, this was a significant impost. We found that a lot of premises underestimated the costs of re-opening their venues after a forced shutdown, the funding for this was hard to find” says Mr. Dangar.
During the lockdown it was less difficult for pubs to make money if they had a bottle shop attached to their premises. “Pretty much the bottle shop saved a lot of locations, especially in regional areas, having a delivery capability improved margins as well” says Craig Dangar.
Upon re-opening many former staff members didn’t return to their old job after the lockdown. As a result of this pubs had to spend money to hire and train new staff members. Pubs also had to spend more money to purchase new stock to replace the old beer kegs that were no longer drinkable.
“The requirements of covid tracing and tracking were difficult for some locations, and we found that this resulted in additional staff cost as there was additional requirements. For some locations, especially in the early stages, it could be argued that they were overstaffed to deal with the changes. A problem for locations that shuttered was that there was a lack of comprehensive maintenance, especially surrounding cool rooms and air conditioning units, but finding trades to deal with this was not simple. Re-engaging with customers was a challenge for a lot of operators, as they did not necessarily know what the week would bring, we found that those that invested into patron engagement around the rules and made the rules easy to work with had an easier start than those that did not necessarily make things simple” says Craig Dangar.
When pubs re-opened they were restricted to how many customers they had dining on their premises. For the first few weeks after the lockdown finished, a number of venues in Sydney that could host over 1,000 people at full capacity were only allowed to serve 10 customers. As a result of this many venues decided to remain closed as opening for 10 customers at a time was not financially viable.
“The reliance upon the poker machine revenue remains significant, and for many venues it was maximising their gaming rooms, for first movers that expanded the size of their rooms or undertook safety procedures, these venues have been able to return to normal much quicker” says Craig Dangar.
Pubs in small towns were still forced house a limited number of guests upon re-opening, despite many of these towns not having any active covid-19 cases and in some cases not having any for a few months.
“The numbers are the killer in the small towns as the costs of running the businesses are similar in terms of electricity, maintenance and staff costs, without necessarily having the people through the door. For small locations there (it can be argued) be less competitive, but the converse is the population cannot necessarily sustain large populations. Cities we are finding have been able to move more quickly as there is stronger trading conditions and an ability to rely upon gaming revenue” says Mr. Dangar.
The no dancing rule meant that a Rockhampton pub stopped having live music performances in their venue as a result of venue having difficulties to get patrons to stop dancing.
With more people working from home it means that less people are coming to pubs for lunch in comparison to in a world prior to covid and the ability for a pub to profit during the daytime on a week day is becoming harder.
“This has been a challenge for venues for a long time, we are seeing pubs in rural locations offer a larger suite of hospitality options (such as coffee or cafes) as well as turning venues more family friendly” says Craig Dangar.
“Pubs have been fairly resilient during the covid pandemic, but it will be a challenging twelve months ahead as economic conditions start to contract and discretionary spending starts to fall” says Mr. Dangar.
The team at C&D Restructure and Taxation Advisory are here to help. As part of the Vault Group we can offer the full suite of financial products and advice to help you navigate the business landscape. Schedule a meeting here via Calendly or give us a call on 07 36086800.
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