Australia's hospitality sector under pressure as costs climb and closures mount
Small business owners across Australia's hospitality sector are facing mounting financial pressure, with rising operating costs pushing a growing number of cafes, restaurants and pubs to close their doors.
"If you're a small business owner, your sleepless nights have increased probably by 50 per cent," Adelaide publican Simone Douglas, who operates two pubs in Adelaide and Port Adelaide, told the ABC.
Douglas, a long-time industry operator who survived the disruptions of the pandemic, says the current climate has proven harder to navigate than that period.
"It is 100 per cent more challenging [now] than it was during COVID. The cost of doing business in South Australia, and particularly in a hospitality environment, is skyrocketing and they are costs that we don't have any control over."
She was forced to close her Adelaide CBD cafe in mid-2024 after costs including electricity, gas and insurance became unmanageable, telling ABC News the venue "haemorrhaged money left, right and centre" despite 18 months of effort to make it viable.
The challenges Douglas describes are not isolated to South Australia. Restaurant and Catering Australia, the peak body representing more than 57,000 cafes, restaurants and caterers nationally, reports that approximately 10.9 per cent of hospitality businesses closed over the past year.
Executive chair John Hart described current conditions as unlike anything the industry has seen before.
"The cost increases right now are absolutely unprecedented. Food prices are going up, the cost of transporting goods is going up but then also labour costs are going up dramatically, over the last three years, a 21 per cent increase," Hart told the ABC.
He noted that even within a four-month window, the cost of goods had risen 17 per cent, adding that the price of serving a single cup of coffee is now nearly a quarter higher than it was three years ago.
Dining behaviour has shifted in response. Patrons are still eating out, Hart said, but are making more cost-conscious choices — sharing dishes and gravitating toward local, value-driven options rather than spending freely.
Elliott Brown opened his first cafe in McLaren Vale in 2023 at age 24, and within a year was running three venues simultaneously across South Australia. The expansion proved difficult to sustain. Staffing pressures, rising ingredient costs and changing customer habits all contributed to declining viability.
Brown told ABC News that customer resistance to price increases made margins nearly impossible to protect: "People don't want to pay more than $22 for smashed avocado, but avocado [has] probably gone up a dollar and so you then need to factor that in plus the wages."
He has since closed all three venues and has called on state government to expand rebates on gas and power to help businesses manage energy costs.
South Australia's Minister for Small and Family Business, Nadia Clancy, acknowledged the pressures while pointing to the state's competitive business conditions. She noted in a statement that more than 25,000 small businesses opened in South Australia in the last financial year, representing the third-highest growth rate nationally, and that an announced 12.1 per cent reduction in default power prices would offer some relief to small operators in the period ahead.
Jonathan Jackson, 2nd June 2026
