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Business confidence soars in accommodation industry

After a dramatic slump in the last quarter, confidence in the Australian accommodation and hospitality sector has surged by 15 points, according to the latest Sensis Business Index (SBI) survey.

This improvement has taken the industry to a to a net balance score of +24 and has now placed it near the national average. A net balance score is the difference between the percentage of businesses with a positive outlook versus the percentage with a negative outlook.

The top three reasons for this upswing in confidence were given as having an established, solid business; initiatives taken by the business; and a positive attitude. The main concerns identified were unfavourable business, economic or industrial conditions, followed by falling sales.

Within the accommodation and hospitality sector, sales and profitability were still negative on balance but improved respectively from -21 to -5 and from -16 to -12 net.

Employment was lower (at -12 from -8) but wages and prices rose (to +10 from -1 and from +6 to +12 respectively).

Sales and profitability this quarter are anticipated to be solid with respective net balances of +26 and +16. Other indicators are also in positive space – prices (+11), wages (+8) and employment (+16).

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The improvement in confidence contrasts sharply with many other industry sectors in the economy. The lack of confidence elsewhere (such as in retail and wholesale trade sectors) is primarily influenced by falling sales and a perceived unfavourable business environment.

The Sensis Business Index, which reflects the views of 1,000 small and medium businesses from across Australia, also revealed that the boost in support for the Federal Government following the May Budget has evaporated, with support dropping by 17 points to +1. Those saying the policies of the Federal Government work against small business doubled from 12 percent to 24 percent.*

Sensis CEO John Allan said: “This survey shows the Government has failed to consolidate the support it generated with its popular May Budget. Only in Tasmania was there a rise in support, with that State now by far the most supportive of the Federal Government.”

The number of businesses who spontaneously mentioned the economic climate as a key concern doubled this quarter from seven percent to 14 percent.

“Given recent events on global stock markets and with Australian unemployment on the rise, it is not surprising to see that only 13 percent of businesses think the economy is growing. In South Australia and Western Australia that figure drops to only four percent,” said Mr Allan.

Business confidence dropped four points for the quarter to a net score of +27, back to the same level seen in the March 2015 survey. The number of businesses trying to access finance was up from 11 percent to 17 percent, with the proportion who found accessing finance hard jumping from 15 percent to 22 percent.

The ACT saw a 14 point rise in confidence to +47 and is now the most confident location, while South Australia saw a 31 point drop in confidence to +1 and is now by far the least confident region, despite sitting close to the national average last survey.

“There were mixed results for business confidence across the states and territories with big drops experienced in South Australia, the Northern Territory and Tasmania, as well as more modest falls in Victoria and Western Australia. On the other side there were confidence gains in the ACT, Queensland and NSW,” said Mr Allan.

At a regional level, the gap between metropolitan and regional businesses in terms of their business confidence has narrowed by 18 points to four points (+29 versus +25).

“In Victoria, Queensland and the Northern Territory there was a reversal in confidence levels, with regional areas now more confident than capital cities in those locations,” said Mr Allan.

“Canberra saw a 14 point rise in confidence to now be the most confident city in Australia, while Adelaide suffered a 31 point drop in confidence to become the only place in Australia to have a negative net balance on -5.”

Small and medium businesses comprise 99 percent of all businesses operating in Australia.

*This survey was undertaken prior to the change from Tony Abbott to Malcolm Turnbull as Prime Minister.

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