Accom insolvency on the rise

AccomNews Sunday, November 18, 2018

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Tourism may be booming in Australia, but it’s no consolation to the accommodation businesses that closed their doors in the year to June 2018.

The Australian Securities and Investments Commission (ASIC) has published its annual overview of corporate insolvencies based on reports lodged during the last financial year.

The corporate regulator found that the number of insolvencies in the accommodation sector had increased.

Accommodation and food service business bankruptcies sat at 14 per cent of the total number, or 1,064 businesses, up from 11 per cent or 884 from the previous financial year.

The news comes as Tourism Australia reports: “The outlook for Australia’s accommodation sector is strong, reflecting both the increased demand for rooms on the back of growth in the domestic and international visitor markets, and the relatively low levels of new supply.”

But while the big end of town may be thriving, with unprecedented hotel building scheduled across Australia’s major cities, numerous smaller operators are feeling the pinch.

Some are blaming competition from Airbnb, others the commissions charged by online travel agents, but entrepreneur Dick Smith this week told Accomnews he feared for the future of family-run accommodation businesses in Australia

“The government should be spending a fortune in trying to protect small Australian family-owned businesses because they are endangered,” he argued.

“I’m concerned we won’t have local-owned accommodation places if we’re not careful. Globalisation when it comes to the accommodation industry has gone too far.”

ASIC’s figures show that overall, businesses with fewer than 20 employees struggled the most and made up 78 percent of the total insolvencies for the year.

Generally, the top three reasons for business failures were identified as inadequate cash flow or high cash use, poor strategic management, and trading losses.