The hospitality industry is exhausted. After surviving COVID shutdowns, labour shortages and years of operational instability, many operators believed the worst was finally behind them. Now, rising fuel costs linked to the Iran war, falling consumer confidence and mounting operational expenses are creating what some hospitality leaders describe as “that eerie feeling” all over again.

“It’s just choking us,” one hospitality operator told the AFR recently. “I feel like I’m going through COVID again.” For an industry already operating on razor-thin margins, the latest wave of economic pressure is exposing a much larger problem beneath the surface.

Many hospitality businesses still lack the workforce visibility needed to protect margins, control labour costs and manage payroll complexity during volatile conditions.

Hospitality Is Feeling The Pressure First

Hospitality is often one of the first industries to feel the impact of economic uncertainty. As CreditorWatch CEO Patrick Coghlan described it recently, “Hospitality is the canary in the coal mine.”

And right now, the warning signs are everywhere. Customers are still dining out, but behaviour is changing. Spending is becoming more cautious. Venues are absorbing rising supplier costs while trying to avoid passing too much pressure onto consumers.

At the same time, labour costs, payroll obligations and workforce complexity continue increasing behind the scenes. This creates an uncomfortable reality for operators:

Revenue uncertainty on one side.
Operational complexity on the other.

According to recent AFR reporting, 11.2 per cent of food and beverage businesses closed in the 12 months to March, the highest level on record. Hospitality also recorded the highest insolvency rate of any sector during the same period. Those figures came before the latest fuel disruption impacts fully flowed through the industry.

The Pressure Is Coming From Every Direction

Restaurants, pubs, cafes and venue groups are now managing multiple financial pressures simultaneously:

• Higher supplier costs
• Fuel levies and transport surcharges
• Wage increases
• Payroll tax pressure
• Workers compensation increases
• Card fee changes
• Ongoing labour shortages
• Reduced consumer confidence

The challenge is that many hospitality businesses cannot simply pass these costs onto customers.

“There’s only so much that we can charge our customers, because we need people coming through the door,” one operator said. Consumers are becoming increasingly value conscious.

Many are still eating out, but spending differently:

• Choosing cheaper menu items
• Visiting trusted venues less frequently
• Sharing meals
• Staying local instead of travelling into city dining precincts

This means operators are being squeezed from both sides.

Costs are rising.
Consumer spending is tightening.
Margins are shrinking.

The Payroll Problem Often Starts Long Before Payroll

One of the biggest misconceptions in hospitality is that payroll issues begin inside payroll systems. In reality, many labour cost and compliance problems start much earlier in workforce operations.

This includes:

• Poor forecasting
• Rosters that do not align to demand
• Overtime visibility gaps
• Incorrect award interpretation
• Manual approvals
• Inconsistent time capture
• Disconnected systems across venues

When margins tighten, these operational inefficiencies become significantly more dangerous. A small percentage of unnecessary overtime across multiple venues can quickly become hundreds of thousands of dollars annually.

Minor award interpretation errors can create major compliance exposure. Labour leakage that may have previously gone unnoticed suddenly becomes material to profitability. This is why many hospitality businesses are shifting focus upstream. The conversation is no longer just about payroll processing. It is about workforce visibility.

Why Workforce Planning Matters More During Economic Pressure

Hospitality operators cannot control geopolitical instability or consumer confidence. But they can improve how labour is planned, managed and validated.

Stronger workforce planning helps businesses:

• Align labour demand with customer demand
• Reduce unnecessary overtime
• Improve roster efficiency
• Increase operational visibility
• Identify labour leakage earlier
• Improve award interpretation accuracy
• Reduce payroll compliance risk

This becomes critically important in multi-venue hospitality groups where complexity increases rapidly across locations, awards, shift patterns and workforce types. The operators managing current conditions best are typically the ones with the strongest operational visibility.

Not necessarily the biggest businesses.

Not necessarily the busiest venues.

The businesses with the clearest understanding of labour performance, workforce costs and compliance exposure.

The Cost Of Getting It Wrong

Hospitality businesses are now operating in an environment where small mistakes carry larger consequences. Understaffing impacts customer experience and revenue. Overstaffing damages margins. Payroll inaccuracies create compliance risk and reputational exposure. Manual processes create inconsistency and inefficiency.

At the same time, employees increasingly expect accurate pay, predictable scheduling and better workplace experiences. The balancing act has become significantly harder. This is particularly true for hospitality groups managing multiple venues, enterprise agreements, junior rates, casual workforces and changing award obligations. Without visibility, many businesses are effectively making labour decisions reactively instead of proactively.

How Hospitality Businesses Are Responding

Across the industry, stronger operators are focusing on three key areas:

Better Workforce Forecasting

Using historical trends, demand patterns and operational data to improve roster planning before labour costs escalate.

More Accurate Award Interpretation

Reducing compliance risk by ensuring worked time is interpreted correctly against awards and agreements.

Improved Payroll Validation

Identifying underpayments, overpayments and labour leakage before issues become larger financial or legal problems. This is where businesses are increasingly using platforms like OAHI to improve workforce visibility across planning, interpretation and payroll validation.

OAHI Workforce Management helps organisations forecast labour demand and optimise scheduling before problems occur.

OAHI Pay Rules helps businesses accurately interpret complex awards and agreements.

OAHI Pay Pulse helps validate payroll outcomes and identify hidden compliance or cost risks after payroll is processed.

Together, this creates greater visibility across the entire workforce lifecycle.

Hospitality Resilience Requires Better Visibility

The hospitality industry has always been resilient. But resilience becomes harder when economic pressure, labour complexity and compliance obligations continue increasing simultaneously. Businesses that improve operational visibility, workforce planning and payroll accuracy will be better positioned to protect margins while maintaining employee and customer experience.

The current environment is forcing hospitality leaders to rethink how workforce operations are managed. Not just to survive current pressures. But to build stronger operational resilience for the future.

If your hospitality business is facing growing labour pressure, payroll complexity or margin challenges, now is the time to review the systems and processes driving workforce operations behind the scenes.

Speak with OAHI to learn how stronger workforce planning, award interpretation and payroll validation can help improve visibility, reduce risk and support operational performance across your venues.

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