Pubs, restaurants, and cafes across regional Australia are unlikely to abandon public holiday and weekend surcharges any time soon, as the cost of doing business outweighs the risk of deterring price-conscious customers.
Tuesday marks the Melbourne Cup public holiday in Victoria, providing a day off work to hundreds of thousands of big business employees — while forcing small employers to make tough decisions.
Businesses that pay public holiday loadings to casual staff could turn a loss for the day if trade is slower than expected.
But adding a surcharge to cover those penalty rates carries its own risk, as diners might simply take their money elsewhere.
That balancing act is apparent in the town of Bright, nestled in Victoria’s north-east high country, which swells with visitors each time the Melbourne Cup public holiday rolls around.
Across the alpine region, local venues are open for business, with 15% public holiday surcharges tacked onto customer bills.
Some venues have extended 10% surcharges to Sunday trade, making extra fees perennial for weekend visitors.
Bruce Hore is an executive member of the Bright Chamber of Commerce, which represents hospitality, retail, and tourism businesses across the region.
Speaking to SmartCompany, Hore said local traders trying to turn a profit through the public holiday have few options outside of surcharges.
“Casual employees will be getting around $60 or $70 an hour for this period,” Hore said.
“You can try and price your food to include that cost, but you’ll become very, very uncompetitive during the rest of the period.”
Alternatively, some business owners have chosen not to roster casual employees at all, taking on the task of running kitchen, counter, and coffee machine themselves.
“If you walk up and down Bright’s main street today, you’ll find it’s actually the mum-and-dad owners who are running the stores, because that’s the way that they avoid paying those incredibly hefty penalty rates,” Hore said.
But if it is not viable to increase menu pricing or go without casual staff, there are two remaining options: add a surcharge, or close up entirely, forgoing any potential profit from the tourist influx.
“Once you get to a medium-sized business with eight to 10 casual employees, you really don’t have a choice but to pass these additional fees on to the consumer,” Hore said.
Bright is no outlier: hospitality businesses across Australia are expanding surcharges in response to rising costs.
Late last year, Geelong restaurant Pavilion made national headlines for installing a 10% ‘peak season’ surcharge over the Christmas trading period, and maintains a 20% surcharge on public holidays.
A spokesperson for Pavilion operator Only Hospitality Group justified the surcharge to the ABC, saying the businesses rented a house to shelter staff who relocated from Melbourne through the busy summer period.
Finding the right full-time staff is a challenge in many regional areas, as workers struggle to pay rent in locations overtaken by temporary holiday rentals.
Many businesses in Bright would like to convert their casual employees to permanent staff members, which would slightly reduce the wage bill on weekends and public holidays, Hore said.
However, “the seasonality of custom here, along with the employees who go to the snow each year, makes that difficult,” he said.
And the same distance from capital cities — which makes regional Australia so enticing to holidaymakers — embeds business costs that metropolitan traders don’t face, he continued.
Hore, who serves as telecommunications spokesperson for the Chamber, said regional mobile networks need improvement.
“When 20,000 of our closest friends rock up,” mobile networks can be rendered “completely useless,” he said.
“Now, what happens then is businesses can’t process transactions via 4G or 5G, so their EFTPOS machines don’t work.
“So they end up having to buy NBN so they can get wi-fi so they can make their EFTPOS processes to work.
“If we lived in the city, there would be no acceptance of that situation, where a business was forced to spend an extra $1,200 a year to have NBN just because their EFTPOS machine can’t use mobile data for a month of the year.”
New data suggests hospitality and retail businessowners are particularly vulnerable to those rising costs.
A survey of 503 business owners and decision-makers, commissioned by Prospa, shows 89% of those in retail and hospitality say they are personally affected by rising costs — more than any other industry sector.
Given those cost pressures, it appears hospitality surcharges are here to stay.
But at what point will consumers, many of whom are already reducing discretionary spending in a tough economic environment, walk away from cafes charging an extra 15% surcharge?
“That’s not a Bright question,” Hore said.
“I think that’s an Australia question.”
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Senior Business Journalist
Focused on the small business sector, David’s work covers the political, regulatory, and economic issues facing Australian entrepreneurs. Prior to joining SmartCompany, he was a reporter for Business Insider Australia. You can follow him on LinkedIn.
