Early warning signs for hospitality and tourism operators on the road to economic recovery

Hospitality and tourism relies on human relationships and social interaction. Changing consumer demands coupled with a reduction in Government stimulus and the added cost of social distancing will have “bottom line” ramifications for many businesses in the lead up to Christmas.

Driven by Government financial stimulus, many hospitality and tourism businesses have resumed operations, changed how they deliver goods and/or have shifted focus towards domestic rather than international markets.

However, a new challenge approaches hospitality and tourism operators. With a temporary and unseasonal spike in activity in the June quarter immediately after the loosening of isolation requirements, many businesses now face a twofold dilemma of:

• not qualifying or only receiving reduced JobKeeper 2.0 during the December quarter; coupled with,

• the likelihood that the Christmas cashflow boost may not eventuate to the extent it previously has due to social distancing restricting Christmas party and summer holiday celebrations.

As such, it is important for hospitality and tourism players, their Directors and stakeholders to act now and continue stay across across the “early warning signs” or lead indicators of financial stress over this time. Whilst trading losses, overdue tax debts and debt recovery letters are obvious indicators, we set out below some further indicators we have seen monitored by companies or their stakeholders in this industry.

Knowing of, identifying and monitoring lead indicators of financial distress facilitates better planning, viability responsive action and helps Directors meet their legal duties.

Early warning signs