Struggles in the Hospitality Industry: How F&B Businesses Are Adapting

The hospitality industry is facing a perfect storm of rising costs, inflation, staffing shortages, weaker tourism, changing consumer habits and post-COVID lifestyle shifts. Restaurants, bars and hotels are responding by controlling costs, investing in people, reducing waste, developing new concepts and finding stronger ways to reconnect with their guests.

Why Is the Hospitality Industry Under Pressure?

Across markets, hospitality businesses are dealing with many of the same problems: the cost-of-living crisis, inflation, recruitment challenges and changing post-COVID consumer behaviour.

But the pressure looks different from city to city.

In Beijing and Hong Kong, reduced tourism and the departure of expatriates have affected customer spending. In Hong Kong, rising rents add another layer of pressure. In Melbourne, hospitality operators are dealing with reduced CBD footfall as more people work, shop and eat from home.

For businesses already operating on tight margins, fewer customers combined with higher operating costs can quickly become a serious problem.

Hong Kong: Tourism, Rent and Staffing Challenges

Alan Wong, CEO and founder of Beijing-based Hatsune Restaurant Group, describes the current situation as a “total meltdown.” Having spent more than 20 years in the industry, he believes the downturn began in Beijing before moving south towards Hong Kong.

One major difference, he says, is the disappearance of Chinese visitors and their spending power.

Josh Chu, partner and food and beverage director at Red Sauce Hospitality, agrees that tourism remains an important issue, alongside the exodus of expatriates.

For Hong Kong restaurants, ever-rising rents make the challenge even tougher.

Chu believes survival requires more than simply cutting costs. Restaurants need to introduce fresh concepts, communicate better with customers and negotiate with landlords where possible.

But perhaps most importantly, businesses need to invest in their teams.

With hospitality businesses struggling to attract people interested in F&B careers, Chu says that training and building a positive workplace culture are essential.

Doing More With Less

For Amy Li, co-founder and CEO of Vietnamese restaurant SUSU in Beijing, controlling costs means creating professional systems and standards.

Rather than aggressively opening new locations, SUSU is focusing on strategic collaborations.

One example is launching a new product line within a shopping mall to promote its core offering, pho, while maintaining an attractive price point for consumers.

It is a useful reminder that growth in a difficult market does not always mean opening another restaurant.

Sometimes, it means finding smarter ways to reach customers with the products you already do well.

Melbourne Hospitality: Where Have All the Customers Gone?

For Melbourne gastropub owner Iain Ling, one of the biggest challenges is simply footfall.

Many CBD buildings remain below capacity, creating a knock-on effect for restaurants, cafés and pubs that depend on office workers and city visitors.

As Ling puts it, the economy needs people “in the street and moving around spending small amounts here and there.”

Pubs have one advantage: customers can visit simply for a drink rather than a full meal.

But when neighbouring businesses continue to close, maintaining motivation becomes increasingly difficult in an industry built around energy, hospitality and welcoming people through the door.

Turning Waste Into Opportunity

For Keith Sawyer, head wine buyer for Hazel restaurant and Dessous wine bar in Melbourne, simply waiting for the hospitality industry to return to its pre-COVID strength is no longer enough.

His venues are looking closely at what they already have and finding creative ways to build value.

His advice is surprisingly simple: look in the rubbish bin.

Can something that would normally be discarded be reused?

This philosophy extends beyond food waste. Sawyer also focuses on creating stories and connections around the products his venues serve — including knowing the people who catch their fish and working with “Shuck don’t Chuck” to recycle oyster shells for reef restoration.

The goal is bigger than sustainability.

It is about giving guests something meaningful to connect with — and giving them a reason to come back.

What Can Hospitality Businesses Do to Survive?

While every market has its own challenges, several strategies emerge from these industry perspectives:

The common thread is adaptation.

Hospitality has always been about responding to guests. Today, that means responding not only to what customers want to eat and drink, but also to how they live, spend and socialise.

For restaurants, bars, hotels and F&B operators, the businesses most likely to weather the pressure may be those that combine financial discipline with creativity — without losing the human connection that makes hospitality worth coming back to.

The Future of Hospitality Is About Connection

The challenges facing hospitality are very real, but the industry's response is revealing something equally important: creativity is becoming a survival tool.

From strategic collaborations and smarter cost controls to staff culture, waste reduction, and stronger storytelling, successful operators are finding new ways to create value.

And ultimately, hospitality still comes down to people.

Give guests a reason to walk through the door, a reason to stay, and — most importantly — a reason to return.

By Annabel Jackson

FAQs

What are the biggest challenges facing the hospitality industry?

The major challenges include inflation, rising operating costs, staffing shortages, reduced tourism, changing consumer behaviour, high rents and lower customer footfall. Post-COVID lifestyle changes have also affected how and where consumers spend their time and money.

How are restaurants dealing with rising costs?

Restaurants are responding through tighter operational systems, waste reduction, strategic collaborations, menu and product innovation, price-conscious offerings and negotiations with landlords.

How can hospitality businesses attract and retain staff?

Investing in training, professional development and a positive workplace culture can help hospitality businesses attract employees and improve retention, particularly when competition for F&B workers is high.

How can restaurants increase customer loyalty?

Restaurants can strengthen loyalty by creating memorable experiences, developing authentic stories around their products, communicating effectively with customers, and building a stronger sense of connection with the local community.

Is sustainability becoming more important in hospitality?

Yes. Waste reduction and responsible sourcing can help businesses control costs while also giving customers meaningful sustainability stories. Examples include repurposing ingredients and recycling food-service waste such as oyster shells.