Carbon tax and hospitality

A study by HLB Mann Judd Brisbane of the hospitality industry in Queensland could be of wider interest to small business owners.
 
While the study was on the impact of the Queensland poker machine tax and increases in minimum salaries on pubs, it also assessed the impact of carbon tax, which will affect all businesses nationally.
 
For small operators in the hospitality area, the findings show that they will come under pressure because of these changes, especially if most of their income is from low margin bottle sales. 
 
Under the modelling, if prices are not increased, small businesses will be facing net losses in 2013.  This is compared to moderate profits in 2012.
 
Medium sized businesses in the hospitality industry are better placed, mainly due to a broader base of income streams.  However, the bottom line will still be impacted, reducing by 26 percent if there is no increase in prices.
 
Large hospitability businesses have the most positive outlook, due to higher income from both gaming and accommodation.  These are largely untouched by the carbon tax.  In addition, they can benefit from the reduction in gaming tax.

	SMALL	MEDIUM	LARGE
Reduction in Net Profit	162,436	185,564	366,653
Percentage Reduction	119.6%	26.75%	12.5%
Carbon Tax Effect	144,972	160,301	327,099
Gaming Tax Effect	(7,399)	(10,601)	(34,471)
Payroll (and on cost) Effect	24,863	35,864	74,025
Required increase to prices of Liquor and Food to keep Net Profit as per 2012	3.61%	3.23%	2.72%

Ultimately, the carbon tax effects on costs will take some months to filter through, but we expect them to be in effect within the next six months. The challenge for most businesses is to manage these costs, at a time when most costs have already been cut back to the bare minimum.
 
For more information on the modeling and assumptions used, contact Steve Gagel on sgagel@hlbqld.com.au