How Successful Hospitality Businesses Manage Their Top Risks

Australian hospitality businesses in 2025 are facing a ‘perfect storm’ of risks. Key issues  include kitchen and food safety incidents, customer and staff injuries, property damage, severe skills shortages, and rising operating costs.

According to the Australian Institute of Credit Management, insolvencies and business failures remain higher in hospitality than in most other industries, reflecting the combined impact of these risks. Managing these hazards well isn’t just about protecting profit but also people and reputation.

Top Risks Under the Spotlight

Each year, more than 4.6 million Australians suffer foodborne illness, leading to almost 48,000 hospitalisations, 38 deaths and an estimated $2.1 billion in economic costs. If an outbreak is traced back to a venue, the legal and reputational fallout can put the entire business at risk.

High staff turnover makes the challenge even tougher. While the average Aussie workplace loses about 15–16% of staff annually, around 40% of hospitality businesses see one in five employees leave each year. Every new hire must also be onboarded in line with Fair Work rules covering pay, superannuation, and rostering. Minimum wage and penalty rate increases can add further financial pressure. Skills shortages remain severe, especially for experienced chefs and front-of-house leaders. Many left the industry during the pandemic and haven’t returned, forcing some venues to cut hours or push existing staff harder.

Wholesale food prices in Australia rose 3% year-on-year in Q2 of 2024–25, says Trading Economics. That’s down from 3.2% the previous quarter and below the 4.1% CPI rate. Even with slower food price growth, many hospitality operators face steeper overall cost increases as other expenses keep climbing.

Add in commercial rent hikes, late-night shifts, complex liquor licensing rules, and seasonal crowd surges during school holidays or major events, and venue owners are constantly balancing safety, compliance, and profitability.

Business insurance premiums are also up. Many hospitality businesses have seen annual increases of 5% to 10%. What’s driving this trend is inflation and higher claims, so there’s a chance many hospitality SMEs will face higher quotes during renewals.

The Three Essential Covers Every Venue Needs

Training, maintenance, and strong safety systems can help reduce some risks, but others require solid financial protection through insurance.
Three covers are particularly important:

• Public & product liability: Protects against claims that a guest or third party was injured or became ill because of your business premises or operations — from a spilt drink on the floor to contaminated produce. Costs for legal defence can be high even when you’re not at fault.
• Workers’ compensation: Legally required for all paid employees — casual, part-time, full-time and apprentices — and covers wages, treatment, and rehabilitation after a work injury or illness. States and territories have different rules, so compliance checks are important
• Business interruption: Keeps cash flow going if your venue shuts temporarily because of events like fire, flood, or power outages, covering lost income and helping retain staff

Other Covers Worth Considering

Not all venues face the same risks, so consider:

• Equipment breakdown: Covers repair/replacement of essential equipment like refrigeration, coffee machines, or cooking gear if they fail suddenly
• Glass cover: Often mandated in commercial leases for protection of internal and external glass
• Cyber insurance: As bookings, POS and payments move online, this helps protect against cybercrime, data breaches, and online outages
• Customised insurance: Off-site catering, events, or high-casual workforces often need tailored solutions for full protection

Don’t Let a Claims Gap Derail You

Being underinsured or holding the wrong type of policy can be just as risky as no cover at all. Expanding your premises, seasonal changes, adding services, or changing your workforce mix should always trigger an insurance review.
Safe Work Australia advises making sure every policy stays aligned with current workplace health and safety laws.

Let’s Talk it Through

You don’t need to navigate the complexity of insurance alone, or rely on generic comparison websites.
An experienced insurance broker or adviser who knows hospitality and local rules can guide you to the right cover. We’ll help protect your business, team, and reputation all year. Let’s discuss now how we can help your SME identify and manage its risk profile.

123 Insurance Pty Ltd ABN 67 621 727 722 ATF for 123 Insurance Unit Trust ABN 46 332 885 229 trading as Bell Partners Insurance is an authorised representative number 1259573 of Community Broker Network Pty Ltd ABN 60 096 916 184 AFSL 233750. This advice has been prepared without taking into account your personal objectives, financial situation or needs. You should therefore consider the appropriateness of the advice, in light of your objectives, financial situation or needs before following the advice. Please obtain a copy of, and consider the Product Disclosure Statement applicable to the general insurance product before making any decision.