‘Bloodbath’: Sydney restaurants brace for one of the toughest winters on record

As Sydney digests a tough couple of months with high-profile restaurant closures, Wes Lambert has a sobering prediction for the rest of the year: “It will be a bloodbath.”

As chief executive of the Australian Restaurant and Cafe Association, Lambert is in a unique position to take the industry’s temperature, and he doesn’t like what he sees. He expects closures for restaurants and cafes in 2026 to hit one in every seven or eight businesses, accelerating from CreditorWatch figures published in January that highlighted a 10.4 per cent closure rate for food-service businesses for the past year.

Labelling it “the great storm of 2026” for the hospitality industry, Lambert doesn’t need data to foreshadow what’s ahead. He is on WhatsApp groups with hundreds of operators and “they’re all saying the same thing”. Business is already unusually tough, with winter setting in.

Forthcoming wage hikes in July add to a list of financial hurdles for operators compounded by “a continued fall in tourism” and higher transport and produce costs due to the US-Iran conflict. Lambert said that spring doesn’t promise much reprieve, with higher wages for young adults being phased in later this year and the looming prospect of a forced nationwide hike in menu prices when the credit card surcharge ban lands in October.

“The industry expects it to get worse before it gets better,” Lambert said.

‘It still feels busy, but instead of buying two cocktails [customers] are buying one.’

Vince Lombardo, Maybe Sammy

There are some hopeful signs in certain sectors, however, with restaurant reservation company OpenTable saying more affordable and mid-priced venues are showing the biggest growth in dining.

“While restaurants are operating under undeniable pressure, the data shows that Sydneysiders are still prioritising dining out; they’ve just become more intentional,” OpenTable’s general manager for Australia, Drew Bowering, said.

“We remain deeply optimistic as Sydney’s restaurants evolve rapidly, proving that when a venue offers value [such as promotions and happy hours] and a sense of occasion, demand is there.”

While acknowledging the “range of challenges” hospitality now faces, 24-Hour Economy Commissioner Michael Rodrigues said that nighttime in-person spending had remained steady despite macroeconomic challenges, with established nighttime precincts – those where businesses, local and state governments work together to bolster local business – proving more robust.

The City of Sydney, Burwood and Inner West all recorded strong results in the March quarter of 2026, he said, outperforming the same period in the previous year by 4.2 per cent, 7.6 per cent and 4.1 per cent, respectively.

Still, concern lingers among many of Sydney’s established and ambitious venues. Chef Junda Khoo is typical of restaurateurs Good Food spoke with who said trade was down about 15 per cent. With his Ho Jiak restaurants in Sydney and Melbourne, Khoo has a snapshot of the two cities. “With Melbourne, the spend is still there, Sydney has dropped more, maybe because of the higher mortgages.”

Chef Orazio D’Elia echoes these concerns: “It felt like winter arrived early in Bondi this year.” The seasoned operator behind Good Food Guide hatted beachside restaurant Da Orazio said that many customers were spending less, sharing pizzas and drinking water.

Vince Lombardo, who operates award-winning Sydney CBD cocktail bar Maybe Sammy and Mexican bar-eatery El Primo Sanchez in Surry Hills, also estimates “established” venues are down about 15 per cent. “That’s all their profit,” he said.

“It still feels busy, but instead of buying two cocktails, [customers] are buying one, and instead of buying an expensive bottle, they’ll choose something for $60 or $70,” he said.

One operator, who asked not to be named, said: “If you’re down 20 per cent, you’re ahead of the curve.” Another added: “The hospitality industry is already in recession.”

Operators bemoan the recent federal budget as lacklustre in offering relief to the hospitality industry, one of the country’s biggest employers.

“If [the government] wanted to save the industry, they’d remove payroll tax or reduce GST [to slow inflationary pricing on menus],” said Ibby Moubadder, who operates a stable of hatted restaurants such as Aalia and Nour as well as the Henrietta charcoal chicken chain.

“It’s not because [operators] want to go out and buy a Ferrari. It’s so they’re not in a state of anxiety about whether they’ll make it through winter.”

“I always refer to hospitality as like running on a soccer field and people throwing things at you, constantly dodging while you’re playing,” he said.

Restaurateur Anna Pavoni and her chef-husband Alessandro have had to navigate several economic cycles; they opened Ormeggio at The Spit during the global financial crisis. With a stable of Sydney venues that now include Postino Osteria and Vineria Luisa in the inner west, and mega-venue Cibaria Manly, the Pavonis have a broad snapshot of the city and maintain that the relationship with customers is vital.

“There’s obviously a mountain of compliance these days, and operators need to tighten their purse strings, but I do believe the public are a great support,” she said.

“They remember during COVID when they couldn’t go to restaurants, and were there when they reopened. I have an issue with the doom and gloom.

“You need to be adaptable and flexible, whether that’s flipping a restaurant concept or turning the menu on its head like we’ve just done at Ormeggio by introducing a larger meat component. Evolution and responsiveness is the key to survival.”