After the hospitality boom, regional NSW restaurants are closing one after the other

As winter approached, Josh and Jess Gregory faced a sobering choice: give up their restaurant, or risk losing their home.

Financial projections were bleak. The seafood restaurant they opened during the post-COVID boom of 2023 sat on the banks of the Hunter River in Newcastle, and each time the temperature fell, so too did the number of customers coming through the door. The couple calculated they’d need more than $100,000 to make it through the seasonal slump.

Josh Gregory turned to his wife: “Do we want to double down and borrow more money against our home, and run the risk of losing everything?”

Maybe 10 years ago, he would have “rode it until the wheels fell off”, he said. But now, he had a three-year-old child to care for. The couple closed Thermidor Oyster Bar & Brasserie in December. Josh said he was thankful they made the decision before the landlord made it for them, as he’s seen at other businesses locked out across Newcastle.

It’s one of more than 60 high-profile restaurants, bars and cafes across regional NSW that Good Food has identified as having shut over the past 18 months. Among them are dining institutions including Yellow Billy Restaurant in Pokolbin and Babyface Kitchen in Wollongong; newer hatted restaurants such as Valentinain Merimbula and Roco Ramen & Sake in Brunswick Heads; and popular drinking establishments like The Moonan Flat Pub, The Barrel Shepherd’s cellar door in Wollongong, and Mr Tipsy’s cocktail bar in Lennox Head.

“If I was ever going to open a restaurant again, it would be in the city,” said Andrew Burns, the head chef and co-owner of Babyface Kitchen, who called time in December after 10 years of service. “Every time I go to a decent restaurant in Sydney, it’s full. It might be winter, it might be a Sunday. That’s just not the case in Wollongong.”

The hospitality scene in Wollongong, like other cities and towns across regional NSW, flourished in the years post-COVID due to record levels of internal migration, the NSW government’s almost $1 billion Dine and Discover Program, and the renewed appreciation for restaurants and cafes following lockdown.

“Everyone was so pumped to get back into restaurants, but within 18 months trade definitely dropped,” Burns said. “Things started to die off. The cost of everything just skyrocketed … and midweek it became hard to get people through the door.”

On a Wednesday night in 2025, Burns looked out from the kitchen to see fewer than 10 people in a 50-seater dining room. It was depressing, he said, and he knew it wasn’t getting any better.

That year, ASIC reported a 57 per cent rise in insolvencies across the food and accommodation sector in the 12 months to March. In Wollongong, closures happened one after the other: chef Daniel Sherley shut Rookie Eatery after a decade of service; Neve and Giorgio Piras retired, selling their 43-year-old Italian restaurant Cosa Nostra; and Dirty Wine Shop & Tasting Room finished up after three years of trade.

“We got great support in Wollongong, but I felt like the restaurant hit a ceiling,” Burns said. There wasn’t enough money to refurbish the restaurant, to hire new talent, or to have the entire front of house team on every night. “It was time.”

Burns stepped back to focus on his casual burger and barbecue restaurant, 2 Smoking Barrels.

Australia’s hospitality sector has the highest failure rate of any industry, according to a 2026 CreditorWatch report that showed more than one in 10 restaurants and cafes have collapsed over the past year.

“Pretty much every conceivable cost has increased substantially − labour, food, utilities, insurance, compliance, freight and maintenance − alongside a squeeze on guests’ discretionary spending. It creates something of a perfect storm,” said chef-restaurateur Troy Rhodes-Brown, owner and operator of two-hatted Muse Restaurant in Pokolbin.

Muse Restaurant has built resilience over the past 17 years in business, making it capable of weathering such storms, he said. “But where I really feel for the industry is the independent operators who have only been trading for a few years.

“Opening a restaurant often means putting everything on the line − servicing start-up loans, building a trusted brand from scratch, learning through inevitable mistakes − all within a framework that leaves very little room for error.”

‘Pretty much every conceivable cost has increased substantially alongside a squeeze on guests’ discretionary spending. It creates something of a perfect storm.’

New regional venues are hit harder than most, said restaurateur Kat Harvey-Barakat.

She moved from Melbourne to the Northern Rivers with husband Ric Harvey-Barakat in 2022, just six weeks after an idyllic post-lockdown holiday.

“We were like, ‘Oh my god, imagine if we just opened a restaurant here. All of our life’s problems would be solved’,” she said. The pair brought their Mulgrave burger shop Slicks to Byron Bay and Lennox Head, and later opened an intimate Middle Eastern restaurant, Baraka.

“It is, hand over fist, a million times more challenging to operate a restaurant in a regional area than it is in a capital city,” said Harvey-Barakat.

The learning curve was brutal, she said. Customers were more transient, stock had to travel further, and a single adverse weather event, like a flooded road, could wipe out an entire evening of trade.

“Freight costs to regional Australia have risen significantly,” said Chelsea Smith, who co-founded independent bottle shop Yakka with James Sherley in 2022. The couple closed their Port Kembla store after two years, and pivoted toward pop-up wine bars and events across the South Coast.

It made more sense to rely on their caterer’s liquor licence rather than fork out for another liquor licence when their tenancy ended, she said.

“Weekday trade was harder to sustain in a place like Port Kembla, with minimal foot traffic and a lot of empty shops,” Smith said. “We now focus on pop-up events … where there is a bit more activity at night.”

Chef Manuel Tersigni found there weren’t enough people in Mullumbimby to sustain Rosetta Deli & Bistro during the cost-of-living crisis. He moved from Sydney to open the mid-sized restaurant in 2023, hoping for a more hands-on experience.

“The restaurant had to really consider how much people could actually spend,” he said. “When your profit margins are so thin, you rely on volume, but that’s the twist … The problem in these areas is that there’s not enough volume, so you hit the ceiling very quickly.”

Tersigi closed Rosetta’s in 2025, and returned to Sydney to helm CBD restaurant Margot Osteria.

“Guests really are making that decision, ‘Do I have that extra bottle of champagne with dinner, or do I pay the power bill this month?’,” said Josh. “It really is that stark.”

The Harvey-Barakats closed Slicks at Byron Bay in 2024, unable to compete with a nearby burger shop. Ric Harvey-Barakat said it was an important reminder: in regional communities, where it’s easy to compare, it’s more important to run your own race. That’s what people loved about their restaurant Baraka, which will reopen on May 7, following a brief hiatus to care for the couple’s new child.

“We went into it with a lot of heart, we tried to push who we were as people onto the plates and into the experience, more so than trying to offer the best food you’re going to find because we just can’t compete in that arena,” Kat Harvey-Barakat said. “People don’t buy products, they buy stories … and bookings went absolutely nuclear.”

Josh Gregory, who now works at Roundhouse within Newcastle’s Crystalbrook Kingsley Hotel, says that’s the part of hospitality he hopes diners will remember long after they’ve forgotten the relief of being released from lockdown: “Cooking for someone is like giving them a piece of your soul. To be able to create and share those moments with people, like a toddler’s first bite or someone’s last meal, that’s what’s enduring about hospitality, and that can weather any storm.”