Renowned Auckland restaurateur Chand Sahrawat says it's "heartbreaking" to see many operators struggle, but there is room for hope. Photo / Good Food Journeys
The battered hospitality sector is scrambling for help to survive the next six months.
“Cashflow is tight for everyone,” restaurant operator Chand Sahrawat says. “We’ve been saying since Covid: It’s not a time to make a profit, let’s break even.”
But the Covid hangover has been hard to cure, with high inflation, erratic tourism numbers and now the winter low season pushing some operators into trouble.
Not every restaurant and bar is in crisis. But the situation is dire enough for Vivace’s Mandy Lusk to pen an open letter warning she might join the ranks of SPQR and others who’ve gone out of business.
“I don’t think many of us have been profitable since 2020,” says Sahrawat, who operates Cassia, French Cafe and Ponsonby’s KOL bar.
With mortgages up and card spending down, the rest of 2024 could be an endurance test for many.
Behind high-profile closures such as SPQR, hundreds of operators and thousands of staff face an uncertain future.
Businesses across the sector are grappling with declining revenues, reduced customer numbers, and deteriorating mental health among operators.
A Restaurant Association survey yesterday indicated 78% of Auckland businesses and 76% nationwide said revenue was down on a year ago.
“There are some operators who are doing well and almost too reluctant to say that openly,” Hospitality NZ chief executive Steve Armitage says.
But many might be wondering how they’ll make it to summer.
Armitage expects some initiatives to be announced at the Hospitality NZ Conference in Christchurch on July 30.
He says more mental health support and advice for operators and their loved ones is being planned.
“We’re looking at something that is very targeted at those who are experiencing issues on the frontline.”
He adds: “How do we empower people close to those who are suffering?”
Forming alliances with retail, another beleaguered industry, could be crucial.
“There’s a symbiotic relationship, for sure.”
Inflation is slowing, interest rate cuts look likely and tourism is generally picking up. But not everyone has the money to weather another few months of malaise.
“The cash reserve situation can be very mixed and then you’re looking at where you cut costs,” Armitage says.
Many owner-operators are working long hours and in his words, trying to do everything themselves, while providing food and drink worth making a trip for.
“The quality of what is being provided by the hospitality sector is still of a very high standard.”
But consumers are often staying home, or spending less when they do go out.
In Auckland, construction and road closures dissuaded many punters from going out, Armitage says.
But plans are underway to get more events staged, and change the downtown atmosphere to make it a more attractive night-time dining destination.
“We’re actively working with Auckland Council and other partners on a night-time economy.”
The CBD’s reputation for drunkenness and violence, whether deserved or not, is a barrier but Armitage says recent inner-city policing announcements are a positive step.
Armitage says city centres face some unique hospitality challenges - one being the many people who still choose to work from home.
“You could make a counter-argument that the suburban establishments have probably picked up a wee bit. [But] it certainly continues to be an issue for city centre environments, particularly on the Mondays and Fridays.”
A summer tourism boost might inject vigour into some restaurants.
He says news from the accommodation sector on forward bookings is encouraging, and there’s strong demand from North America.
Unite union’s John Crocker says tough times typified the past few months but “crisis” is too dramatic a term for the sector’s troubles.
“The restaurants, bars, cafes we’re dealing with, they’re telling us in bargaining they’re facing a tough time. We’re taking that with a grain of salt but from some of our work in the field, we’re seeing lighter patronage.”
Fast food was so busy some of the workers he represents there worry about under-staffing. But other operators are cutting staff - Crocker says he attended a restructure meeting on Thursday.
“You’ve got to look past the headlines. Hospo businesses turn over all the time. You’ve really got to look at the numbers. Look at the vacancies.”
Much economic and card spending data has been grim lately.
Crocker says consumers clearly want to cut discretionary spending, but could still find ways to support their local hospo staff.
An impulsive outing would likely be more expensive than a well-researched one.
“Maybe plan it more ... Don’t not go to a restaurant and then get depressed and go online shopping.”
Westpac senior economist Satish Ranchhod says relief for hospitality is probably still about six months away.
Interest rate cuts expected later this year may take a while to relieve cost-of-living pressures and rising unemployment.
“Households are very nervous about their spending and they’ve been winding back.”
He says Westpac data for all credit and debit card transactions in New Zealand showed second-quarter spending down 9% compared to a year earlier.
The downturn was most severe in Auckland, Wellington and Christchurch.
“People are spending less, or going out less.”
When sacrifices must be made, dining out is often first to take a hit.
But he says people should get more purchasing power in the early New Year if inflation trends continue and the Reserve Bank cuts the Official Cash Rate - and tourism also has room for growth.
“Tourism flows are around 80% of their pre-pandemic levels. What we’re missing now are the visitors from Asia, especially China.”
Heart of the City chief executive Viv Beck says more events and business co-operation should help hospitality.
“You can still go into places and see they’re very full. The figures tell a story, though.”
She says CBD sales figures for restaurants and cafes for last month were down 13% year-on-year.
Beck hopes this August’s Restaurant Month promotion and the influx of events such as this week’s World Choir Games should boost hospitality but more events are needed in future.
“Not everyone benefits from every event, but major events do make a difference.”
Meanwhile, Sahrawat, over at her Ponsonby Rd cafe not far from SPQR, says you don’t have to be optimistic to work in hospo, but it probably helps.
“It’s heartbreaking to see some really amazing operators having to go through this ... it’s hard out there. We have mortgages as well.
“If you want your favourite place to survive, don’t assume it’s doing well.”
John Weekes, online business editor, has covered beats including consumer affairs, crime, court and politics at different newsrooms since 2011.
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