Auckland's flash bars first to recover

High-end bars have fared better than lower-end establishments since the economic downturn. Photo / Kenny Rodger

Light at the end of the tunnel is growing brighter for bars and restaurants but a business adviser warns it is still not a good time to get into the hospitality trade.

The industry faced a tough haul through to early summer although Auckland establishments were already in recovery, said Andrew Harris, a business advisory partner for chartered accountants Grant Thornton.

Based on Statistics NZ figures and feedback from clients, he said Auckland appears to have started a gradual recovery around October-November last year, but Wellington and Christchurch have yet to see any such lift.

Tough times are reflected in Hospitality Association of New Zealand figures which show 150 members have closed or been put in receivership in the past year.

Latest retail trade figures show the Auckland and Waikato regions averaging 5 per cent growth over the previous six months, with the Wellington and Christchurch regions both showing negative growth.

"It is pretty much the same for the bars and restaurants that we act for, although restaurants and cafes appear to be recovering slightly faster than bars and clubs."

The "last supper" for the Auckland hospitality industry was around September in 2008 with a gradual recovery for restaurants beginning late last year and bars about March this year.

Middle- to higher-end bars recovered first with the construction downturn in central Auckland hitting lower-end bars.

"Some drinkers have moved to clubs like the RSA where they can drink more cheaply, while others are buying from the supermarkets and drinking at home because they have lost their jobs or had their hours cut," said Harris.

Harris said that many bars struggled through last winter, and looked to summer to build some fat to get them through this winter.

"Unfortunately for many, the summer did not give them the profit needed to see them through a second winter of discontent. There's no fat left and they are walking a tightrope," he said.

"Things are dire out there for many bars, definitely the toughest trading conditions seen in at least 20 years."

Harris said now was not the time for those thinking of buying or opening a bar, unless they are well advised and have a strong equity position.

"The banks and breweries have picked the players they will support, and if you are outside their respective teams, there are not a lot of places to hide."

The recession had highlighted an oversupply of bars and restaurants.

Harris said the impact of October tax changes - a GST increase and personal tax cuts - could be broadly neutral. Further ahead, the hospitality sector could look forward to a better 2011, largely because of extra spending during the Rugby World Cup.