Hospitality is bouncing back, but chronic staff shortages remain a major problem. Photo / 123RF
One of the lifebloods of our economy, the hospitality sector was dealt a cruel blow by the Covid-19 pandemic.
Starved of tourists and local punters, the industry has been left battered and hanging by a thread.
Now the shackles are off. Borders are open. Patrons are back. And so too are events.
But just as Covid’s long tail has lingered in the community, so too has its impact on many businesses.
So has the sector made a comeback and what does 2023 look like?
Two women at the forefront of the $12 billion-plus industry say it’s actually bounced back stronger than expected, but say chronic staff shortages remain a real concern.
Julie White, chief executive of Hospitality NZ, said the industry was getting closer to pre-Covid levels.
“Things are certainly looking much better than they did this time last year when our borders were still shut.
“Sports and music events have drawn big crowds and business events are at or above pre-Covid levels. This has had a positive halo effect for everyone involved in hospitality.”
She said the accommodation sector was reporting stronger forward bookings and higher occupancy rates than at any time since early 2020.
And even with a cost of living crisis, White says customers are telling them they will curb their spending in retail but still dine out.
“We’re confident consumers will use more of their discretionary spending in hospitality as they look to connect with people as they tighten their belts,” she said.
“They are still keen to get a coffee, though perhaps not as many as previously, and social occasions remain important in these tougher times.”
Restaurant Association chief executive Marisa Bidois said its members were optimistic ahead of the festive and summer season.
This is a stark contrast to the dire industry insider predictions just a year ago.
Last August’s return to Alert Level 4 plunged the hospitality industry back into uncertainty, with many fearing for their survival.
This was followed by months of restrictions under ‘red light’ of the Covid-19 Protection Framework (or traffic light system) that squeezed hospitality’s opportunity at a comeback over the summer.
But calls of restrictions being a final “nail in the coffin” for operators are now firmly in the past.
“Data shows that the industry is bouncing back well with more people dining out. This will of course be boosted by the return of visitors to our shores,” Bidois said.
The Restaurant Association Hospitality Report, released earlier this week, revealed New Zealand’s hospitality sector achieved record sales of over $13.38 billion for the year ending September 2022, buoyed by a sales increase of 7.7 per cent over the previous year.
Revenue gains increased 10.75 per cent on pre-pandemic figures.
Cafes and restaurants recorded annual sales of $6.6b, more than 15 per cent higher than 2019.
Over half of every dollar spent dining out was spent at a restaurant or cafe, the report said.
“Until the pandemic hit, the hospitality industry contributed $12b to the economy, making it one of New Zealand’s largest industries,” Bidois said. “Forecasting has shown that without Covid interruptions, the industry would likely have been posting annual revenues of $14b.”
But there are some big challenges facing the industry threatening to sour its mood.
Bidois said staffing levels were at “crisis point”.
“The single biggest issue [for members] is access to skilled labour.
“This ultimately impacts revenues as businesses need to restrict their opening hours to compensate for the lack of staff.”
At 0.37 per cent, employee growth level is its lowest in more than 10 years, the Restaurant Association Hospitality Report found.
Employee numbers for 2022 are sitting at 135,000.
“The industry is predicted to need another 30,000 employees to keep up with the pace of growth over the summer period,” Bidois said.
Increasing labour and food costs are also putting pressure on businesses.
Bidois pointed to annual food prices in October which increased at a 14-year high of 10.1 per cent, but restaurant meals and ready-to-eat food prices only increased 7.5 per cent.
“Restaurants are being hit by both labour and food price increases with more price hikes and wage increases pending.
“Margins in the hospitality industry are deceptively low, with an average between just 4-7 per cent. There isn’t a lot of wiggle-room there.
“Our sector is being pushed to the brink with compounding compliance costs, difficulty in finding staff, and restrictive immigration policy which has made it hard to bring workers in.”
White said 86.5 per cent of respondents to its Summer Readiness Survey felt it was harder to find experienced staff than 12 months ago, and 77.4 per cent said it was harder to get entry-level staff.
She said the Government could help this issue in two ways.
“By altering immigration settings to make it easier for people with the skills we need to come here, and by offering more targeted funding for Kiwis to enter the industry. These are both crucial to keeping the recovery on track.”
Meanwhile, half of the Summer Readiness Survey said they were very concerned about fair pay agreements.
White said recovery in 2023 “will be under something of a cloud of regulation, starting with Hospitality Fair Pay Agreement and the Sale and Supply of Alcohol Act review.”
Immigration Minister Michael Wood acknowledged that people to people movement globally remained slow compared to pre-Covid levels.
“We are listening to the concerns of these sectors, and working with them to take practicable steps to unlock additional labour, as businesses work towards more productive and resilient ways of operating,” he said.
“We are supporting the tourism and hospitality industry by providing median wage exemptions for specified tourism.
“There is also a steady return of key labour sources, with over 21,000 working holiday visitors arriving in the country, out of the 38,000 approved since March and thousands more are expected to arrive in the coming months.”
Wood noted that working holiday makers already in New Zealand with visas expiring between August 26 and May 31 next year had been extended by six months to help the hospitality sector retain staff.
While the sector has shown signs of a comeback, many businesses are not out of the woods as they recover from the impacts of the pandemic.
Less than three weeks ago Malaysian-fusion restaurant chain Madam Woo was part of a restaurant group placed in the hands of voluntary administrators, citing the impact of Covid and an extreme shortage of staff for its troubles.
“Many are still paying off debt they incurred to try to keep their doors open and their staff paid during the tough days of 2020 and 2021,” White said.
“But they have showed they are resilient people and we are confident they will get through. They just need people to go out more and to travel more.”
White said 44 per cent of respondents to its Summer Readiness Survey felt their business position would improve in the next 12 months, while 27 per cent expected it to remain the same.
By the end of September last year, the Restaurant Association had estimated that more than 1000 hospitality businesses had gone under since the beginning of the pandemic, with a loss of about 13,000 jobs.
Following on from the success of the Rugby Women’s World Cup last month, and a steady stream of big name artists returning to our shores, there’s plenty more for local hospitality operators to look forward to in 2023.
But none will be larger than that of the FIFA Women’s World Cup.
The tournament, which will be jointly hosted by New Zealand and Australia in July and August, is a major draw for both countries.
An independent assessment forecast that the World Cup will deliver nearly $200 million into the New Zealand economy, while attracting 25,000 international visitors.
New Zealand will play host to four groups – including the defending champions United States – and select knockout games (which includes a semi final).
The last edition of the FIFA Women’s World Cup – hosted by France in 2019 – was watched by a combined 1.12 billion viewers worldwide.
It’s estimated 25,000 US fans alone travelled to watch their country play in France.
A French Football Federation report, released a year after the 2019 World Cup final was played, found that hosting the tournament contributed roughly €284m ($468.1m) to France’s GDP.
While there could easily be a case of location, location, location with the French tournament, the opportunities to showcase New Zealand – and our host cities – are obvious.
But a tournament of this size comes with a large travelling contingent.
Participating teams, referees, FIFA guests, friends and family, media and broadcast, commercial affiliates and spectators are among those making the journey downunder for the month-long tournament.
“Ensuring we have sufficient staff to give visiting nations a great hospitality experience and capitalise on the increased visitors will be our biggest challenge,” Bidois said.
“The FIFA Women’s World Cup will be the largest sporting event New Zealand has ever hosted. Host countries of major sporting tournaments usually experience a surge in tourism, hotel stays, and spending in hospitality venues.”
Next year will also see the return of a number of sporting events lost to Covid.
After a two-year hiatus, both the men’s and women’s ASB Classic tennis tournaments will return in January.
And the Warriors are back, full time that is. After 1038 days away from their home at Mount Smart, the Auckland outfit made a return in 2022 playing four home games.
“Recent concerts have also made a difference, and with many more spread around the country over summer, we are expecting good things,” said White.
'The inclination is not to do too much,' Forsyth Barr analyst Peter Sigley said.