The Restaurant Association is calling for the Government to tweak alert level 2 operating rules for hospitality if the industry is to avoid mass closures from extended restrictions.

The membership organisation says 10 per cent of the country's 18,000 cafes, restaurants, bars, eateries and taverns are at risk of closure under current restrictive alert levels.

Prime Minister Jacinda Ardern this afternoon announced the Government had decided to extend alert level 2.5 in Auckland for another two weeks and to keep the rest of the country at level 2 for another week before reviewing if it could move to level 1 on September 21.

But the Restaurant Association says even a week more of level 2 will have a huge financial impact on the already struggling sector.

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In August under level 2, the industry was losing approximately $89 million per week. Auckland businesses' turnover was down about 60 per cent and for rest of the country turnover was down an average of 40 per cent.

August spending figures show overall retail spending in the month took a dive as spending in the hospitality industry tumbled by 13 per cent or $115m following 19 days of alert level 3 restrictions. This followed an encouraging month of recovery in July.

Nicola Waldren, general manager of the Restaurant Association, said the easing of restrictions under level 2 were still strangling businesses, which are grappling with higher wage bills and reduced revenue through operating inline with the single server and no counter service at licensed premises rules.

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The industry had been hoping for further easing of restrictions.

Waldren called the decision to keep Auckland at level 2 for another two weeks "devastating", adding that it was disappointing for Covid-free regions outside of Auckland to remain at level 2 for another week ahead of another review.

"For our industry it's not business as usual at level 2 so even one more week that has a major impact," Waldren told the Herald.

"Some areas like the CBDs are devastated because at level 2 people are still not working from their offices as much - another week of that really does have a big impact."

The Restaurant Association last week met with Treasury to discuss further financial aid and to plead for operating rules such as the single server per table and no counter service to be dropped in favour of mandatory face mask use by staff.

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"Things like requiring staff to where PPE at all times, that could mean that some of the other restrictions could be taken away. There are examples where other [rules] could be introduced which could mean a business could run as normally as possible," she said, adding that the association was working on a framework to formally submit.

"We know from feedback from our members how difficult some of those restrictions put in place at level 2 are to manage and for practicality."

The association says the sector urgently needs targeted financial assistance. This could be through helicopter money via subsidised dining out vouchers, specialised wage subsidies, temporary removal of GST on fresh fruit and vegetables or financial hardship grants.

Any further extension to level 2 or 2.5 outside of the renewed two weeks would make it hard for many businesses to remain viable.

Nicola Waldren, general manager of the Restaurant Association. Photo / Supplied
Nicola Waldren, general manager of the Restaurant Association. Photo / Supplied

No other industry faced so many restrictions under level 2, Waldren said.

"We know there are these guidelines put in place but we think we can make some tweaks to those that would make businesses be able to run a bit more viably and still ensure that there is that safety in place."

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The industry needed financial support now if it was to manage further extended periods of alert levels, she said: "Our industry is full of resilient people who are going to do whatever it takes to remain viable but it is really difficult."

Auckland Business Chamber chief executive Michael Barnett said the Government's lack of decisive action and decision to review the situation again next week did not give certainty to business or the ability to plan ahead.

"New Zealand beyond the Bombay Hills must be bitterly disappointed that they have to remain under restrictions. There's evidence that inter-regional travel by Aucklanders has been safe with no spread of the virus. More frustrating is having the carrot dangled in front of them that there will be more seats available on planes to bring domestic tourists to the regions with the one bit of positive news - relaxation of distancing on public transport," Barnett said.

"As for Auckland, it's more pain with no gain. We still don't know the criteria and the rules to give us back our lives and livelihoods ... And don't think the bounce in consumer spending is a panacea for lifting an economy that is still stalled with some sectors and businesses likely to fail."