This setting has a cap of 100 people per venue, and requires customers to be seated and separated, with no dancing allowed.
Sarah Bolton, who owns Red Square Bar in Wellington's CBD, says these restrictions make it impossible to operate a nightclub.
"Our core business is we're a nightclub, so trying to do seated business … we tried it last time when we were in level 2 and everyone was quite feverish that time so it was OK."
"But even with the wage subsidy and the resurgence payment we were still really struggling.
"This time, with nothing from the Government, I've had to tell my staff I can't pay them."
The red light setting places a 100 person cap on venues, and all patrons must be seated and separated, wth no dancing. Photo / Supplied
Aside from the lack of government support this time around, Bolton said the other difficult factor was the seemingly endless nature of the restrictions.
"There's no end in sight, the Government has given no indication on when this will be through.
"I've seen something in the media about it being May – nightclubs and bars can't survive that long with no support.
"The industry is just going to go under, which is really sad."
Bolton had told her 20 staff she was unable to pay them and was now looking at getting another job herself.
"It is really sad to just have it taken away from you, with no option at all to try and make it work," she said.
The bar was still opening for one-off private functions of 100 people, and Bolton asked people to consider supporting them in that way.
Meanwhile, live music bar San Fran had also said they would be closing temporarily under the red light setting, which they announced on their Facebook page earlier this week.
San Fran director Tim Ward said their bar involved a lot of standing and dancing, so they were limited in what they could do under the red setting.
Within 72 hours of the red-light announcement, he said they had been hit with phone calls from promoters and artists, cancelling or postponing their shows.
In the past they had adapted by doing "tiny concerts", to keep numbers under the 100-person cap, but this was not possible this time around.
"Generally [tiny concerts] result in a turnover of about 10-15 per cent of what we would normally trade with," Ward said.
"That was able to be done with the Government's wage subsidies and resurgence payments.
"This time around we've done a review of what it will cost us to trade and what it will cost us to hibernate, and we found that we would save money if we go into hibernation."
Wellington bars and nightclubs are concerned about the damage the restrictions will do to the industry. Photo / Supplied
Loss of venues such as theirs not only hit business owners and staff but had a ripple effect on the entire music industry, he said.
"When San Fran stops operating or pauses like this, or heaven forbid has to close down, it's not just affecting the owners and the staff of that business, it's affecting a national touring circuit.
"It's affecting local touring acts of having a platform where they can perform. All bands, no matter how big they are, started in venues like ours, and played to very few people."
Hoff Hospitality group owner Matt McLaughlan said the industry as a whole was already seeing the effects of the red light setting.
"The CBD has been a ghost town," he said.
"We're seeing massive downturn of patronage, it's 40-50 per cent on what was previous, which was pretty poor as it was."
"There's real concern from hospitality owners that some places simply won't make it through."
Without government support, he said it was up to the Wellington public to support venues as much as they could while there were still few Covid cases in the community, and businesses had not yet been hit by staff shortages.
"The outlook is bleak - we're resigned to the fact that the Government is not going to give us any help this time around," he said.
"So it's almost a plea to the Wellington public to come out and support your hospitality venues, to go and buy that coffee, to go and have that lunch, to meet a buddy for a beer, to get a quiz team together.
"Come and support these venues while you can because I daresay the hours will start to be squeezed and venues will start closing on certain days."
He described the industry as "gobsmacked" and "in shock" by the restrictions.
"We're all kind of walking around like we've been punched in the face, we're in shock," he said.
"It's such a shame because the city was starting to revitalise.
"There's a lot of work going on in the city safety zone – the city was changing for the better and now it's been hit with this. It really concerns me for the longevity of our industry in Wellington."
