Rotorua restaurants say cost-of-living crisis is hitting the hospitality sector

At full capacity, The Indian Star on Rotorua’s Eat Streat used to have 130 people seated for a meal - now it is lucky to have 30.

Award-winning restaurant owner Ray Singh, who also owns Urban Gusto, says customers used to wait in queues for 20-30 minutes “but now we are the ones waiting for them”.

Most nights he is “happy to be breaking even”.

Rotorua restaurants are struggling to keep up with increased food costs, wages, overheads and a sharp drop in customers as people tighten their belts due to the cost-of-living crisis.

Singh has had to reduce Indian Star staff numbers from 15 to 11 due to a drop in local foot traffic.

“The game has changed completely,” Singh said. “We’re just trying to get through this hard time and break even.”

“Fewer people are dining out because bills are going up and up.

“Those with a mortgage are having to pay an extra $200 a week and they’re trying to cut that cost as much as they can,” Singh said.

His business was also grappling with soaring food costs. Before Covid-19, Singh was paying $32 for 20 litres of soybean oil and now he’s paying $80 — more than double.

He said he used 50-60 litres of oil a week.

Ray Singh, owner of the Indian Star and Urban Gusto, talks about the struggle brought on by the rising cost of living, including increased food costs and a significant change in foot traffic. Photo / Andrew Warner

Butter prices had also skyrocketed, and where Singh used to pay 99 cents for 500 grams, he now paid $8.

“We used to provide free rice with our curries but the price of rice has doubled now and we can’t afford to give even a single grain for free anymore”.

Food prices have increased 8 per cent in the past 12 months with fruit and vegetables rising 22 per cent, and meat, poultry, and fish increasing 7 per cent - the fastest increase in four decades, according to the Restaurant Association.

The association’s chief executive, Marisa Bidois, said profit margins in the industry were “notoriously slim, even during the best of times, typically ranging from a mere 2-4 per cent”.

“However, given the current customer downturn, many businesses are telling us that their primary goal is merely to break even.”

Buy NZ Made executive director Dane Ambler said small businesses were facing challenges far greater than those during Covid-19 disruptions.

A Buy NZ Made survey revealed company liquidations were up 40 per cent on the same period last year.

It also found just under 70 per cent of New Zealand businesses it surveyed believed the next 12 months are going to be tougher than the last 12 months.

Deepak Kundal, owner of six restaurants and one cafe in Rotorua, said food costs had soared.

Deepak Kundal, who owns six restaurants and one cafe, knows all about how the cost of living has affected hospitality. Photo / Andrew Warner

“We’re trying to give the best quality of food but it’s really hard to pass all the inflation on to the customer,” said Kundal.

A recent member survey from the Restaurant Association indicated that 35 per cent of businesses rated managing the customer downturn as the biggest challenge facing their businesses.

While Kundal had not had to lay off staff, he has needed to reduce their hours from 40-45 a week to 35.

“I talked to a local the other day and they said they said they are coming less because they are trying to save money by cooking more at home,” said Kundal.

“If you’re struggling financially, you’re just not going to spend $40 on a meal.”

Rotorua restaurants relied heavily on tourism for income, especially visitors from Auckland.

Kundal said the weather over winter had not helped.

“If you look at the weather from the past two to three months, there has been so much rain and you don’t go on holiday when it’s raining.”

Kundal said it rained seven days in the most recent school holidays.

“We also get about 600-700 people coming in for conferences and this year there we didn’t see that. Every business I’ve spoken to can feel that.”

Cruise ships from Tauranga were driving up the customer numbers, with more than 100 cruise ships set to visit between mid-October and mid-April 2024.

The Royal Princess was the first, bringing about 3600 passengers to New Zealand.

While Singh believed sales turnover had improved “a little bit” in the last few months, he was holding out for overseas and domestic tourists to come back at pre-Covid levels.

“The numbers are picking up again now, but locals aren’t coming like they used to,” said Kundal.

“It’s really tough but it’s all part of the game and we have to stay positive,” said Singh.

Harriet Laughton is a multi-media journalist based in the Bay of Plenty.