Covid-19: Tough choices loom for desperate hospitality and accommodation providers

Tuesday, 7 September 2021

Stacie Warren is trying to work out how to find $40,000. That’s the amount she needs to meet her monthly bills.

Increasingly desperate hospitality and accommodation business owners are considering liquidation, debt and selling their homes as the snowball effect of the Covid-19 pandemic hits hard.

Hospitality New Zealand is warning the new level 2 won’t offer any reprieve for businesses that lost thousands of dollars a day during lockdown, and the new restriction of 50 indoor patrons “could be the final straw” for many without additional financial support from the Government.

Restaurant and bar owner Tony Crosbie talks about how lockdowns have affected his businesses. Video first published in September 2021.

“Operators are in an horrific state financially,” chief executive Julie White said.

Along with the continued wage subsidy, the resurgence payment – which helps with fixed costs such as rents – should change from a one-off payment to a weekly grant, she said.

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Tracy Reeve, left, from Cedar Grove Motor Lodge and Stacie Warren, of Century Park Motor Lodge. Both businesses have struggled to survivedue to the Covid-19 pandemic.

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“Rent, ACC and other fixed costs continue whatever level you’re at, and adding restrictions will make meeting them even more difficult.”

Finance Minster Grant Robertson says the wage subsidy has “served New Zealand very well”.

As long as Auckland was in lockdown the rest of the country suffered, because so many domestic travellers came from the region, she said.

“Some accommodation providers are down to zero occupancy, and others to single-digit occupancy. They simply cannot survive like that.”

Finance Minster Grant Robertson said the resurgence payment was not available last lockdown, and was being monitored to see if it needed adjusting.

“We will continue to assess how it works, just as we did last week when we opened it to businesses who had been operating for a month, rather than the six months when it was first put in place.”

The wage subsidy continued nationwide as long as any part of the country was in level 3 or 4, he said.

“What we are doing is striking a balance and a sharing of costs with business. The purpose is to keep employees attached to their jobs and provide a subsidy to assist businesses on a temporary basis so they can keep their staff on during higher alert levels.

“It served New Zealand very well last year.”

Stacie Warren says there won’t be any reprieve at the Century Park motor Lodge until Auckland reaches level 2.

But Ian Williams, who owns The Vic Public House and Burger Culture in Nelson and is the local branch president of Hospitality New Zealand said it was not just the cost of this lockdown businesses were dealing with.

“In 2020 we had a lockdown, followed by a winter trade, followed by a poor summer trade, followed by a winter, followed by another lockdown. With the current prospect of another poor summer and another winter trade. The cumulative effect is enormous.”

The latest lockdown and level 2 would be the “last straw for many”, he said.

“We have accumulated additional private and government debt, deferred payments, and bank overdrafts … A large number are now faced with the choice of taking out further loans, selling their home, and/or closing the doors on the business and abandoning the lease and chattels. “

Direct financial help was the only option left on the table for many businesses on the verge of ruin, he said.

“There is no team of 5 million, and the Government is happy to see us as the sacrificial lamb of the pandemic, whereas everyone should bear the pain and cost equally. That would be teamwork.”

The motel owner

Stacie Warren is trying to work out how to find $40,000. That’s the amount she needs to meet her monthly bills.

She and her husband own Century Park Motor Lodge in Nelson.

Restaurant and bar owner Tony Crosbie owns 14 bars and restaurants across the South Island, including Armadillo's in Richmond. The lockdown has cost him about $200,000 a week.

Their monthly expenses are $50,000. During this lockdown they have received $5272 from the wage subsidy and a $3500 resurgence payment. All while earning just $150 a day since lockdown.

But level 2 was no reprieve, she said. Without international tourists they were reliant on people travelling from Auckland.

“Two-thirds of the population live up there – that’s two-thirds of our business … as long as Auckland is in dire straits so is the rest of our business.”

For a mum and dad business high on overheads and low on staff costs the wage subsidy was of little use.

Rents continued regardless of patronage, and there wasn’t the same rent relief being offered from landlords as the last lockdown as they too felt the financial pressure, she said.

A quiet summer had exacerbated matters, as summer profits helped carry the business through the quiet winter months.

While there had been a “sugar rush” of locals getting out and about after last lockdown, that was unlikely to eventuate this year, she said.

The bar and restaurant owners

After wage subsidy and resurgence payments are gone, Tony Crosbie still needed to find about $200,000 a week to keep the lights on during lockdown.

He owns 14 bars and restaurants across the South Island, including Armadillo’s and the Star and Garter in Richmond.

The new level 2 rules would make it impossible to make money, and businesses would be lucky if they could even cover costs, he said.

By the time you allowed for 18 patrons using the pokies you were looking at only 32 in the restaurant.

“From a cost point of view, 35 people in a pub is just having a party at home in your lounge.”

He was hoping level 2 would be short-lived, because if it was any longer than two or three weeks he would have to make tough choices, he said.

He was on the national board for Hospitality New Zealand, and said the message from colleagues was that they were struggling.

The hope through level 2 was just to get enough cash flow to keep things going until level 1, he said.

But he also doubted the “sugar rush” that followed the last lockdown would re-eventuate.

“We won’t be able to rely on that.”

Ian Williams, from The Vic Public House and Burger Culture, said those businesses were losing about $2000 a day through lockdown.

“We still have overheads not covered, such as rent, rates, insurances, ACC, and additional loan interest. Also, we are topping up our staff pay to the 80 per cent level over and above wage subsidy.”

The cumulative effect of Covid, coupled with a staff shortage meant even at level 1 the business would still be restricted, he said.

“I have one business that operates on half its 2019 trading hours, and the other closed one day a week.”