SME income plummets more than 70 per cent in lockdown with hospitality hardest hit, MYOB data shows
Thursday, 9 September 2021
Level 2 trading has not been that much better for Wellington cafe owner Frank Hsu than level 3, but he’s keeping his fingers crossed that it will bounce back soon.
He owns two cafe businesses offering coffee and cabinet food, Frank’s The Terrace and Frank’s Newtown, which serve office workers and Government and council employees in the CBD and health professionals, hospital workers and locals in Newtown.
The novelty of level 3 resulted in a flurry of trade as customers soaked up the enjoyment of being able to buy takeaway coffee and food, but it did not last long.
“Although I am feeling grateful for moving into level 2, the new restrictions in place are bringing the hospitality sector to its knees particularly.
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“The 50 people restrictions create inconsistency for small versus large hospitality venue operators, and such restrictions cannot be said to be observed in supermarket or food packaging sectors.”
Business platform MYOB has released business data which represents activity from an anonymous sample of MYOB’s SME online business users showing how much takings have plummeted in lockdown for small to medium-sized businesses, and much more for those in hospitality.
Hsu said trading at level 2, which started yesterday, was “underwhelming”, both in the capital’s CBD and Newtown.
“I feel people are quite cautious. They are not in a hurry to come back to work.” He was hearing that some office workers would not return to work until Monday.
Customers were more likely to buy takeaways than sit down. The Government restrictions on the number of people who could be served seated forced him to remove half the tables. People had been compliant wearing masks and socially distancing.
One of the big issues was the stress and uncertainty for staff on how long the lockdown would last. It was quite demotivating, Hsu said.
For him there had been a lot more paperwork and communication with staff and the landlord who had been understanding and provided rent relief, as well as having to comply with Government restrictions about physical distancing and customer number restrictions.
“It’s stressful, really stressful.” The company would qualify for the wage subsidy because its revenue was down more than 40 per cent.
Hsu said cafes like his had put in place the safety measures required by the Government.He hoped that would give the public confidence to come back.
Yina Yang the owner with her husband of The Rolling Pin which has three dumpling bars and a catering business in Auckland said it was a struggle with zero income in the past three weeks at level 4.
There were still bills to pay like mortgages, rates and power and rent to three landlords, so the family was having to use savings.
A main part of the business had been catering and all the three months of forward bookings had been cancelled.
“It’s a struggle. We are hoping it will be finished soon.”
The business had about 10 staff, and she was concerned for them having enough income for their families. The business was receiving the wage subsidy to help pay the staff.
Other concerns were that when the alert levels reduced that customers might not return that quickly as more people were working from home, and whether the business would be able to keep all its staff.
She supported the lockdown because it was the way to stop the virus spreading though it was a huge hit to the hospitality industry.
“I’m a positive person. I think we can survive,” Yang said.
Restaurant Association chief executive Marisa Bidois said much of the industry has been reduced to zero revenue over the last few weeks and while businesses outside of Auckland were able to open, the new look level 2 was far from normal trading.
“What we desperately need now is some specific financial assistance for our industry that continues into level 2. Many of our businesses are carrying large levels of accumulated debts, not to mention ongoing fixed costs.
“We will start to see a huge fallout of businesses if our Government doesn’t step in and offer something other than the wage subsidy and resurgence payment.”
MYOB is measuring the impact on SMEs in lockdown using EFTPOS card payments.
The data from online business customers shows that card payments fell 73 per cent in the week ending August 28 when the country was in level 4 compared to a baseline of February to March last year.
In the week until September 7 when much of the country was in level 3 the decline in card payments was a bit less, 63 per cent.
The hit to the hospitality sector was greater. Card payments fell 85 per cent to the accommodation and food services sector in the week until August 28.
Payments to retail and trade services were down almost 60 per cent in the same week at level 4.
The decline eased marginally when most of the country moved to level 3. The decline in payments to accommodation and food services was 78 per cent and the decline in payments to retail and trade was 50 per cent.
MYOB head of customer service, Jo Tozer, said in its Covid-19 SME Snapshot taken from July 6 to July 16, 46 per cent of SMEs said a short-term level 3 or 4 lockdown would put them under significant pressure, and the data was showing that impact.
The snapshot revealed a third of SMEs would need financial support to cover overheads in a level 3 or 4 lockdown, and they were just one of several financial burdens they were facing as a result of the outbreak.
“Looking at these figures, it really is time to reassess whether all current financial assistance goes the distance, because if it doesn’t, neither will some of our small businesses,” Tozer said.