Restaurant Association's annual report reveals industry's $1.2B loss and a sector forever changed

Saturday, 12 December 2020

The Restaurant Association's annual report shows eateries were struck hard by Covid-19 but are slowly recovering. This video was first published in 2021.

Kiwis spent $12.1b on drinking and dining in the year ending March 2020, before the pandemic slashed revenue by over $1b. But the Restaurant Association’s annual report paints a picture of grit, survival, and opportunity. Kelly Dennett reports.

Fishbone was in Darren Lovell’s DNA. Lovell had cooked at the popular Queenstown restaurant six nights a week for 15 years. It had received multiple awards, been named one of New Zealand’s top 100 restaurants, was hand-picked for guide books and Lonely Planet lists. Tourists flocked to the fresh fish eatery.

But the quiet before the storm came in February, “when the borders closed and the world wasn't coming here.” In what would normally be Queenstown’s busiest month, Covid-19 was already making its presence known. Lovell responded. He tweaked the menu; a bit less seafood, a bit more wild-caught venison and rabbit.

But by Easter the country was in lockdown. After reopening, things weren’t the same. Seventy-five per cent of Fishbone’s diners had been tourists and their loss was keenly felt.

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Soul Bar at Auckland’s Viaduct was packed on Friday lunchtime.

Meanwhile Lovell’s promise to customers of having the freshest fish from Bluff, Dunedin and the West Coast was becoming harder to keep. “We just weren't busy enough.”

The message from central government and industry experts was blunt: pivot, or close.

Darren Lovell and Kareem Harvey, chefs and founders of Love Chicken

“So we thought we'd do the mother of all pivots.”

In 2019 Lovell and Kareem Harvey had launched organic fried chicken takeaway joint, Love Chicken, in Frankton. Locals loved it.

Lovell put Fishbone on hiatus – he plans to reopen when the border does – and threw his energy into a second Love Chicken. The core management team remains but Love Chicken requires less staff. Now, people wandering into the former Fishbone will see fresh cray swapped for the likes of a Hawaiian barbecue chicken burger (with grilled pineapple, sriracha mayo, and pineapple mayo slaw). While business is still quiet, Lovell takes it a day at a time. For now, they’re surviving.

“It was very hard and there was a risk attached to it. You lie awake at night thinking, was that the right decision?’”

Lovell’s businesses are the face of an industry hanging on for dear life – he’s in the worst hit part of the country, revenue and staffing wise, but he made the most of the trends pegged to stay; the renewed love for neighbourhood eateries, and the ongoing revolution of the ‘pop up’ business.

New figures show Queenstown’s restaurants were the most severely affected in the country, with a 67.8 per cent decline in revenue between April and June, a loss of $57.3 million. The region is also suffering from employee shortages thanks to a disappearing migrant work force.

Lovell’s pivot saw him recognised at the Restaurant Association’s resilience awards this week, named among businesses that swapped hamburgers for baking, switched gin distilling for hand sanitiser, and turned fine dining into delivery.

The Association's annual report, released on Sunday to Stuff, identifies an industry in survival mode.

Lemonwood Eatery owner Barbara Olsen-Henderson runs a vegan cafe in Taranaki.

The big numbers

Pre Covid figures show the sector was doing well and by the end of March it had grown revenue by 3.3 per cent to $12.1 billion despite reduced tourism as early as January.

Consumer spending was highest in Auckland ($4.8B), Wellington ($1.3B) and Canterbury ($1.4B).

Kiwis spent the most, $6.1 billion, in restaurants and cafes, a growth of four per cent. Takeaway sales grew by 4.1 per cent in that same period, accounting for $2.9 billion in spending, while bars, and taverns had a 0.8 per cent decline, down to $1.68 billion.

Growth in the regions

Pre-Covid, Northland and Taranaki experienced the most growth. Diners spent $276 million in Northland and $234 million in Taranaki, with sales in each up 10 and 7 per cent respectively.

Taranaki's plentiful culinary choices paired with its thriving gin and beer scene, plus its views, made it the optimum place to enjoy hospitality, Taranaki cafe owner Barbara Olsen-Henderson, of Lemonwood Eatery, described the region's hospitality scene as vibrant, interesting, and all encompassing.

Kaikohe’s Bank Bar was riding the wave of Northland’s strong hospitality trade. Owner John Maurice says it’s lucky most of its spend came from locals and cyclists on the Twin Coast trail, rather than international tourists.

The growth will “undoubtedly go backwards”, he says, but it’s a waiting game to see what the post-summer figures show. “Northland is not feeling the hurt as much as some other parts of the country … but it is still hurting”.

The Restaurant Association's Marisa Bidois says the hospitality industry hasn’t completely recovered but has regained its footing.

April – June

Between April and June – the lockdown period – restaurants posted sales of $1.7 billion, a drop of more than 40 per cent.

Queenstown recorded the largest decline, 67.8 per cent (from $84m in the same period last year, to $27.2m this year) followed by Kaikoura (from $4.2m the same quarter the year before to $1.4m this year).

Auckland lost 36.9 per cent of its sales, representing a drop of $430.9m. The city had experienced significant hardship thanks to repeated lockdowns and a lack of tourists.

Dining has changed

While the industry has regained its footing in the subsequent months, customers unwilling or financially unable to return to bars and restaurants will ensure the sting of lockdown endures for some time.

More than half of about 800 diners surveyed by the Restaurant Association said Covid-19 had changed their dining habits with most planning to go out to eat less, and 47 per cent saying they would only go to places they felt safe.

Restaurants have reduced opening hours, and are running leaner operations by simplifying or reducing their menus. Some downsized staff, or started delivery or takeaways.

Challenges ahead

The Association says while the industry isn’t back to pre Covid levels, it’s regaining its footing. By the third quarter of this year many regions had recovered well financially including the Tasman, Kaikoura, Marlborough and Northland.

Businesses’ biggest concerns were finding staff, paying fixed costs, last minute changes to alert levels, further increases to the minimum wage, keeping the business profitable, and another Covid wave.

Restaurant Association chief Marisa Bidois said while the industry overall was feeling hopeful, pain was ongoing.

“Something that isn't recognised or talked about enough, is how strong these business owners have been, and how many are still struggling. This week especially, I’ve spoken to quite a few that are at breaking point. They've been forgotten. There are some great stories to tell, of resilience and courage by these business owners, but in some cases the cracks are starting to show.”

She believed eateries that had initially survived would be facing closure, particularly in Auckland where there was a perception that the CBD’s office workers would see it through. In the event of future lockdowns the association had advised Treasury improvements it could make to survival packages to ensure doors stayed open. It was also gearing up for a campaign to get more people into the hospitality industry, to plug the gap once filled by international workers.

It was important central government realised that while the country had beat Covid-19, for the time being, stress was still happening.

“You don't suddenly recover from a loss of revenue quickly, it takes time. A lot of members have moved out of their homes, rented them out, and taken drastic steps to make sure they keep their people employed. That takes an effect on you.”

There are small signs of recovery. On Friday afternoon Soul Bar, the popular establishment on Auckland’s viaduct, was pumping, and Christmas parties are helping trade, to some extent. After sales plummeted during lockdown, they recovered to just over $1 billion in the following quarter.

Darren Lovell says without its tourists, Queenstown is a challenge, but he’s hopeful for the future. He’d like to see Love Chicken become a national brand, and the pop-up was a good way to test it.

“I can only give the advice that I tell myself, and that is to persevere. I kind of take each day as it comes and don't panic.”

Additional reporting: Josephine Franks and Stephanie Ockhuysen