‘Survive until ’25’: the hospitality industry’s mantra after one of its ‘most challenging’ years

Sunday, 28 July 2024

In restaurants on Auckland’s waterfront and at cafes looking over the southern lakes, there’s a common mantra being whispered by hospitality operators who’ve faced “one of the most challenging” years yet: “survive until ’25”.

Although across Aotearoa, sales in the industry topped $15.7 billion in the 12 months to March 2024 – a 5.8 increase on 2022/2023 – according to the Restaurant Association’s annual report, most of that growth was swallowed up by inflation, which rose by 4.6%, its chief executive Marisa Bidois said.

The release of the report today comes just over a fortnight after Ponsonby Rd’s SPQR restaurant folded after more than 30 years in business.

A liquidation report said it owed more than $2 million to creditors and staff.

The venue had been a hot spot for both local and international celebrity diners, including Mick Jagger, Duran Duran and Boy George, since the nineties.

It was the latest of a string of high profile eateries to have closed in recent months.

In the capital, the award winning restaurant Shepherd shut in November.

Its closure was followed by that of Hiakai, which made a name for its unique take on Māori fine dining, in March.

The Restaurant Association’s report showed Wellington’s hospitality scene was doing it even tougher than elsewhere, seeing a decline in revenue of -5.5% in the first quarter of 2024 as at the same time last year. Sales were down -0.8% across the whole financial year.

That figure came as somewhat of a surprise to Bidois, “because there is such a vibrant and buzzing food scene in Wellington”.

She said 2024 “absolutely” brought with it the risk of more closures.

While she described 2023 as “one of the most challenging periods” for the industry in a long time, the outlook for the immediate future was even worse.

A recent survey by her organisation found that just shy of three-quarters of members expected the next 12 months to be even more difficult: “So many of them are saying the new mantra is to ‘survive until ’25’.”

Many operators had taken out loans to keep afloat at the height of the pandemic and were now having to pay these off, while rents, food prices and wage costs were simultaneously rising.

Add to this somewhat “subdued” spending on eating out and you had the perfect recipe for trouble.

Foot traffic remained lower than expected in Auckland, Bidois said, where takings were up a modest 7.2% on 2022/2023.

But it wasn’t all doom and gloom. One notable bright spot in the report was the 20.6% jump in sales recorded at hospitality venues in Gisborne, which was decimated by severe weather events.

Further south, in Canterbury and Otago, things were also looking a bit better, with revenue up 9.0% and 10.4% respectively.

While trade usually picked up in hospitality over summer, Bidois said sales weren’t expected to increase significantly until 2025, when it’s hoped that people will have more cash in their pockets to spend, so operators were trying to “survive” until then.

This was because of the wider economic outlook: “Hospitality is always a barometer for the economy… Despite all of the challenges, our industry is ready to return to the growth.”

Mike Egan, of Monsoon Poon in Te Aro, shared Bidois’ optimism.

“We’ll get through it because we always have,“ he said.

Even businesses like his, which had been around for 23 years, were not immune to the pressures facing the industry.

“This is the time where owners and operators have to look at every single aspect of the business and see where efficiencies can be made [without sacrificing quality]… It’s a delicate tightrope to walk.”

While he counted himself “lucky” because Monsoon Poon was well-known and got “quite a lot of good will”, he acknowledged that “business is not as sort of steady seven days a week as it used to be”.

Egan, who is the national president of the Restaurant Association as well as running restaurants, said there seemed to be more confidence in the cafe and restaurant sector in Auckland, than there was in Wellington.

He put this down in part to disruption caused by the now-nixed Let’s Get Wellington project and restructures and cuts in the public sector.

“You’d be very brave to be opening a new premises around the Golden Mile. You could open up and next minute there could be diggers for two or three years putting in infrastructure,” Egan said.

Meanwhile, his daughter had recently opened a brasserie called Gilt on High St in the Chancery in Auckland’s CBD and it was going “gangbusters”.

Nationally, the number of hospitality outlets grew by 0.1% to 19,518 in 2023.

While Egan was doubtful that there’d be many operators in Wellington willing to take a punt on opening a new venture anytime soon, in his view, the existing ones would “take what they've got and polish it and nurture it and keep it relevant”.