‘It’s the toughest it’s ever been’

Saturday, 15 June 2024

Hospitality, it’s a bit broken.

The line was used by an Aussie cafe owner to explain the reasoning behind her decision earlier this year to shut up shop.

Wellington’s Simon Pepping knows exactly what she means. Because hospitality here is also broken. And more than just a bit.

“I’m trying not to sound burned out,” Pepping, a 30-year hospo veteran says. “But yeah this is the toughest it’s been in all my time in the industry.”

The owner of award-winning Egmont St Eatery and the Catering Studio is, to put it mildly, exhausted. Hospitality, he says, is in survival mode with operators driven to the brink by a combination of food inflation, staff shortages, soaring interest rates, and patchy customer demand.

Add to that the fact venues are now facing the quietest months of the year, uncertainty around the effect of the Government’s job cuts on the Wellington economy and the impact of the council’s vision for a car-free central city, and the extent of the “broken-ness” becomes apparent.

While Pepping is upfront about the strife he personally is going through, he points out there’s any number of businesses worse off, and at risk of going bust within months.

Veteran restaurateur Al Brown echoed that, saying the environment was unprecedented.

Takings were down across the board. In the case of Best Ugly Bagels custom had dropped by around 30% as people continued to work from home.

“So that comes straight off our bottom line, even before you start using words like ‘crisis’ and ‘cost of living’. It’s hard work…it’s really hard work.”

Restaurant Association figures show first-quarter trading in Wellington was down 5.53% compared to 2023, with an additional 11.84% decline when comparing the first quarter of 2024 to the fourth quarter of 2023.

Food prices have risen by almost 7% and the cost of dining out has also continued to rise, increasing by 7.2% over the last 12 months.

Says Pepping: “My mental health is shattered. In the past I’m like, no, we’ll be right, and we’ve always bounced back. We’ve always done well. But I have struggled to be optimistic about business over the last couple of years.

“There was a period there where the restaurant was full noise. Catering was really busy. And I had seven bakers working overnight. That stuff's gone. I don’t have any bakers any more.

“We ripped the business apart as soon as we went into lockdown. We made some massive changes then, thinking things would just go back to where they were, but they’ve never gone back.”

As customers became more cautious about their spending high end dining had also taken a hit, meaning head chefs and other key staff required for a la carte service were almost impossible to find.

“That market has gone. I mean I don’t go out for dinner, I can’t afford it.”

That, along with all the other challenges had prompted a rethink of where the business was at, he said. Renovations were under way to combine the restaurant and catering kitchens and re-brand as the Egmont St Deli and Diner.

It would offer deli sandwiches and salads alongside take-home meals, salads, and soups, as well as the popular Rogue Burger. Small plates would be served in the evening.

Hospitality NZ chief executive Steve Armitage, while conceding some venues were hurting, with “fairly consistent” reports that trading was down, noted others were bucking the trend and had been experiencing record weeks—largely buoyed by regulars, events and entertainment and music nights.

“There’s no denying that businesses have been doing it tough in recent times, and at the moment, we have a perfect storm. The cost-of-living crisis, high interest rates, a recession, job cuts and general cautious sentiment has meant that discretionary spend has noticeably dropped and hospitality has certainly been affected by that.”

He said while long-term infrastructure projects in the Capital were affecting foot traffic he expected businesses would be “able to bank a little bit over the summer period and during busy event periods, to help tide them over this quieter and somewhat challenging time.”

Pepping, however, was sceptical. He blasted the council for its ambivalence toward businesses in the CBD: “They’ve absolutely destroyed us. I have social housing above the building…so I’m dealing with all that other stuff and also dealing with the theft and crime and staff harassment, and then there’s no parks. People I talk to just say they’re not coming into town because it’s too hard.”

That lack of bodies has also hit Cuba St’s Highwater Eatery. It cut back its hours, no longer opening on Sunday following Covid and is now considering dropping its Friday lunch service.

“Friday after work used to be a vibrant time in the city, people would head out for a drink or bite. Now it can be a bit of a ghost town,” manager and co-owner Rachael Stevens said.

Stress levels in the industry were high. “It’s very up and down. Customer downturn is the biggest worry currently, so add that into the last few years of having to deal with everything Covid threw at us and there’s some that are not in a great place.

“A lot of us also have mortgages, families and are experiencing the increased cost of living too, so it’s a bit of a double whammy.”

Stevens said special events and celebrations, such as Mothers’ and Valentine’s Day, definitely boosted revenue but “there’s definitely less people out just enjoying the city’s offerings and some people when they do go out are spending less.”

It was very much the same in Auckland, Al Brown said, with issues around the city rail link and increased parking charges adding to existing pressures.

“The hangover from Covid is very real for a lot of us, in fact for everyone in this game. We’ll weather the storm, but it’s as bad as it’s ever been in this business.”

He said while next month’s tax cuts would do little to help the misery —“don’t get me started on politics”— he urged people to keep supporting their local eateries.

“If we don’t get the support, when it does come right, there won’t be as many cool little places around.You don’t have to go out and drink Bolly and eat oysters but you can go out and have Prosecco and a toasted sandwich.”

Ramesh Naran is CEO of Wellington-based HospoConnect, a software system that links hospitality venues with suppliers to save costs, time, and reduce waste. He’s never seen the sector quite so vulnerable.

“[People] are doing whatever they can just to get through the next six to 12 months.”

That included sending staff home early, working shifts themselves—either front of house or in the kitchen— curbing capacity, or, like Highwater and others, slashing opening hours.

“If demand dampens even further than current levels, it's inevitable that restaurants will need to review their operations, and think about how to reduce costs and generate demand in other ways.

“Putting up prices is a delicate balancing act at the moment. While they have to put up prices in the face of rising input costs, there is a tipping point at which price rises will reduce demand too much. When the financial stress on the business goes on for too long…then closures follow.”

Asher Boote has dealt with every emotion over the years he’s been in the business. At one stage he owned restaurants in Thorndon, Victoria St and Newtown. Today it’s just the Tinakori Rd venues, Hillside and Daisy’s, that keep him awake at night.

Like the others, he mentions the lingering impact of Covid and the lockdowns as a significant factor in the downturn, but says September’s election, and uncertainty around that added even more pressure.

“I think there was a false sense of optimism last year, with Covid and the effects of that tailing off, and then everyone got smashed around election time. It just went dead in Wellington.”

Boote doesn’t expect the mood to lighten any time soon, with operators hunkering down for winter and customers tightening their purse strings even further.

“There will be peaks and troughs, and different people will do well at different times, but it’s going to continue to be a really tough time for the industry as a whole.”

Economist Brad Olsen was more upbeat, referencing the latest Worldline figures which show spending in the region up 2% over the last year. Nationally it was down 0.8%.

Household spending was subdued, but not as bad as it was during Covid, he said.

“It is absolutely a difficult environment, and for some businesses any additional sales activity will be welcome, but I wouldn’t say it was the worst ever.”

Restaurant Association CEO Marisa Bidois was careful about how she framed the cliff-edge situation many of its members have found themselves in.

When asked about the challenges number one would be the drop off in customers.

“We strongly encourage people to support their favourite establishments if they can, their patronage is crucial…”

Numbers man Olsen was in full agreement, suggesting that the upcoming tax cuts, however small, could be put to good use at your local cafe.

“I don’t think there would be many retailers out there who are realistically waiting for the tax cuts to hit people’s pockets and bring about a turnaround. It will provide some cushioning and some additional spending in some areas but it’s not going to turn around current retail fortunes. Interest rates will drive that.

“If you only buy one more coffee, that’s not a lot for sure, but if everyone did that then some cafes would be doing a lot more coffees then they were doing and that would give a big aggregate boost.”

On a plate

Visa Wellington On a Plate was launched in 2009 during the global financial crisis as a way of supporting local businesses through the quietest part of the year.

In its first year 35 restaurants took part, offering fixed price menus. Participation peaked in 2019 with 290 venues dishing up their best.

This year, 238 restaurants are offering 99 festival events and 197 Burger Wellington entries throughout August.

WOAP manager Beth Brash said despite the tough economic times, those numbers were relatively similar to the past two years of the festival, post-Covid.

“[The event] was started as a way to support Wellington’s hospitality through some tough times. That original kaupapa continues to drive us.

“Globally, the hospitality industry has had a few tough years and Wellington’s culinary community has definitely had its fair share of struggles. Sadly, we’ve seen some wonderful Wellington restaurants close in the past year – but there is also some really good stuff happening in hospitality, with several exciting new restaurants open in the past year. ”

She encouraged Wellingtonians to get out and support local eateries.

“They offer more than just great food, they offer truly great hospitality, a third place and are an important part of what makes Wellington such a great place to live.”

Ticketed and non-ticketed events run from August 1-31 and Burger Wellington from August 5 - 25.

The Post’s pick: Parla Preview. The latest from hospo veteran Dean White (Kisa, Ombra, Mr Go’s) Parla doesn’t open until November, but will be showcasing its middle Eastern-inspired kebabs and sides from a foodtruck outside its planned Island Bay site. 4.30pm to 8.30pm, August, 23 and 24; 216 The Parade, Island Bay.

Openings

Glou Glou, Allen St. Wine bar, cafe, croissanterie, in the old Exchange Building. From the team behind catering outfit Food Envy.

Le Ciel, Tory St. In what used to be Grace Patisserie and the short-lived Holy Mac. Bakery run by Shuchi Bhardwaj, the pastry chef behind Wellington On A Plate’s 2022 and 2023 Best Dish awards.

Super Deli, Featherston St. Small offshoot of Taranaki St cafe Sixes & Sevens offering scones, sammies, pastries. Coffee by its own Skunkworks roastery.

Good Boy, Riddiford St. The hole-in-the-wall sammie joint has expanded and now offers eat-in.

Dough, Ottawa Rd, Ngaio. Dough Bakery’s empire now includes an outlet in the western ‘burbs.

Otto Champagneria & Beer Hall, Featherston St. Not strictly a new opening. The Champagneria has relocated to the northern end of the CBD, saying it had become too difficult to continue in its Courtenay Pl premises, and rebranded.