HOSPITALITY FEELS THE HEAT
Bars, cafes and restaurants face $1 billion in losses and new ways of doing business, writes Amanda Cropp.
Michael Turner is unsure whether coronavirus will finally spell the end of his Christchurch restaurant Cafe Valentino which is due to celebrate its 30th anniversary next year. ‘‘I’m not 100 per cent sure if we can arise a third time after earthquakes, terror attacks and now this.’’
The Restaurant Association estimates lockdown losses across the hospitality industry will top $1 billion, and of its 2300 members, a fifth are considering closing their businesses permanently, putting about 30,000 people out of work.
Turner hopes he is not one of them. ‘‘I’ll give it six months and see how it works, if it doesn’t it’ll be goodbye Cafe Valentino, which will devastate me because it’s my life’s work.’’
The bleak outlook from industry bodies is reflected in Statistics NZ figures for March which showed spending at cafes, restaurants, takeaway outlets, and bars plunged 27 per cent ($238 million), taking it back to levels last seen in 2015.
Confusion all round
There is a saying that uncertainty is the enemy of business and hospitality operators are desperate for some straight answers.
On Wednesday Restaurant Association chief executive Marisa Bidois told the Parliamentary epidemic response committee that Ministry of Health guidelines for hospitality were ‘‘grossly inadequate’’.
She pleaded for clarity on how the industry could operate at all alert levels, and the introduction of contact-less and kerbside delivery options.
Mojo’s chain of 37 cafes has just one still open (serving essential personnel at Wellington Hospital) and general manager Katy Ellis says a lack of information, such as whether takeaways will be permissible at alert level 3, is a problem.
‘‘We have no crystal ball . . . what will be the requirements for social distancing and contact tracing?
‘‘We’re reliant on a corporate base so there’s no point in opening if nobody is allowed to go back to work, most hospitality is holding out for level 2 so there are more people in the CBD.’’
Turner is worried about the cost of yoyo-ing between alert levels if infections start to rise again.
‘‘If it suddenly ramps up to level 4 again, what do you do with all the stock that you have in the chiller that has just been delivered and has cost you $4000 or $5000?’’
At level 3, before the full lockdown came in, the ministry announced that no more than 100 people could be in a space at one time, and customers were asked to record their contact details.
Those limitations would not work at Leo Molloy’s Headquarters bar in Auckland’s Viaduct Harbour which can take close to 700 patrons, and he is still looking at whether they will reopen.
‘‘On the Sunday before the lockdown I thought we were staffed fairly economically. I did a head count at 4pm and we had 32 customers and 33 staff. Just opening our doors takes 15 staff.’’
Cutting costs
Maka Angyalova owns three Bohemian Bakery outlets in Christchurch.
Much to her relief, a kitchen equipment leasing company has given her a three-month payment holiday, and rent on her stall at the city’s popular Riverside Market has been discounted by 80 per cent this month, 50 per cent in May and 20 per cent in June.
Another landlord has so far refused to budge and she may end up voting with her feet. ‘‘If I get a better offer in future, I will go with a different landlord.’’
Bidois says a growing number of landlords are refusing to negotiate and she is hoping the Government delivers on assurances it is looking at the issue of commercial rents.
How suppliers respond to the current crisis is also top of mind and if they decline further credit until outstanding bills are paid up, the result would be disaster for businesses with no cashflow, says Hospitality New Zealand chief executive Julie White.
Davey McKenzie doesn’t think it is smart to reopen until the country is back to alert level 2, and he is determined to keep his three Queenstown and Arrowtown businesses afloat by appealing to locals and domestic visitors.
The menu will be simpler and a lot cheaper, with a production kitchen supplying all three outlets, and he is working with Altitude Brewery on a lower-cost beer.
‘‘So we can offer a place to come for a quiet beer and it won’t cost a fortune.’’
Last year more than 2500 new hospitality outlets opened their doors, taking the national total to almost 18,000, but there could be a lot of vacant premises by the time Covid-19 has swept through.
Tony Maginness, a business adviser with Baker Tilly Staples Rodway, says those who want to quit the hospitality scene may struggle.
‘‘If it’s been sold a couple of times, it’s not in a good location and the landlord is not realistic with the rent, they can be impossible to sell.
‘‘In a lot of cases there’s no real assets to sell because the money has been spent on the fit-out that is attached to the building, and the chairs and tables and kitchen equipment are often leased.’’
The new normal
The big unknown is how people will behave once the lockdown is lifted, especially given escalating job losses.
It’s also possible those accustomed to two metre social distancing and still fearful of infection will not feel comfortable standing shoulder to shoulder in a crowded bar.
When hospitality opened up in Christchurch after the earthquakes, residents flooded back, but Turner is not so sure that will happen this time.
In his experience people spend when they feel good, such as when property values soared after a city-wide revaluation.
‘‘How are the public going to react when the lid is lifted off their confinement? Are they suddenly going to go out to restaurants and be happy again? ‘‘Everybody here is going to have to hold hands. ‘‘The banks have to give the landlords a break, the landlords have to give the tenants a break, and the trade creditors are going to have to cut the restaurants they supply some slack, otherwise no one is going to have any custom.’’
Restaurant Association chief executive Marisa Bidois says a growing number of landlords are refusing to negotiate.