More hospo failures as roadworks, rents bite

‘‘Before you decide to set up a new hospitality venture in Christchurch, take a pill and lie down until the feeling goes away.’’ Savills real estate director Jonathan Lyttle

High rents, roadworks, more competition and a lack of patrons are adding up to a heap of financial trouble for a growing number of Christchurch hospitality outlets.

Some have closed and others are said to be teetering on the brink as the traditionally tough winter months loom.

The Running Bull bar and restaurant on Riccarton Rd closed last Thursday when parent company Hotel Parkview Ltd went into voluntary liquidation owing creditors just over $112,000. The debt did not include money owed to Inland Revenue.

Liquidator Lynda Smart, of Rodgers Reidy, said major roadworks to replace the Riccarton roundabout with traffic lights had contributed to the closure.

‘‘Summer is normally a busy time for them, but that didn’t happen this year with the roadworks, and in winter Christchurch people tend to stay home and not go out the same.’’

The long wait for a change of use consent from the city council also had an effect, she said.

Park View on Hagley motel in the same building is a separate business and is unaffected.

Hospitality business owner Jonny Botherway – whose empire of bars in Auckland, Queenstown and Christchurch collapsed in 2009 owing $7.8 million – is again in bother.

Less than six months after opening, his new Gusto eatery in Burnside closed and a notice posted on the window said the landlord had taken possession of the premises for non payment of rent.

The landlord declined to comment and Botherway would only say he expected to reopen any day.

Thousands of office workers are flooding back into the CBD, but competition for their custom will be stiff with at least 30 hospitality outlets due to open in The Terrace, King Edward Barracks and Hoyts EntX developments.

Savills real estate director Jonathan Lyttle questioned whether every large office building really needed a cafe on the ground floor.

‘‘Who’s going to go to all these places? Where’s the customer base?

‘‘Before you decide to set up a new hospitality venture in Christchurch, take a pill and lie down until the feeling goes away.’’

Business broker Phil Adcock said roadworks and a lack of parking were causing difficulties and he knew of 10 hospitality businesses officially on the market. ‘‘Unofficially there’s probably 10 times that figure who would jump at selling if someone was interested [in buying].’’

It usually took a few months to sell a business, but some could not afford to wait that long and closed their doors, Adcock said.

Auctioneer Bryan Andrews said many hospitality businesses were struggling, and in the past couple of weeks he had been called in to assess those considering their futures.

‘‘There are five or six just waiting to push the button.

‘‘Those that rely on Friday and Saturday night trade are skating on very, very thin ice. Some of the contributing factors are that there are now more outlets than before the earthquakes and rents are unsustainable.’’

Tanya Kiyanova, who opened The Dirty Apron cafe in the Awly office building in January, said high rents and the lack of foot traffic and tourists made things tough. ‘‘It’s really quite disheartening.’’ Landlords should consider lowering rents while businesses got established, she said.

‘‘The first year is crucial. If they fall over, it’s not good – the landlord loses a tenant and has to start over.’’

Hospitality New Zealand South Island manager Amy McLellan-Minty said many places were still humming during the week, but rents were a major issue in some areas, and leasees should do their homework before signing up.

Lyttle said with hospitality rents ranging from $350 to $1000 per square metre, tenants needed to make sure their business plans stacked up.

Landlords were doing their bit to help by offering ‘‘stepped’’ rental agreements and incentives, such as paying for the installation of ventilation systems.

The reality was though that it cost 25 per cent more to build in Christchurch than it did in Auckland, and rents had to reflect that, he said.