Lots of food for thought in the world of hospitality
Operators now need to be smart about how they cope and adjust to meet the new reality, writes Nick Giles
Last year was an interesting one for the hospitality sector. There were a few curve balls, certainly, with staff issues, the spectre of capital gains tax and changing immigration policies, to name a few.
I was fortunate enough to speak to many owners over the year. General sentiment was that sales were down a little.
Of course, the main topic on everyone’s lips was that of staff challenges. Finding the right staff, keeping the right staff, paying an increased minimum wage, and immigration.
It was certainly more of a "buyer’s market" when it came to hospitality staff looking for positions. I get to see under the hood of many of these businesses and, having analysed profit and loss statements for cafes, bars and restaurants, I saw some of these concerns for myself, particularly in "higher than normal" wage percentages.
However, for as many businesses that seemed to have a more difficult time, there were equally as many that enjoyed another strong trading year.
Increased wage costs are here to stay. Operators now need to be smart about how they adjust to meet this new reality.
IBIS World reported not only growth over the last five years in the hospitality sector, but continued growth for the next five, albeit at a slower rate.
People need to eat and they need a bit of relaxation away from daily life.
The report cites continued immigration and population growth, a rise in discretionary spending (through 2020), shifting dining trends and habits (for time-poor people dining out or ordering Uber Eats is the new ‘norm’), and increased consumer sentiment as evidence for this expected growth.
Some owners worry about oversupply of hospitality businesses, especially in Auckland with the relaunch of of Westfield in Newmarket, the soon to open Commercial Bay in the CBD, and extension of dining opportunities at Sylvia Park.
As a customer, however, I’m delighted by this progress and I think most people are. We really are worldclass now in terms of our dining and drinking establishments.
Some businesses will not survive this new wave of competition, but that’s not a bad thing.
It’s always been the case that almost as many cafes, bars, and restaurants close as open in New Zealand every year, but we always have that "net growth".
I was delighted to launch LINK’s hospitality division early in 2019 and I am very proud of the team across the country.
Though it was a tougher trading
“People need to eat and they need a bit of relaxation away from daily life.” environment (fears of capital gains tax, lower business confidence etc), we had another great year.
We took on a new bunch of hospitality professionals over 2019, taking our caf, bar, restaurant years of ownership experience to well over 300.
Each sale did take longer, but prices were robust. Despite a slightly more buyer-orientated market, good business continue to attract good prices. I have actually seen little change in that side of things for 11 years now.
I’m excited by new developments and I think 2020 is going to be a cracker both for hospitality operators and for people buying or selling into or out of their businesses this year.
- Nick Giles is head of hospitality, New Zealand at LINK Business Broking