Editorial: Bars and restaurants like SPQR are on the brink - let’s support them

The sun sets on Ponsonby Rd restaurant institution SPQR after liquidators were appointed to the business. Photo / Alex Burton

EDITORIAL

The closure of Ponsonby Rd institution SPQR was a shock. However, there are fears within the industry that is just the tip of the iceberg as many established names struggle to survive this recessionary winter.

A combination of rising prices and high interest rates has seen consumers putting their wallets away.

There are signs of hope on the horizon; the Reserve Bank has softened its outlook and expectations for rate cuts have come forward to as early as October.

But spring looks a long way off for many operators who struggled to survive through Covid lockdowns. only to hit a wall of economic gloom where hopes for a post-pandemic rebound had been.

Just talk to the staff or owners of central city venues right now. Things are as tough as they have ever been.

Grim anecdotes aside, the data shows New Zealand businesses are running on empty.

New Zealand’s non-financial business sector showed a negative saving of $2.5 billion in the March 2024 quarter, Stats NZ figures show. It has experienced negative savings in four of the past five quarters.

Negative savings, for the record, just means greater outgoings than income. The gap is being funded by prior savings or new borrowing.

The sector’s gross operating surplus decreased to $16b in the March 2024 quarter. This was the fifth consecutive decrease since the final quarter of 2022 when the gross operating surplus was $18.9b.

Meanwhile, interest paid increased by a further 2.2% to $7.2b in the March 2024 quarter. Interest expenses make up 28% of income payable in the latest quarter, and 14% in the September 2021 quarter – when interest paid was at its lowest level in the series ($3.0b).

Businesses have taken on more debt and reduced their inventories to fund the difference between income and outgoings. And business surveys show they’ve hit the wall on their ability to pass on price increases.

When we drill into the hospitality sector data the story is equally bleak.

Electronic card spending figures, from Stats NZ last Friday, showed hospitality spending down 0.5% for the month and 2.1% for the quarter.

The nominal dollar figures for Kiwis’ spending on hospitality, are roughly back on par with the $3.5b we spent in the last quarter of 2019 pre-pandemic.

But considering high levels of inflation since then – raising costs for operators and squeezing margins – that is a terrible number.

Card spending data from New Zealand’s largest bank ANZ focuses more specifically on “restaurants and bars”. It shows spending was down 6.3% year on year.

In contrast, spending on alcoholic drinks was down just 2% for the year. We’re still drinking but we’re more likely to be doing it at home to save money.

All this adds up to one of the worst winters on record for the sector. It is almost inevitable we’ll see more operators closing their doors before this economic cycle turns.

So, if you can, get out and support your local bar this winter.

Otherwise, when summer comes and you feel like heading out into the evening sun, it might not be there.