Lift of restrictions is expected to encourage more people back into hospitality venues. Photo / 123RF
As New Zealand nears alert level 1, hospitality operators are hopeful for a potential surge in business as the number of people allowed in venues open up.
Profit margins in hospitality are low, and with restrictions limiting the number of people within venues at one time and rules requiring a single server per table, high labour costs have been eating into already muted earnings.
Tony McGeorge, director of Comensa Group which operates Auckland eateries Cafe Hanoi, Saan and Xuxu Dumpling Bar, expects revenue and patronage to pick up over the next three months.
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The move to level 1 would likely facilitate an improvement in trading, particularly in areas such as Auckland CBD, as an influx of corporates resume office working.
"I think what's going to happen is that downtown will steadily increase over the next four to eight weeks. I'm hoping that by about August, for hospitality businesses, we'll be in a place which is reasonably solid," McGeorge told the Herald.
"I don't expect that we're going to be back to 100 per cent [pre-Covid trading levels] - I'm hoping that within two months' time, if we're tracking at 80 per cent, I think we'll be doing pretty well."
McGeorge, who also owns Ponsonby Social, said one Comensa venue in Auckland CBD was trading at about 50 per cent compared to typical trading levels, while another was at between 30-40 per cent.
The Ponsonby venues had been trading better than those located in the CBD, he said.
Viaduct Harbour and bigger venues would no doubt have found operating during level 2 a challenge. Suburban venues, however, had likely bounced back to good levels of trade, he said.
At 80 per cent of pre-Covid trade levels, Comensa businesses would be able to make some profit, at 70 per cent, however, it would mean that business would only be breaking even," McGeorge said.
He said he was hopeful for a return of trade to at least 80 per cent as it would enable the group to keep its current staffing structure.
The business would likely look to reapply for the wage subsidy, he said.
"I see the next two to six months as being hugely uncertain. We want to be back at 80 per cent but we don't know ... there are parts of our audience that are not coming back in a hurry.
"In the CBD we would get a lot of Australian businesspeople who would be coming in once a month or so - they'd always come to Cafe Haanoi, so that's a proportion of our audience who is no longer turning up. That might only be two or three per cent, but if you have three or four audiences like that it adds up to 10-15 per cent," McGeorge said.
"The big unknown at the moment is economic confidence. I think the move to level 1 does reduce a lot of fear in terms of confidence around health and wellbeing; that's not going to be stopping very many people from going out, what will be stopping people from going out is possibly economic confidence."
While health concerns may not stop people from dining out or grab lunch on the go, job stability and their financial position may.
A long string of companies have laid of tranches of staff in recent months and more redundancies are expected as more businesses feel the economic impact of Covid-19.
From an operational perspective, business operators will have less restrictions to be mindful of and be able to get creative about trading and alternative revenue streams.
McGeorge said the drop in rules requiring one server per table would reduce stress - he said the three Ss was difficult for many hospitality businesses to meet - and inefficient.
"For our businesses, having more tables in, for sure that's certainly going to help on the busier shifts. Removing those regulations is amazing, it's going to help us to operate more effectively and profitably.
"Every gain in revenue back towards some level of normalcy is going to be based on hard work and focusing on the businesses."
Comensa venues, like most hospitality businesses, were considering new ways to draw revenue. It is looking at pushing deliveries and pick up orders, considering at home catering for gatherings and merchandise that it could sell.
"Most people in hospitality at the moment are talking about widening up their revenue channels ... if there is a structure 10-20 per cent decline on sales for the next then where can we get that from?," McGeorge said.
"We're not going to revolutionise our businesses model - we don't think our business models are broken - but we do believe that we're going to have to look at other ways to augment them ... [new revenue streams] may only be 1 or 2 per cent, but it all adds up."
Marisa Bidois, chief executive of the Restaurant Association, said the move to level 1 was a positive step for the hospitality industry.
"The removal of restrictions on our businesses will certainly make a big difference. We've had to have social distancing in place, which has limited the number of guests, there have been a lot of restrictions that we've had to manage, including the single server [per table]; all of these things cost time and money to manage," Bidois said.
The association remains "cautiously optimistic" about the return of hospitality revenues.
"I'm confident that our businesses will certainly benefit from the removal of the restrictions."
The latest weekly survey of Restaurant Association members found that industry revenues experienced another week of falling revenues.
After a third week at level 2, 60 per cent of members reported a fall in revenues compared with the same trading period last year, with 22 per cent calling the losses 'significant'.
Members ranked the single server rule as the single most challenging aspect of operating at level 2, with maintaining physical distance ranking second.
The survey revealed that more than 60 per cent of members would look to change their business models over the next 30 days and almost 60 per cent would restructure to reduce their staff numbers.
Bidois estimates it will take about three years for hospitality to recover to what it was pre-Covid.
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