Raise prices to cope with GST hike says hospitality boss

Luke Dallow, Sale St and Chapel bar owner, will be putting prices across the board next Friday. Photo / Steven McNicholl

An industry association is advising bar and restaurant owners to put prices up next Friday to compensate for the GST increase that comes into force that day.

Hospitality Association NZ chief executive Bruce Robertson said he supported prices going up because otherwise businesses would suffer and jobs within the industry could be put at risk.

GST is to increase from 12.5 to 15 per cent next Friday, on the same day tax cuts come into effect.

"Our expectation is that some prices will go up on October 1. Some may have already increased prices and some may wait and move their prices in the next few months.

"Different businesses are going to respond differently but ultimately businesses are going to have to increase prices to recover the extra GST cost," Robertson said.

"We hope customers will notice they have more money in their pockets as a result of receiving tax cuts. We hope people will come out to our bars and restaurants and spend some of it."

Empire Tavern owner Paul Webber said it was inevitable prices were going to rise but he doubted by much and whether customers would notice the difference in his pub.

Webber said he and his business partner wife Hilda, had not decided on what products would be increased.

"We have to maintain our margins. Otherwise we're opening the doors for the goodwill of being open," he said.

"It won't be a blanket price rise, we won't be putting up prices across the board at all. We will probably identify certain areas and it will be more for margin than anything else, to maintain margin rather than putting the price up of the best seller."

Webber said coffee would remain the same - a flat white costs $3.50 - but there would be changes to food and alcohol.

The 2.5 per cent increase could cause certain businesses to round up to the nearest dollar or half dollar, which could prove problematic, Webber said.

"If you're selling a pint of beer for $7, do you change $7.20 or do you round it up to $7.50? Three quarters of customers pay through electronic banking and the rest is cash. So that still leaves a quarter of the business paying cash. You don't really want to be charging someone $7.20 for a pint and then give the customers 80c in change."

But Sale St and Chapel bar owner Luke Dallow will be implementing the 2.5 per cent rise across the board next Friday.

Tap beer will go up 20c from $8 to $8.20, but he said this would not inconvenience customers as 80 per cent pay electronically.

"We can't absorb the increase in the pricing. If we absorb the extra GST we are going to make less profit. We have some big expenses such as staffing." Dallow said he was expecting a slight downturn when the increase comes in next week "until people get their heads around it".