At alert level 3, restaurants and cafes can only open for contactless takeout. Photo/Sylvie Whinray
Summer didn't save them and now they're back in lockdown. The future is bleak for inner-city restaurateurs, reports Kim Knight.
A man from New Zealand walks into a restaurant and sits down.
Lucky bastard.
That's it. That's the joke, as told recently on Twitter. In the middle of a global pandemic, when thousands of restaurants had gone to the wall, New Zealanders were still choosing between the chicken or the fish. If you didn't laugh, you'd refinance your house - because perception is not always reality.
Summer trading figures from the Restaurant Association of New Zealand surveys told a tale of two very different Covid outcomes in Auckland. While 30 per cent of operators reported better January sales than the year prior, 23 per cent said turnover was less and another 41 per cent said it was "significantly" less.
And now the country's biggest city is in its fourth lockdown in less than a year. ASB Bank economists estimate the current week at alert level 3 will cost Auckland about $200 million, with the brunt being borne by the hospitality and event sectors. Meanwhile, the Restaurant Association "conservatively" estimates a 32 per cent decline in food and beverage spending for the week - a loss of $74.3m for an industry that, in previous hospitality hotspots, is haemorrhaging money.
The association is still finalising February data, but raw figures show 89 per cent of respondents reporting revenue drops compared to the same time last year. The survey of 143 hospitality businesses (including 68 in Auckland) revealed customer traffic was down by between 60 and 70 per cent at a quarter of all sites. Seven operators indicated staff cuts were looming.
Over recent weeks, the Weekend Herald has spoken to one restaurateur forced to take out a second mortgage on her family home. Another industry stalwart had, for the first time in 24 years, experienced nights with zero customers and no forward bookings. An inner-city pub owner says even if he had to keep paying rent, it would be cheaper to mothball his business for a year than yo-yo between shutdowns. And down at the Viaduct, the heart of the America's Cup challenge, one operator who didn't want to be named showed us his books - a $224,000 drop in January takings compared to the same month last year. In February, business was down almost $700,000.
"Just the way life is," he said. "No tourists around. Not even domestic."
In the first week of March last year, he took in $410,000. This week, the only income will be $21,000 in Government subsidies - not enough to cover even half the regular wage bill.
This story was scheduled to go to print three weeks ago. But if things were grim then, they're worse now. Valentine's Day was supposed to be the bright spot in a candlelit room. Restaurants that wouldn't normally open on a Sunday night were booked out with set menus across two sittings. Instagram feeds had pivoted from food porn to photographs of fully subscribed reservation lists. The country's first planeload of vaccines was on its way. Maybe, just maybe, everything would be okay?
The Civil Defence cellphone alert blasted just before 8.30pm on February 14. Auckland was, once again, experiencing community transmission of Covid-19. A snap, three-day, alert level 3 lockdown would be in place by midnight. Kerr Houston, chief executive of Collective Hospitality, braced himself. Over the next fortnight, his catering company would lose $600,000 worth of business as major conferences were cancelled and the Halberg Sports Awards were postponed.
"I know no one's dying, but it's just really hard on the staff, you know. On our people."
Knock-on effects continue. On Saturday, his company provided the three-course meal for 1500 corporate hospitality guests at the Joseph Parker and Junior Fa boxing fight. He says food prep only began on the Wednesday prior, days later than normal.
"The future is one where we don't commit too much in terms of resource, ingredients and stock until a couple or three days out from an event," says Houston. "Normally we would have been making sauces and a whole bunch of stuff way before to make sure the load is evenly spread. That's a massive impact in your labour rostering, and you end up using temporary labour, which isn't as skilled."
The Parker-Fa fight had not even begun when the Civil Defence phone alarms went off again. Auckland was, yet again, going into lockdown, effective from midnight - hours before the scheduled Round the Bays event that Collective Hospitality had also been contracted to cater for.
"We are in process of getting all the prepared food packaged up and then sent to the Auckland City Mission," Houston reported on Monday. "We can thank our Ports of Auckland client for that."
The scramble that hit Auckland's restaurants played big on social media. Peter Gordon's new restaurant, Homeland, was prepping to feed 500 people at private events. Smokin Cole BBQ had a Sunday function for 50. Bread and Butter Bakery and Cafe was ready for the Grey Lynn Farmers Market: "We will have mountains of breads and pastries that we now cannot unmake," it posted.
Takeout and home delivery were back on the menu across town. The vibe was resigned, but upbeat. "What a rollercoaster," said Hello Beasty's Instagram feed. "We love you, most especially when you come in hot 'n hangry and needing sustenance. 09 - you know the drill." At Cazador, you could pre-book a Friday night goat kebab and, between 5 and 6pm every day, "dial-a-Dariush" gave customers access to free culinary advice from the co-owner and chef. Amano advised contactless coffees, passionfruit meringue tarts and an upbeat "stay safe Auckland, we can do this!"
But can we? Can the city's restaurants, bars and event caterers really survive repeated lockdowns?
Back in November, Kerr Houston wrote to Finance Minister Grant Robertson outlining what Collective Hospitality had done to stay afloat. The $17m business had exited from the Wellington market and established a sinking lid staff policy (16 had left and another eight were made redundant). The entire management team had moved to subsidy-only wages for three months and there had been a push for new business opportunities, including the creation of high-end, ready-made meals for Farro supermarkets.
"We have proved, given the opportunity to trade, we are able to wipe our own face," Houston wrote, calling on the Government to look harder at those businesses which had lost 80 per cent of their income, but would, under normal circumstances, be profitable. He suggested further wage subsidies and an extension of the small business interest-free loan scheme (up to $500,000) to cover medium-sized entities.
"In the events industry, we are the very first to be locked down and the last to get going," Houston said. "We rely heavily on business confidence."
Virtually every operator we spoke to said the same thing. After the first lockdown, business was buoyant. It was far slower to pick up following Auckland's August outbreak, and the November 13 alarm, when people were urged to avoid the central city for the day, seriously impacted Christmas bookings. With every successive shutdown, the bounce-back has been slower and softer.
Desperate operators are asking the Restaurant Association (which represents about a quarter of the country's 9000 hospitality businesses) to lobby Government on multiple fronts, suggesting everything from a two-year delay to minimum wage increases to free public transport into the CBD.
Mandy Lusk, co-owner of Fort St's Vivace, says she accepts Government has chosen a health-based approach to the fight against Covid, "but I hate the fact that our industry is treated purely as collateral damage".
And, she says, there is a lack of empathy from some people.
"Frequently those are people who are happy to stay at home receiving full pay. They do not seem to understand that the snap lockdown was not just three days - they followed 74 days that we were closed with zero income and 65 days where we were restricted to 50 per cent earning ability due to distance seating requirements - all in the last 11 months.
"It is the cumulative effect that hurts . . . For most, level 3 is an inconvenience at worst, some even appear to enjoy the home time on full pay with no traffic or commuting. For some of us though it is slowly but surely destroying our businesses and having a horrible effect on the lives of our staff, suppliers, and families in the process."
Lusk pays $112,000 rent annually for Vivace's Fort St location that, once, was ideally situated to cater for tourism and events at the 12,000-seat Spark Arena. Now, she says revenue is down 70 per cent and she's refinanced the family home to keep a 29-year-old business afloat.
"From that second lockdown, everything has got that little bit worse."
Vivace is surrounded by large international corporations whose new norm is working from home most of the week. It's also flanked by managed isolation quarantine hotels. Lusk says regular diners have told her they're scared to come into the city in case they encounter potentially infected workers. Meanwhile, nearby Britomart train station - which, in pre-Covid times, recorded 38,000 passengers daily - was completely closed for 23 days from December 26 and impacted by partial line closures since October.
"There are literally no people on the streets," said Lusk. "Should there not be two tiers of subsidies - one for businesses that are able to work from home, which is different from those businesses that are completely banned from trading?"
At Vivace, January takings were down 70 per cent and staff numbers have dropped from 32 to 18. Lusk says any corporate entertainment dollars were being spent on the water and the America's Cup had not benefited downtown businesses to the degree they'd hoped.
"We are certainly not alone - although the suburbs are doing fantastically. We've got friends with restaurants who are having a wonderful time because people are dining out and working from home."
Anyone who has tried to get a table at Ada or Lilian or [insert latest vege heavy, pizza adjacent, natural wine, neighbourhood local here] will concur. City fringe and deep suburbia is surviving, and in some cases, thriving. Matthew Aitchison's hospo career spans big names like The French Cafe and Cassia, but last November, he and his sister opened Stanley Avenue in Milford.
"We're a small little suburban bistro, but we had been negotiating our lease and the site and the planning and the design for at least 15 months before we opened."
He says they could have walked away once Covid hit, but persevered: "The locals here on the North Shore have welcomed us with open arms . . . certainly over this way, people were avoiding town, working from home so they didn't need to travel, we wiped out the harbour bridge for a couple of weeks . . . people have supported local for sure."
Aitchison says in Sydney and Melbourne, high-quality suburban eateries are common, "and I think that would be a good trend here. If I was a lower profile person, I would hesitate to open in the city in the next 12-18 months. But if you're a talented operator, I definitely think there's huge potential in the suburbs."
From the outside, hospo has never looked healthier. High-profile chefs like Michael Meredith, Ben Bayly, Peter Gordon and Matt Lambert have all opened brand new central Auckland restaurants since the emergence of Covid. New luxury hotels boast restaurants like Sean Connolly's Esther and Tom Hishon and Josh Helm's Kingi.
Meanwhile, Commercial Bay has added more than 40 eat and drink options to the downtown mix. But, like that North Shore bistro, all of these offerings were in train before Covid made a single headline. And, while many new places are busy, there is a fear the honeymoon buzz for new restaurants won't last as long as it used to.
"We had the option of pulling out when I was about $200,000 into it," says Ofir Yudilevich, who operates two eateries (Billypot and Paella Pod) inside Harbour Eats, the upmarket food court section of Commercial Bay. "But I kind of doubled down."
He's betting on a future that relies on pedestrian and car access to downtown ("the last couple of months there's been a ****load of orange cones everywhere"), full occupancy of the five corporate office buildings connected to the new retail and food precinct and the return of tourism, especially cruise ships.
Right now? "There are about 35 outlets in there and I can pretty much safely tell that about 30 are losing money. A couple of standout tenancies are doing okay."
Yudilevich says Commercial Bay's success was predicated on its close proximity to at least 8000 lunch-hungry office workers and the cruise industry, with its 2000-plus capacity ships.
"The question is do you walk away and risk a damaged reputation and future tenancies, or do you lose, say $5000 a week, and hold on for, let's say a year until things improve and then you make $10,000 a week? Are you losing enough money where you cannot sustain your business overall?"
Yudilevich is a former chef turned businessman who also owns Fort St bar The Jefferson.
"We rely heavily on suits finishing work and coming down for a drink and a catch-up from 5pm onwards . . . we just don't have those suits, because they're working from home. Even those that do come in, the spending pattern has changed . . . the CEOs, the managing directors, they're basically saying to me 'look, we laid people off, we put people on 80 per cent of their wages, we're asking everyone not to spend money and we can't be seen going out and having a $500 drink'."
Speaking just before the newest wave of community transmission, Yudilevich said The Jefferson was still holding its own, but if there were extended lockdowns, then mothballing the bar for a few months (even with a $100k-plus annual rent bill) would be a better option than continuing to pay fixed monthly costs like insurance, electricity and even music licence fees.
"There's still a $30,000-$40,000 a month expense you can't get away from. You know, when someone says why am I paying $10 for a beer when I can buy it from $2? Well, buddy, go and buy it for $2 and sit at home where you don't have liquor licences and staff and dishwashers and repairs and maintenance."
His post-lockdown message? "What I need to happen is for Kiwis to get the carrot out of their arse, to stop thinking we've got Covid in the streets, to go and have a drink and have a meal . . . get out of the house."
But some inner-city restaurateurs fear they might never return to a pre-Covid business model. In his 24th year of operating O'Connell St Bistro - a restaurant that has survived a fire, a flood and an electricity crisis - Chris Upton says he's never seen it this bad.
"There's no one out there, the streets are empty, the phone doesn't ring, the forward bookings are almost non-existent, there's no corporate entertaining."
He says December was "okay" but since then, business is down 70 per cent. He's dropped three lunch services, cut staff numbers from 16 to nine and gone "cap in hand" for rent relief. The famous wine cellar that used to carry a $100,000 collection now holds just $30,000 worth.
Upton, who paid $230,000 rent annually in pre-Covid times, says he just doesn't know what his future looks like.
"It's got to take its toll sooner or later. There's got to be decisions made soon. We are a formal, fine dining restaurant, but we still class ourselves as a bistro . . . I don't think that any amount of advertising or social media telling people that you are now [for example] a tapas restaurant is going to bring people in at this stage.
"What do you do? Do you pack it all up into a container and leave it for a year? We've got to be pragmatic about the whole thing and try and understand what the direction and future is . . . how long and how much do you have to put back into your business to keep it afloat. Is it worthwhile? Is the future worthwhile for that?"
Treasury has forecast a 29 per cent drop in food and accommodation service GDP over the next 12 months. Marisa Bidois, Restaurant Association chief executive, says the country's big picture might have looked okay, "but spending is not necessarily going on dining out. Those that can afford it are spending more on big-ticket items and upgrading their homes.. . . electronic card transactions for December, for example, show retail spending rose 3.5 per cent but spending in hospitality was down 5.3 per cent."
Before the most recent lockdown, Bidois spoke calmly about the main issues for Auckland - a "seismic" shift to work-from-home as a new normal, the businesses that relied on international tourists for 60 per cent of their income and the ongoing infrastructure changes like roadworks. She highlighted pockets of the country, like the Bay of Plenty and Tauranga, where members were reporting strong turnover. This week, her tone shifted.
"I love my job, my industry and the challenges that come along with it. However, I have found myself wanting lately. Wanting better engagement from Government, more responsiveness from those that purport to be leading our country toward a pathway of normality. Wanting an actualised plan that takes us beyond just lockdown after lockdown as a management approach. Wanting the Small Business and Tourism Minister to respond to our urgent request to meet."
The "silence is deafening", said Bidois; the blanket approach to alert level changes was failing sectors that could not work from home: "We need a different approach to supporting our business and a clear plan on what will be happening over the next year."
Hospitality is not for the faint-hearted. In the year ended March 2019, for example, some 1116 new businesses opened in Auckland, and 930 closed. Statistics that fully capture the Covid-effect won't be released for some months, but, in the latest Restaurant Association survey, three members confirmed they were selling up. One, when asked for further comment, summarised the situation in all caps: LEAVING THE INDUSTRY.
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