Whanganui hospitality businesses are under rising pressure after a tough financial year.
Whanganui hospitality businesses are under rising pressure after a tough financial year.
The end of the financial year is spelling bad news for some in the hospitality sector, as industry experts forecast more owners will walk away in the coming months.
Labour supply shortages, rising wages, food costs and supply chain issues have created a “hostile economic environment” for small business owners.
This week, the Chronicle reported Whanganui eateries Kools Chicken and Gracias Tex-Mex have shut up shop, with owners citing a raft of financial pressures.
But others are feeling the pinch.
Malcolm Whitlock, owner of the Citadel Café, said the past financial year was the most difficult and arduous he had seen in his business career.
“Sometimes we have to paint a smile on our faces, knowing what’s happening behind the scenes,” he said.
Whitlock said it was positive for working conditions in the industry that, due to a shortage of skilled labour, businesses have to be better employers to retain staff.
But significant minimum wage increases also had to be absorbed by the business, and then get passed on to the customer.
“There definitely is a point where people will not spend $7 on a cup of coffee.”
Data from Whanganui & Partners showed that in February this year, consumer spend for local cafés, restaurants, bars and takeaway shops was up 20.9 per cent compared to the same month in 2022.
Wages have increased by 25 per cent in the Citadel’s last four years, and Whitlock said he’s had to adjust customer prices to keep staff.
The financial pressure of balancing costs is hurting existing businesses, and dissuading newcomers.
Whanganui & Partners tracking of business growth and employment showed there were 12 fewer businesses in the sector in 2022 compared to 2021.
But a Whanganui District Council spokesperson said 31 new registrations were made for businesses in 2022, and 29 were surrendered.
Adam Parker, North Island regional manager for Hospitality New Zealand, said there’s too much red tape, such as compliance costs and alcohol licensing, involved with setting up a hospitality business.
“It’s becoming less and less appealing for people,” he said.
But he believed the industry is resilient and will emerge from this difficult period.
“In the interim, there are going to be plenty of people that walk away and just decide it’s too hard these days.”
Chris Rod, owner of Fitzies Bakery and Café, said it has definitely been the hardest financial year of his four years running the business.
“We definitely have copped a bit from customers not being happy with prices, but unfortunately, it costs money to make product - we can’t sell it for nothing.”
Rod said wage hikes combined with food prices going up on a bi-monthly basis had made the year a struggle, but food suppliers, especially local companies, had helped ease the strain by being flexible and easygoing.
“All we can do is just keep chipping along.”
Helen Garner, chief executive of Business Whanganui, said currently the risk-to-reward ratio was the worst for hospitality out of all business sectors.
“It’s a hostile economic environment, and it’s not conducive to small-business New Zealand or people wanting to create wealth through growing a small business.”
Whanganui Chamber of Commerce chief executive Helen Garner. Photo / Bevan Conley
Competing with big chains like KFC or McDonald’s was tough for smaller restaurants, and Garner said she was concerned these hospitality players are locking out smaller companies.
“They’re marketing machines.”
Garner said businesses that are agile and can make changes when they need to would be in the best position.
“Some people don’t get support or ask for help, and leave it too late to act when their businesses aren’t sustainable.”
For companies, a potentially business-saving move was to get industry support by becoming a member of a professional association.
“Support is just a phone call away.”
Adam Parker from Hospitality New Zealand said it was important for Whanganui residents to give their support to local hospitality businesses.
“I know times might be hard around finances, but if going out to be social with your friends over a meal is something you take value out of, then go out and support these businesses who really need it.”
