Hospitality recovery in Auckland

Hospitality recovery in Auckland; rest of New Zealand still struggling

The hospitality industry may be showing signs of recovery in Auckland, but the rest of the country still lags well behind, with one Christchurch operator describing the situation as “dire.”

Auckland appears to have started a gradual recovery in October/November last year, but Wellington and Christchurch has yet to see any such lift, in fact, alcohol sales since Christmas have continued to decline in many areas.

Andrew Harris, Partner Business Advisory for Chartered Accountants Grant Thornton New Zealand, who act for a range of clients in the hospitality industry, said that hospitality sales closely mirror retail sales.

“The recently released Retail Trade Survey showed the Auckland and Waikato regions pushing along, averaging a 5% growth over the previous six months, with the Wellington and Christchurch regions both showing negative growth.

“It is pretty much the same for the bars and restaurants that we act for, although restaurants and cafes appear to be recovering slightly faster than bars and clubs.

“The last supper for the Auckland hospitality industry was September/October 2008 with a gradual recovery for restaurants beginning October/November last year and bars about March this year.

“On the bar scene, it has been the higher end that has recovered first. The blue collar bars have had a double whammy. Some drinkers have moved to clubs like the RSA where they can drink more cheaply, while others are buying from the supermarkets and drinking at home because they have lost their jobs or had their hours cut.

“The corporate market does not seem to have been hit so hard,” he said.

Recent comments by the chief executive of the Hospitality Association of New Zealand, Bruce Robertson, back this trend, with 150 of his members having closed or been put in receivership in the past year. A recent example was the 20 Auckland and Wellington bars associated with Northern Hospitality Management that were put into receivership earlier this month.

Harris said that many bars only struggled through last winter, looking to the warmer summer months to build some fat to get them through this winter.

“Unfortunately for many, the summer did not give them the profit needed to see them through a second winter of discontent. There’s no fat left and they are walking a tightrope,” he said.

Harris’s comments were backed by a substantial South Island bar owner/operator.

“Things are dire out there for many bars, definitely the toughest trading conditions seen in at least 20 years. For many it is going to be a long, hard winter, one that they might not be able to survive.

“Some suburban bars/restaurants are doing okay and a few inner city bars where the younger generation frequent on a Thursday and Saturday night are holding up. In Christchurch, the bars that make it through to Cup Week (second week in November) should survive, but that’s a long four months away,” he said.

Dunedin bars are believed to be in an even more precarious position than those in Christchurch and Wellington, although last weekend’s rugby test will have helped slightly. Queenstown is waiting for the ski season to kick in fully, while, for the first time, some of the regions such as the West Coast are also noticing a tightening in trading conditions.

Harris said that for those thinking of buying or opening a bar, now is not the time, unless they are well advised and have a strong equity position.

“The banks and breweries have picked the players they will support, and if you are outside their respective teams, there are not a lot of places to hide.

“The recession further highlights the current oversupply of bars and restaurants with the weaker operators being found out and the stronger, with the backing of the banks and the breweries, now taking advantage,” he said.

ENDS

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