Auckland hospitality businesses call on the Government to provide the wage subsidy at level 2

Monday, 4 October 2021

Infometrics Senior Economist Brad Olsen says hospitality has not bounced back in the same way other sectors have.

The hole in Auckland’s hospitality spending is estimated to have hit $281 million since the Delta lockdown started, Infometrics says.

Infometrics principle economist Brad Olsen said the hit had been harder for Auckland than other regions, raising concerns about the possible speed of the bounce back.

“We can see that even at level three the reduction in spending is higher in Auckland than other parts of the country. Even at level 3 for the first week we have data for, we can see that revenue is still down about 59 per cent from pre-pandemic 2019 levels,” Olsen said.

“That is a slightly harder hit than what we have seen nationally. The resilience of business has been worn down substantially more.”

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Fleur Sullivan from renowned Moeraki restaurant Fleur's Place has chosen not to reopen until the South Island moves to alert level 1. Tighter restrictions under Delta mean only 50 people can be seated.

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At an emergency online meeting facilitated by the Hospitality Association on Sunday, more than 300 Auckland hospitality businesses discussed the critical situation.

They have called on the Government to provide the wage subsidy for staff at level 2, after seven weeks of level 3 and 4. The businesses also want the Government to make resurgence payments available either weekly or fortnightly, tied to revenue.

The Government is due to make its decision on Monday about whether Auckland will move down to level 2.

Mark Wilson, owner of The Grange in Takapuna, is one of the businesses asking the Government to provide wage subsidy assistance at alert level 2 to Auckland hospitality businesses.

The businesses said they had endured extreme hardship under level 3 and 4, and had survived by taking on unprecedented levels of debt from borrowing and not paying bills.

The ability to pay back the debts would not kick in until the city was at level 1, and would take up to a year to repay.

A move to level 2 that limited capacity with restrictions on staffing and sociability would limit revenue to less than break even.

Losses would be worse at level 2 because businesses would no longer be eligible for the wage subsidy and for businesses outside of Auckland, it would mean the loss of Auckland travellers as customers, they said.

Owner of The Grange, in Auckland, Mark Wilson said at level 2 this time around it appeared that cafes and restaurants would allowed to have only 50 people inside and 100 outside. Last year in lockdown they were able to have 100 people inside.

“Our venue seats 130 inside and we’ve got provision for 200 to 250 outside. We are going to be forced into a situation whether we like it or not that if we are able to trade at 45 per cent this time around we’ll be lucky,” Wilson said.

“So it's essential that the Government continue with assistance, especially because they’ve given it to the rest of the country up until now that are trading.”

Wilson had another business and source of income, which many others did not. Asked if The Grange was at risk of closing, he said “absolutely”.

Brad Jacobs, master franchisee of The Coffee Company says its inner city Auckland cafes are at high risk from lockdown.

“It’s all about viability. The Government is … saying that hospitality as a whole is not a viable industry. You get [Small Business Minister]Stuart Nash saying they want to get people out of hospitality and into better paying jobs and [Finance Minister] Grant Robertson saying ‘why would I give them assistance because most of them are to go broke anyway’.”

He would not continue to “flog a dead horse” if that was where it was heading, Wilson said.

Coffee Club master franchisee Brad Jacobs said Auckland had done it the toughest for the longest and then was getting cut off at the last second.

“That isn’t logical, apart from being unfair,” Jacobs said.

The rest of the country had the benefit of being able to claim the wage subsidy because Auckland was at level 3.

Any business that was down at least 40 per cent on its revenue should be able to claim the wage subsidy, he said.

The Coffee Club had 69 franchises nationwide and 48 within the Auckland boundaries. Five in the central city were the worst hit, with one already closings its doors, he said.

“The city will take a huge amount of time to recover this time. It’s got slower each lockdown and they were only level 3 lockdowns. This time it's going to be extremely tough in the city.”

Olson said while the bounce back was on for many other sectors, it wasn’t the same for hospitality.

At end of the June quarter last year, after the first national lockdown, all other sectors recorded an operating profit. However, the accommodation and food services sector made a $390m operating loss.