‘The old bottle is broken’: What hospo business veteran says can save the struggling sector

Thursday, 4 June 2026

Luke Dallow outside his former bar Chapel, on Ponsonby Rd.

A hospitality veteran says businesses need to start focusing on customer connection to help overcome this hard period, where the sector is struggling to survive.

Liquidations in hospitality have surged by almost 50% with 399 businesses closing in the past 12 months, according to the latest Centrix Credit Indicator.

But why is it so hard for hospitality businesses to stay afloat?

Luke Dallow, co-owner of the former Ponsonby Rd restaurant Gigi, told Stuff two key reasons why the sector was struggling were the rising costs of running a business, and broadly, the lack of heart and community.

“I've been in the hospitality industry for 35 years, owned bars, built restaurants, survived recessions, interest cycles… but I've never seen the industry under so much pressure in so many directions at the same time,” he said.

Dallow, 54, started as a dishwasher when he was just 16. Since then, he’s run around 14 hospitality businesses, and is currently writing a book about the state of the sector.

Rising costs

Dallow said hospitality isn’t dying, rather resetting, because “the old bottle is broken”.

“Big venues, massive rents, million dollar fit-outs, large debt,” he said. “Customers are not behaving like they did five or 10 years ago.”

“It's a tough game today, and we've got to adjust,” he said.

He said hospitality businesses have to deal with the increased costs of rent, wages, insurance, food and alcohol, alongside the red tape and compliance costs.

Luke Dallow was former co-owner of Gigi Ponsonby.

“And there's just less disposable income for people to spend in your bar or restaurant, which is a shame,” he said.

When Dallow started his career, people used to earn $15 per hour, which was the equivalent of three pints of beer, he said.

Now, minimum wage was the equivalent of one and a half pints.

Rent for businesses has also increased.

“When I first started, 30 years ago, the rent was 4% of the turnover. Now it's around about 9.5% of the turnover.”

A night out back in the day, cost $100, but now Dallow says it’s up to $300.

Trade union for workers of the sector, Unite, said hospitality was one of the first sectors to feel the impact when economic downturns hit.

“When households have less disposable income, spending on eating out, entertainment, and hospitality declines almost immediately,” it said.

But aside from the economy, Dallow said the biggest change he’s seen has been the customer.

“Today people are more selective,” said Dallow.

“They’ve gone out with so much money because that’s all they can afford, and they’re going to the places that they can rely on for a good experience,” he said.

Low wages across the sector contribute directly to people spending less, said Unite, “especially when customer bases skew younger, and are more affected by real-term minimum wage reductions”.

Customers seeking community

Under the current economy, customers can’t risk having a bad experience, said Dallow.

Liquidations in the hospitality sector have surged by almost 50% with 399 businesses closing in the past 12 months.

“Anyone could put a steak and a beer on a table… but it’s an emotions game.

“Hospitality has to be not just about food, it's got to be about the experience, the atmosphere, and the connection that they have to your establishment.”

He believed operators had started designing venues to photograph, “but customers don't come back because the wall looked good on Instagram”.

“The best restaurants and bars in the world aren't remembered because the tiles were expensive. They're remembered because of the experience had.

“They come back because they felt something more than just the steak and the beer, they felt the handshake at the door by the operator, they felt something small, like a little top-up of wine,” he said.

The biggest competitor to hospitality right now is “Netflix, the couch, and uber eats,” said Dallow, as people will opt to stay home rather than go out.

“The current operators haven't suddenly become bad operators, just the environment around them has changed, and they've got to adjust quickly, or they too will go under,” he said.

“Successful venues will be smaller, smarter, less debt, lower overheads, owner-operated and on the floor, community-focused and experience driven,” said Dallow.