The hospitality industry says it's facing its most turbulent time yet in the Covid outbreak, and many businesses will struggle to survive
Well-known Auckland eatery Frasers Cafe looks set to shut its doors as the Omicron outbreak continues to suffocate hospitality businesses. It's not the first and it won't be the last. Other cafe and restaurant owners are selling or mortgaging assets to pay staff wages, they say.
Forty-three years after incorporation, City Grind Limited, which trades as Frasers Cafe in Mount Eden, is in liquidation.
Once a reliable lunch option, or a cosy spot to grab a late night hot chocolate on a Sunday evening, the cafe had to shrink its hours and open only four days a week over the last few weeks. Now it's gone.
When Newsroom visits the cafe on Wednesday, the lights are off and front doors firmly shut. A notice on the front door regretfully explains the eatery will be shut this week due to staff illness.
Just over two weeks ago, it posted on social media about navigating “these incredibly difficult times”.
“Hospitality is in survival mode so please support local whenever you can. We cannot thank you enough for your loyalty and continued support,” an Instagram post reads.
PKF Corporate Recovery and Insolvency is working on the case, with the company put into liquidation on March 11.
Paul Fraser is listed as the sole director of the company. He’s also a shareholder, along with co-owner Sandra Fraser and Lynley Ann Wood.
No one at the cafe responded to Newsroom’s attempts at making contact to ask what the cafe's future is, but it’s clear the business isn't the only one suffering.
Mark Wilson knows this to be a fact - both from personal experience and hearing the “desperate” stories of others in the hospitality industry.
He owns The Grange Bar and Bistro in Takapuna, and he’s also set up NZ Hospo Last Call, a support group which has about 3500 members from around the country.
The group held an online webinar last month, with politicians including National Party leader Christopher Luxon and Labour MP Helen White attending.
“We're facing the hardest, most turbulent time that we've had during the pandemic. Everybody else is coming out the other end but because of these restrictions, and Omicron just spreading so rapidly through the community, hospitality has just lost its trade." - Mark Wilson, Grange Bar and Bistro
It was a teary meeting, according to Wilson.
One of the business owners spoke about how he’d sold his Ford Ranger ute to pay his staff’s wages next month, while another spoke of selling off his house to keep the business afloat.
“We're facing the hardest, most turbulent time that we've had during the pandemic,” he says.
“Everybody else is coming out the other end but because of these restrictions, and Omicron just spreading so rapidly through the community, hospitality has just lost its trade.”
More than 400 hospo owners have signed an open letter Wilson has written to Finance Minister Grant Robertson, pleading for targeted financial support to be provided to the hospitality industry.
The Government is offering a targeted Covid support payment for businesses which can show a 40 percent drop in revenue over a seven-day period since February 16, compared against a typical week in the six weeks before, or during early 2021 when the entire country was at alert level one.
Eligible businesses will get a fortnightly payment of $4000 per business for six weeks, plus $400 per full-time employee. The payment is capped at 50 full-time-equivalent roles, or $24,000.
But Wilson says this support isn’t enough and covers only some fixed costs.
Instead, he’s suggesting the Government provide short-term and targeted support to the hospitality sector using the same eligibility criteria, but bumping the amount paid for each employee up to $450.
This equates to about 40 to 50 percent of an average wage at 35 to 40 hours a week, he says.
But Robertson hasn’t given any indication a targeted payment will be rolled out just for hospitality.
Instead, he says all businesses are welcome to apply for the scheme.
“As we have throughout this pandemic, the Government will monitor the impact of Covid and will adapt support payments if necessary.”
Many businesses on last legs
Michael Barnett, chief executive of the Auckland Business Chamber, says behind every shut front door is an owner who’s thrown everything they’ve got into the business.
“At some point, they had to make a decision whether to take on more debt to carry them through, in the hope that we’d return to a relatively normal environment, or take the step to move out of business,” he says.
“It’s devastating … [it’s] not that a business has failed, but we're talking people who’ve probably extended a mortgage and gotten themselves into debt.”
Those individuals will likely have to carry this financial burden as they step away from their business.
“For some it's going to be financially devastating or take them years to recover. For others, the actual fact of failure is going to have an impact on their own mental health and wellbeing,” Barnett says.
“If the Government does not step in now and offer some greater financial support, then we will sadly see more establishments fall at the last hurdle.” - Marisa Bidois, Restaurant Association
A Restaurant Association poll of its members last month showed 86 percent of respondents have had to reduce trading hours on a regular basis into the foreseeable future due to staffing shortages, while 42 percent closed on some days due to ongoing workforce gaps.
Worryingly, close to 90 percent say revenue is lower compared to the same month last year, with the average decline sitting at 34 percent.
And this is having an impact on owners, with the vast majority saying their health and wellbeing is currently affected.
Restaurant Association chief executive Marisa Bidois says many businesses in the industry are on their last legs.
“If the Government does not step in now and offer some greater financial support, then we will sadly see more establishments fall at the last hurdle.”
