INDEPENDENT NEWS

Real World Case Studies Of Covid Level Impacts On Hospitality Businesses (Aug-Sept 2021)

Published: Mon 13 Sep 2021 04:47 PM
Hospitality New Zealand has released a sample of ‘case studies’ drawn personal testimony from members last week, outlining their financial situation under lockdowns and level 2.5.
CEO Julie White said the sample was representative of a “very grim” situation unique to the hospitality sector because it was the most affected by Level rules designed to reduce socialisation.
The general picture from hospitality is that the new lockdowns hit just when businesses had clawed back losses from last year and were hoping for Spring and Christmas to regain profitably.
Businesses are carrying and increasing debt to cover costs while either earning nothing or earning less than break even under Level 2.5 rules limiting patron numbers. There is no date from which New Zealand will return to Level 1, or after which it won’t lockdown again – which means businesses don’t know how long they will be losing money. Closing the business down is therefore a necessary consideration.National
National chain of 18 hotels18 months of losses carried forward loss within intention of profit this summer, but new lockdowns and levels have removed that chance.We’ve had about $500k of bookings cancelled through to January.December conferences and events are cancelling or not booking.Auckland
Bar1 week in lockdown is 10 weeks of revenue lost.Lvl 3 will not be profitable to open.Don’t know when Lvl2 coming.Considering options.
3 x Restaurants / Event venuesFor every three days of lockdown we lose 6 days of bookings.Cancellations are now into November. Spring is big wedding season for us and couples getting married from the middle of August onwards are now deciding what to do.No rent relief from our Landlord at all. Trying to find $20,000k of running costs / month and refund $10,000 when we have had a crippling 18 months and now no income.We tried to remortgage our house. The bank refused because "You are in the hospitality industry."There is no future plan, no dates, no certainty - devastating for the wedding sector, which works 18-24 months in advance.Hamilton
RestaurantHospitality margin of about 11% meant we had just got back to black from last year's lockdowns.Takings $0 over lockdown. Resumption of trade under 2.5 down 35% on normal trade - not breaking even.
RestaurantWe have been turned down, inexplicably, for the wage subsidy. Our business was zero during lockdown, and we cannot fit in enough people to run at break even under 2.5.There has been no bounce-back. People are not making advance bookings.I had only just recovered financially from the 2020 lockdowns, and also recovered my mental health brought on by that stress - after medical and psychological treatment.I have no savings to cover the losses we’re now incurring.Whanganui
RestaurantEmploys 33 full time employees and 1 part time.Normal annual turnover is up to $3m (ex Covid). Now operating under break-even.Maximum capacity is at 350 people indoors and outdoors. We also have an adjacent Camp Ground and facilities mainly tenanted by permanent working couples in Whanganui.Havelock
Restaurant20 Staff, on 80% salariesLockdown forced us to put $40,000 of our own money into the business.At Delta Level 2 our maximum capacity 100 people in a session - which isn’t profitable.Restaurants all around us are shutting doors.Even if we do return to normal, there isn’t enough staff to run at full capacity.Hastings
RestaurantStaff: 31 (subsidy helpful)Income in Lvl 3 and 4 was $7k. Our usual over the same period would have been $180kWe had just caught up over the last year. Needed to put our own money into business in this lockdown.Seating capacity is 220, but now restricted to 50 - completely unprofitable, especially with rules around staff to table ratio. Had to turn away ppl to fit within 50 cap - could have taken 70 today.We have just had a GST bill we can’t paySo we’re on a bank overdraft. Have put our vacation house up for sale to make sure we survive.Taranaki
3 x RestaurantsNo income during level 4 and level 3Income during level 2 is currently 40% on the 2 weeks prior to lockdownCapacity restrictions means our venue goes from 180 pax capacity to 90 pax (50 in one space shared by 2 businesses and 40 in another space). Turnover at 90 pax is a loss.No relief from landlordsHow will we pay wages next week? How long will this go on for? Will I have to make staff redundant?Palmerston North
3 x restaurants / nightclub74 employees will be cut to 42 next weekAfter lockdown last year there was a great resurgence, which recovered our lossesThis time is different. The nightclub is closed due to the Delta Lvl 2.Resurgence payment only covered 1 week of costs across all outletsOpening doors to lose money - extra staff for single-serviceVery quiet - people not coming out. Pub: 300 capacity - 50 kills the vibe and operates at a lossWellington
3 x CBD BarLvl 2.5 - 30-40% customers at mostLvl 2 - 60% customers at mostBank debt / Holding rent off / not paying GSTUncertainty about the future forcing us to consider whether to stay or close.Bills two weeks into lockdownNo wage subsidy at 2.5 so will lay off staff.Landlords 50% discount over Lvl3 and 4Functions for catering: cancellations coming in now
CafeLvl 2 is 30% of usual turn-over - doesn’t break evenLockdowns meant we lost all the money we built up since last lockdownClosing for levels was so expensive - threw out fruit and vege purchased day before, and $1200 of coffee beans.Uncertainty - don’t know this time when it will return to normalAdd to that staff shortages and all the additional costs added this year like holidays and sick leaveThere will be no profit this year. I have to work in the business every day. Is this worth it?
Catering12 staff members - down to 1Healthy business after lockdown - grew back to pre-lockdown turnover100% loss over lvl 3 & 4.Lvl 2 - 90% down in ordersNo bounce back from last time. Cancellations for events through to January.
3 x Suburban Bar/RestaurantLevel 2 is pretty difficult this timeA few months ago we were running at about 45% of normalThis time more like 30% of normal revenue - but with greater payroll costs due to new regulations.Landlord unsympathetic this time, and customers not keen to return.Last year we managed to achieve (almost) net sum zero during lockdown. This time we are hemorrhaging cash.Wairarapa
Iconic RestaurantCapacity 160 - 62% of seats outCan’t break even at that rateSubsidy definitely helpingBut costs can’t be metCan’t work without the subsidy - will lay off peopleBank restructured the loan / using reservesNo bounce backNelson
AccommodationMonthly costs are $50,000 (rent is $19166 per month/$200k pa), we have received $5272 for wages subsidy and $3500 in resurgence payment.We have earnt only $150 per day since the beginning of lockdown and into Level 2. Cancellations are coming in for August to November.
AccommodationMonthly costs are $20,000 (mortgage, GST, wages and running costs)Gross Income from guests of $2700 during the 21 days of lockdown less 15% GST (August 18 to September 7, 2021).Business is not restarting again. Cancellations and no bookings from Auckland or the wider region that used Auckland airport. We expect to be very low through to Christmas.
AccommodationMonthly costs are $28,750 per month ($300K pa) in rent. Daily income only low $100s. No increase since Lvl 2.5. Cancellations coming in through to November.Have only received a $3100 resurgence payment.Golden Bay
AccommodationWe did well following the shock of the 2020 lockdown and enjoyed a good bounce-back.But this time is different - occupancy is only 5% of normal/There’s nothing new coming in, and forward bookings are cancelling. Worse, the forward bookings are from large tour groups planned for summer.Christchurch
2 x Pub / RestaurantsStaff: 40 over 2 sites.Turnover since April 2020 reduced by 20 - 30% pre-Covid19. $200,000 debt over lockdown. Will repay from personal loan/mortgage.Lvl 4/ Lockdown: gave away $6,000 in perishable stock. Told suppliers that payment plans / direct debits could not be honoured.Staff on 80% - 100% of usual wages, with subsidy. Resurgence payment helped towards insurance and utilities. Borrowing from bank to help with other costs.Lvl 3: Remained closed as cost of restocking outweighed financial benefit, and not suited to take-aways.Lvl2.5: We were fully booked for functions on most weekends until Christmas, but most have now been cancelled, including large corporate Christmas functions.Trade is around 50% of usual covid trade. I don’t know if we can afford to carry on, especially as it is unclear whether level 2 restrictions will last for 1 week, or 3 months.Invercargill
Accommodation10 unit motel in Invercargill. 1 casual employee.Monthly costs about $12,000. Daily income slashed, and only from a few essential workers and construction workers.Resurgence payment doesn’t even pay half the rent for the month, let alone other fixed costs.Our cash reserves are rapidly diminishing and we are reviewing how much to borrow.Some business/ corporate reps unable to travel due to lack of flights. (Some companies won’t allow their employees to stay overnight until Level 1)$20,000 of cancellations since Lockdown commenced (up until end of Sept), with more to come if Auckland remains in L3/4. Impromptu bookings are zero.Cancellations of Sports events (Secondary Schools Tournie Week, Teretonga Motor, Drag Racing competitions), Business conferences, National competitions (power Lifting Nationals)There is certainly a lot more potential to lose significant income if large events such as Tour of Southland, NZ Cycling Champs are cancelledQueenstown
Restaurant40+ staff.Recovery after the last lockdown allowed us to put aside $280,000 earnings, anticipating more lockdowns.We can’t trade profitably at Delta Lvl2 - first day opening at level 2.5, only 10% of revenue.We will burn through that $280k by the end of September.

Next in Business, Science, and Tech

David McLean Appointed As KiwiRail Chair
By: New Zealand Government
‘More Milk From Fewer Cows’ Trend Continues In A Record Year For NZ Dairy Industry
By: Dairy NZ
Consents Remain At Record Levels
By: Statistics New Zealand
Fonterra Lifts Forecast Farmgate Milk Price Range And Revises Earnings Guidance At First Quarter Update
By: Fonterra
Canterbury Museum: New Research - Bald Haast's Eagle Feasted On Moa Guts
By: Canterbury Museum
Demand High For Covid-proof Businesses
By: ABC Business Sales
Almost Two-fifths Of New Zealanders Don’t Feel Safe Enough To Shop In-store This Black Friday
By: PriceSpy
View as: DESKTOP | MOBILE © Scoop Media