2019 was an interesting year for the hospitality sector.
There were a few curve balls, certainly, with staff issues, the spectre of capital gains tax and changing immigration policies to name a few.
I was fortunate enough to speak to a many owners over the course of the year. General sentiment was that sales were down a little and, of course, the main topic on everyone’s lips was that of staff challenges. Finding the right staff, keeping the right staff, paying an increased minimum wage and immigration. It was certainly more of a "buyer’s market" when it came to hospitality staff looking for positions.
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I get to see under the hood of many of these businesses and, having analysed profit and loss statements for plenty of cafes, bar and restaurants over the year I saw some of these concerns for myself in black and white particularly in "higher than normal" wage percentages.
However, for as many businesses that seemed to have a more difficult time, there were equally as many that enjoyed another strong trading year and recorded stats support this positive industry position. Increased wage costs are here to stay! That’s just how it is. Operators now need to be smart about how they cope and adjust to meet this new reality. The $5 Flat White, anyone?
IBIS World reported not only growth over the last 5 years in the hospitality sector, but expects continued growth for the next 5, albeit at a slower rate. People need to eat and they need a bit of relaxation away from daily life. The report cites continued immigration and population growth, a rise in discretionary spending (through 2020), shifting dining trends and habits (for time-poor people dining out or ordering Uber Eats is the new "norm"), and increased consumer sentiment as evidence for this expected growth.
Some owners worry about over-supply of hospitality businesses, especially in Auckland with the relaunch of of Westfield in Newmarket, the soon to open Commercial Bay in the CBD, and extension of the dining opportunities at Sylvia Park. As a customer, however, I’m delighted by this progress and I think most people are. We really are world-class now in terms of our dining and drinking establishments and it’s a hugely exciting time for the sector.
There will be "natural selection", of course and some businesses we will not see survive this new wave of competition but that’s not a bad thing. It’s always been the case that almost as many cafes, bars, and restaurants close in NZ every year as open but we always have that "net growth".
From our side, I was delighted to launch LINK’s Hospitality Division early in 2019 and I am very proud of the team across the country. Through a tougher trading environment (fears of capital gains tax, lower business confidence etc etc) we had another great year and 2020 I just can’t wait to get in to. We took on a new bunch of Hospitality professionals across NZ over 2019 taking our café, bar, restaurant years of ownership experience tally to well over 300!
Each sale did take longer, there is no doubt about that, but prices were robust. Despite a slightly more buyer-orientated market, good business continue to attract good prices. I have actually seen little change in that side of things for 11 years now.
No, you can keep your concerns. I love the hospitality industry, I’m excited by new developments and I think 2020 is going to be a cracker both for Hospitality operators and for people buying or selling in to or out of their businesses this year.
- Nick Giles is head of hospitality, New Zealand at LINK Business Broking
