Business / Covid 19

Covid-19: One in five hospitality businesses expects to close permanently

11:15 am on 8 April 2020

By Eva Corlett

Hundreds of businesses fear they will have to permanently close their doors, as revenue dries up and ongoing bills take their toll.

Photo: Unsplash / Benedikt Geyer

The hospitality sector is bracing for a big hit, with one in five businesses telling a survey they doubt they can survive the pandemic.

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A small cafe in Hamilton's city centre, Snack Baby, could be one of them.

It is Kat McIntosh's first solo-run business, which she started up just six months ago.

The cafe's social media profiles document its growth from a small bland space into a instagram-worthy pink hotspot.

McIntosh's love and excitement for her new business is evident in every update.

The cafe is hanging on for now, but if the lockdown is extended, or things don't pick up soon after restrictions end, Snack Baby may have to permanently close.

"It would just be heartbreaking, so much work has been put into this," she said.

"It's my little baby, it would hurt and be really hard."

"I don't think anybody wants to come away from [a business] as a failure, regardless of the reasons," she said.

"I'm just hoping against hope that we won't come to that."

The wage subsidy is excellent for keeping her two employees afloat, she said, but there was still the problem of rent and bills, and she was finding it tricky to get a hold of the right people.

The fixed costs on the business created the biggest strain and rent relief was urgently needed, she said.

An Auckland restaurant owner who RNZ has agreed not to name has been running his spot that employs 20 staff for six years.

Any addition to the lockdown period even if just two weeks long would mean game over, he said.

"The wage subsidy is great for the staff members - it's fantastic - but we have creditors to pay for the month of March, we have landlords to pay and they haven't come to the party yet."

One of the biggest worries for these businesses is how slowly things may take to pick up once the lock down is lifted.

They urged people to shop locally once restrictions eased, and said this may be the only way they would survive.

The hospitality industry has been particularly hard hit.

Restaurant Association chief executive Marisa Bidois said an industry survey of 400 businesses showed 20 percent thought they would not survive the lockdown.

"When your business has been forced to stop trading, it's very difficult to continue to service these sorts of cost coming in. This is what we are hearing from members. We would like to see the government considering this and see landlords step up and negotiate with their tenants."

Auckland Chamber of Commerce has surveyed 1000 businesses, and found 30 percent believed their business would not survive.

Chief executive Michael Barnett said most of those were small-to-medium businesses that had no money pool to draw from.

"As well as their rents, they're going to have overheads like ACC and GST and provisional tax - these are all things that keep going on and have to meet. If they have a limited reserve on them, they're unlikely to survive," he said

Barnett said the government needed to promote conversations between banks, landlords and tenants to come up with fairer solutions for those most at risk.

The government said it was considering new measures to help commercial tenants pay rent, but details were yet to be announced.

Waikato Chamber of Commerce will release its survey on Thursday, while the Wellington Chamber will conduct a survey over the coming weeks.

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