The latest quarterly report from the Restaurant Association of New Zealand reveals a mixed performance of dwindling profits, rising costs and declining foot traffic across the hospitality sector, as it navigates through some of the most challenging times in recent years.
The association’s 2nd Quarter 2024 Hospitality Dashboard, highlights the ongoing struggles faced by businesses, despite a slight year-over-year revenue growth being recorded.
Key figures from the report show an annual sales revenue of $15.7 billion for the year ending March 2024, representing a 5.8% increase compared to the previous year. These gains are overshadowed, by the industry’s ongoing difficulties, particularly in Auckland, where Q2 sales revenue dropped by 0.7% from the previous quarter, signalling the persistent impact of economic pressures on the region.
Significantly Worse
The report states that 76% of surveyed Restaurant Association members reported worse or significantly worse profitability compared to the same period last year.
The downturn in customer numbers continues to be the biggest challenge, with 52% of respondents identifying it as their primary concern. This decrease in foot traffic, coupled with inflation and rising operational costs, has forced businesses to adjust their menu prices by an average of 6.4%. Despite these efforts, profitability remains elusive for many.
Takeaways Versus Dine-in
Interestingly, the takeaway sector appears to be defying the odds, with a notable 4.2% increase in year-over-year sales during Q2 2024. This growth highlights a shift in consumer behaviour, as more people opt for the convenience and affordability of takeaway options amidst tightening household budgets. This sector’s resilience offers a glimmer of hope for the broader industry, providing a much-needed revenue stream for businesses that are otherwise struggling with declining foot traffic in dine-in operations.
Some businesses, however, are bucking the trend with 24% of respondents stating income that is on par with or up on the previous year. “Neighbourhood eateries with a strong local connection are finding success by building loyal customer bases that value the community aspect of dining locally. These venues are thriving because of their close ties with their surrounding areas, which encourages repeat business,” said Restaurant Association CEO Marisa Bidois.
Marketing Imperative
“Established eateries with strong brands are also navigating the challenging landscape more effectively. These businesses are using their well-known reputations to retain customer loyalty, ensuring they remain top-of-mind for diners looking for a trusted dining experience.
“Additionally, businesses with a clear and unique offer are staying ahead of the curve. By doubling down on their distinct value propositions, these venues are able to differentiate themselves in a crowded market, ensuring customers continue to seek them out.
“Those focusing on creating a truly exceptional dining experience and doubling down on their marketing efforts are also proving that success is possible. By staying agile and innovative in their approach, they are not only attracting new customers but also retaining their existing customer base, proving that an exceptional experience can overcome many of the challenges currently facing the industry.”
Visa Processing Delays
Staffing issues, though slightly eased, remain a critical concern. While 78% of businesses report being fully staffed, recruitment for senior roles remains difficult, with 59% of employers describing it as “difficult or extremely difficult.” The report also highlights the ongoing challenges with visa processing delays and a significant skills gap, requiring employers to invest heavily in training new hires, many of whom are on short-term visas.
Mental health and wellbeing in the industry are also under strain, with 54% of owners indicating a negative impact on their health, a significant increase from 42% in the previous quarter.
Despite these challenges, the report notes a resilient spirit within the industry. Operators are determined to navigate the remainder of 2024 with a lean approach, eyeing potential positive changes in Q3, including warmer weather, potential interest rate adjustments, and stabilising inflation, which could bring some relief to the struggling sector.
Extraordinary Determination
“While the industry is undoubtedly facing challenges, we continue to see extraordinary determination from our members,” says Marisa Bidois, CEO of the Restaurant Association. “We’ve weathered tough times before, and while the trading environment remains difficult, we are prepared to face these challenges head-on and are focused on surviving until 2025 and beyond.”
As the industry looks forward to the latter half of the year, the Restaurant Association remains committed to supporting its members through these challenging times, advocating for necessary changes, and providing the resources needed to weather the storm.