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Letter to Ministers – re wage subsidy and rent arbitration announcement

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To: Hon Grant Robertson – Minister of Finance, Hon Kris Faafoi  – Minister of Commerce and Consumer Affairs; Hon Stuart Nash – Minister of Small Business

Tēnā koe Ministers

Wage subsidy unfit for hospitality and rent arbitration announcement

I am writing to you to bring to your attention two matters: the criteria for ongoing wage subsidy relief being unsuitable for many hospitality businesses, and the rent arbitration announcement.

Wage subsidy unfit for hospitality 

We are requesting the Government reassess the wage subsidy extension criteria for the hospitality sector specifically, and consider these applicant businesses in terms of net profit, rather than revenue. The reason for this is that for hospitality businesses to operate safely and in line with Alert Level guidance, they have faced increased costs such as around single server requirements and single use items – hospitality businesses are reporting an average 20% increase in staff costs.

For example, Michael owns a restaurant that usually runs a full dinner service of 12 people with 5 floor staff, but in Alert Level 2 he has had to remove tables, so has 60% less tables and 20% more staff to operate in line with Alert Level guidance. His revenue through Level 2 has been 35% less than last year’s numbers on average – meaning he is not eligible for the wage subsidy extension – yet his net profit is more than 50% lower (this may result in businesses not breaking even in many cases) given the significant increase in wages and other costs. 

I assume this was not the Government’s intention, as it creates an unconscionable outcome for some of New Zealand’s hardest hit businesses.

Rent and lease relief

In my 21 April letter to collective Economic Ministers, I impressed upon Ministers the urgent need for rent and lease relief and the need for the support packages to be publicly announced as expeditiously as possible. Today’s announcement by Hon Andrew Little is disappointing and falls well short of our expectations to say the least.

Unfortunately, I feel the need to reiterate that at Alert Level 4, 98% of our member businesses had no ability to generate any revenue. Alert Level 3 operations did provide some relief, however few in our industry were set up to thrive in Alert Level 3.

Despite the Prime Minister saying Alert Level 2 has the economy “by and large” back in operation, this is far from the case for hospitality. In fact, many hospitality operators are now battling not just economic downturn, but an increase in baseline costs due to safe operations required through Alert Levels.

As reflected in the May Hospitality Dashboard, provided to you all on Friday, the most common pain point for our sector is the lack of targeted hospitality relief in Budget 2020. Since lockdown began we have seen 53 member businesses close, resulting in almost 1,000 job losses. There will be more that are not captured by our data. We are currently estimating a $110 million per week loss by hospitality businesses.

For a sector that generated annual sales in excess of $11 billion and employed more than 133,000 people in 2019, to not have a dedicated Minister and policy shop to call on for advice, has meant many COVID-19 announcements have missed the mark when contrasted with realities faced by our sector. We need the Government to act with commonsense and consider these issues to acknowledge the real effect COVID-19 has had on our sector.

I welcome the opportunity for an urgent constructive conversation with you all on what practical steps we can take together immediately to better support the hospitality sector now and into Alert Level 1.

I look forward to hearing from you.

Ngā mihi nui,

Marisa Bidois

Chief Executive

Restaurant Association of New Zealand

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