2020 Hospitality Report shows industry in continued growth, before taking a sharp decrease
Our 2020 Restaurant Association Hospitality Report finds that nationwide sales for the hospitality industry reached an all-time high of $12.1 billion year ending March 2020, before plummeting, posting just $1.7 billion for the period April – June 2020, a decline of more than 40 per cent.
In 2019 New Zealand’s hospitality sector achieved record sales of over $11.7 billion increasing to $12.1 billion for the year ending March 2020. This represents sales growth of 3.3 per cent over the previous year, which follows three years of significant growth (4.2 per cent from 2018-2019, 3.6 per cent from 2017-2018 and 9.7 per cent from 2016-2017).
Sales growth carried across the industry, with restaurants and cafes recording the highest sales increase in dollar terms. Over half of every dollar spent dining out is spent at a restaurant or café, which has more than 51 per cent market share.
Annual sales for this dominant sector grew four per cent year end 2020, which in dollar terms translates to an increase over the year previous of $236 million.
Takeaway and food to go also realised annual sales growth of 4.1 per cent, the highest for the sector, while catering services also saw a 4.0 increase posting sales of $956.8 million.
Sales in 2020, after March, do not paint such an optimistic picture as under Level 4 lockdown, sales revenue for the industry plummeted, posting just $1.7 billion for the period April to June 2020, a decline of more than 40 per cent compared to the same period last year.
However, trading conditions improved overall in the third quarter of 2020. Whilst the industry overall had a 3.1 per cent decline in sales over the same quarter in 2019, many regions recorded very positive sales growth, including Tasman (up 29.3 per cent over 2019), Kaikōura (19.4 per cent), Marlborough (18.2 per cent) and Northland (17.8 per cent).
We’ve noted in the report that it’s still very much a mixed bag out there. Whilst some businesses are recovering well, many others are still experiencing significant losses. Establishments in tourist hotspots as well as Auckland CBD are still down on last year with the trend of city centre workers staying home and loss of tourist dollars continuing to cause significant reductions in trade.
The industry was overall still in decline in the third quarter of 2020, compared to the same quarter in 2019. However, takeaways recorded a positive 8.4 per cent sales growth over this period – the only sector to record a positive change.
For all regions it will still take some time to recover from the declines experienced from April – June, with Auckland and Queenstown continuing to be the two most affected regions.
The road ahead may be a bumpy one but there are also opportunities and with careful planning operators can make it through while building a strong and sustainable business. Operators identify New Zealanders supporting local businesses and building deeper relationships with customers and our communities as two of the most significant opportunities for their businesses over the next 12 months.
The 2020 Hospitality Report is free for members to download (login first to download). The Report can also be purchased here.
Breakdown by region
Consumer spending remains highest in Auckland, Wellington and Canterbury. These three regions all enjoyed annual sales of more than $1 billion per annum.
The Waikato region also now records annual sales of just under $1 billion, reaching $946 million. Regionally, the largest percentage sales increases from 2019 to 2020 were in Northland (up 10.8 per cent in 2020), Taranaki (up 7.5 per cent), and the Marlborough region (up 7.2 per cent).
From April to June 2020, the 40 per cent decline in revenues was experienced by all regions. With its reliance on international tourist revenue, Queenstown-Lakes recorded the largest decline (down 67.8 per cent from April to June 2020 over 2019) and Kaikōura experiencing a 66.7 per cent decrease.
While trading conditions have improved overall in the third quarter of 2020, it will take some time to recover from the declines experienced from April to June.
Industry wage rates increased by just under 5 per cent in 2020, the results of the 2020 Restaurant Association remuneration survey have revealed. In some cases, employee wage increases reflect the efforts of industry operators to recognise the efforts of staff amid the difficult events of Covid-19. However, while the industry continues to grapple with the financial uncertainty of Covid-19, many employers have currently indicated that balancing remuneration rates with business viability is becoming increasingly challenging.
The shape of the hospitality industry may change forever as a result of the events of 2020. Preparing for future operational success will need to be conducted carefully and with a plan to adapt in the future if necessary. However, while the Covid-19 pandemic has dealt the hospitality industry with uncharted challenges, it also presents opportunities for operators.
A recent member survey indicated that the top three concerns are further increases to the minimum wage, another Covid-19 outbreak and maintaining profitability.
Many hospitality businesses have already adapted throughout the year, finding creative ways to change in order to survive. A recent industry survey identified that more than half of the industry respondents have reduced their opening hours permanently.
To survive, and to thrive, operators have also indicated they are focusing on running leaner, more efficient operations. Forty-two per cent have made changes to the menu, choosing to simplify, or reduce the menu to help maximise efficiencies.
Last minute changes to alert levels, paying fixed costs and finding skilled staff rank as the top three operational issues.
But with crisis comes opportunity, and operators report New Zealanders supporting local business, becoming a leaner business and developing deeper relationships with community as opportunities for the year ahead.
The 2020 research reveals the impact the Covid-19 outbreak has had on consumer’s daily lives, helping operators to understand what drives consumer behaviour in our current environment.
Responses were collated from almost 800 customers, who revealed that eating out plays an important role in our daily lives.
Forty-four per cent of consumers eat out at restaurants or cafes one to three times per week. In addition, 40 per cent indicate that they order food to take away (pick up or home delivery) one to three times per week.
Although the majority of customers say that they feel safe dining out at restaurants and cafes, even during heightened alert levels, those aged 55-64 felt safest (58 per cent said they felt completely safe dining out at alert levels 3 or 2), followed by those aged 25-34 (55 per cent).
When asked what measures are most important to make customers feel safe when dining in heightened Covid-19 alert levels, Obvious additional cleaning measures were highlighted as the key factor offering some reassurance, followed by businesses having hand sanitiser available for customers to use.
More than half of the Dining Out survey diners say they will dine out less as a result of Covid-19 – 49.8 per cent will choose to eat more locally and 47.2 per cent say they will choose to dine at places they feel safe to eat in.
People aged 18-24 currently eat out the most frequently with 69 per cent saying they eat out one to three times per week and 3.5 per cent saying they eat out more than four times. Pre-pandemic 14 per cent in this age group ate out more than four times per week, with another 65 per cent eating out one to three times on average. Over the next year, those aged between 45-54 are most likely to dine out less often than before – higher than any other age group. This age group is also most likely to choose to dine more locally in the future.