Covid 19 Delta outbreak: Auckland goes orange, while hospo venues' credit remains in the red

NZ Herald,
Publish Date
Thu, 30 Dec 2021, 9:46am
Hospitality industry figures believe more venues are set to close, like Euro, including some who have been cut off from their previous suppliers due to rising debts. Photo / Alex Burton
Hospitality industry figures believe more venues are set to close, like Euro, including some who have been cut off from their previous suppliers due to rising debts. Photo / Alex Burton

Covid 19 Delta outbreak: Auckland goes orange, while hospo venues' credit remains in the red

NZ Herald,
Publish Date
Thu, 30 Dec 2021, 9:46am

As Auckland prepares to move into orange under the Covid-19 traffic light system in time for the arrival of 2022, a dire warning has been issued that an influx of customers at hospitality venues will be too late a financial reprieve for some operators. 

Auckland will shift to orange at 11.59pm today after more than 130 days of existence under level 4 and 3 lockdowns, and most recently life under red as part of the traffic light system. 

The shift will lead to a lifting of restrictions for bar, pub and restaurant owners who employ vaccine pass requirements – including the end of crowd limits, a dancing ban. 

But a hospitality industry source told the Herald that the move would be too late to save some establishments and jobs due to debts unable to be paid during the most-recent protracted lockdown. 

"It will be too late for some ... totally," the source said. 

"I know of operators who can't even get supplies anymore because they are still carrying their debts forward from 120 or 130 days ago. They are running around with bundles of cash trying to buy stock from other operators [because suppliers won't sell to them]. 

"And that is tragic." 

Extended lockdowns, and earlier alert level settings, this year have seen the many normally profitable businesses lurch into debt around the region. 

That includes establishments around the Viaduct which had to remain closed for periods of the America's Cup, other bars which haven't been able to open to show footage of other large sporting events like All Black tests, and restaurants both large and small. 

Hospitality NZ chief executive Julie White confirmed she was aware of some downtown Auckland venues which had been cut off by their regular food and beverage suppliers. 

"I am hearing that," White confirmed. 

"On December 3, when [the Government] introduced the traffic light system, our members were saying 'It is do or die this summer'." 

She said businesses were struggling through no fault of their own. 

And White said no blame could be attributed towards suppliers of various goods who had decided the debt they were owed from respective venues meant they could no longer trade with them until they received payments. 

"It would be reasonable for suppliers to start calling in what they are owed . . . and I think this is the start of it. 

"Ninety per cent of our sector is made up of small operators who rely heavily on working capital. So, when you are not open you have no access to working capital . . . cashflow . . . but you have those fixed costs adding up. 

"With us being shut, suppliers who had no channel for market." 

White said lockdown and the previous red light had meant 2021 had been a fizzer for many of its members. 

"For some, operating is just going to get too hard and they won't reopen their doors in 2022 ... 100 per cent ... that is the year we will see the industry shrink. 

"These are mums and dads and it is not through their fault. They have literally lost access to their customers." 

Closure of venues would have a wide-ranging "ripple effect" which would then impact financially on suppliers and also musicians who performed at them. 

"It is so welcome moving to orange, but I just hope that it is not too late. That is the reality." 

The previous red-light status – which included maximum size groups and enforcement of seating – had impacted on trading during what was meant to be a "festive" time. 

"What we are hearing is that people are choosing to stay home or stay local. So, the hardest hit are the venues that are in the Viaduct," White said. 

She said members of HNZ hoped that people understood venues operating under the vaccine pass scheme – meaning only vaccinated people were allowed in – were safer than private parties which anyone might attend regardless of their vax status. 

Auckland mayor Phil Goff said earlier this month that the industry would be the big winner of a shift to orange, telling Newstalk ZB: "The main thing is really for the hospitality industry, it has taken a real hammering, and obviously it would welcome that." 

High profile bar owner, and Auckland mayoralty hopeful, Leo Molloy fears for the future of some of his counterparts and their venues. Photo / Michael Craig 

Two leading restaurants on the Auckland waterfront, Euro and Saxon + Parole, have already closed their doors, unable to keep trading under Covid-19. 

Euro – for a time one of Auckland's most popular waterfront locations - made its announcement on social media in October, saying: "The ongoing challenges caused by the Covid-19 pandemic over the past 18 months have meant that it is no longer sustainable to reopen, despite doing everything in our power to do so." 

Leo Molloy – owner of popular Viaduct Basin venue, Headquarters – said there had been no summer "sugar rush" of business for bars in Auckland's prime entertainment area. 

"Things are solid without being fantastic. But it is a bit like running with your pants around your ankles, no matter how hard you try, you can only go at a certain pace when you are limited to three lots of 100 [punters], and then you have all these addition pile-on costs of having security for each defined area. 

"So, all your operating costs are doubled effectively, and your turnover is halved. It is pretty easy to work out that there is no bottom line there, so we are providing a service at the moment." 

He said it was inevitable more bars and restaurants would fold as summer heated up; regardless of what colour the Covid-19 traffic light system was at. 

"They [owners who are doing it tough] will go into January, February and March … and January will be a very tough month for a lot of people. 

"We will be fine. But there are a lot of people out there, smaller businesses and vulnerable businesses, where January will be a very tough month. God knows what will happen … once summer is gone, they will be gone I think." 

Molloy – who is a confirmed contender for the Auckland mayoralty race – said Auckland's CBD had been "eviscerated" by the lockdowns brought on by successive Covid-19 lockdowns since early 2020. 

Earlier this month, Heart of the City chief executive Viv Beck described the shift from red to orange as "great" and will allow for an "extra special" New Year's Eve. 

"It's just disappointing we have to wait until December 31," she said. 

"On the positive side, it will give event organisers certainty for the New Year, get the hospitality sector operating at full capacity for New Year's Eve and give the confidence to attract visitors." 

- by Neil Reid, NZ Herald