Cost of living: Many restaurants on brink of closing as customers cut spending

Restaurants across the country are barely scraping by and their savings are gone after the COVID-19 pandemic and cost of living crisis decimated the industry.   

The hospitality industry is in chaos with many restaurant owners reporting a huge drop in the number of people dining out and it's seriously eating into profits, forcing some to close their doors.   

One business owner who is feeling the pressure acutely is Chand Sahrawat who runs Cassia, KOL and French Café.   

Sahrawat told AM on Wednesday the COVID-19 pandemic ate up hundreds of thousands of dollars in savings and there's nothing left to prop them up through this period.   

"We've wiped away almost $600,000 in savings during COVID, so that's the numbers we're looking at topping up through our mortgages but there is going to be a ceiling limit to that," she told co-host Ryan Bridge.  

It comes as customer numbers are dropping fast as Kiwis batten down the hatches to pay rising mortgage and living costs.   

"We are down about 50 percent with people coming in and I think there's nothing to blame. You can't blame the customers everyone's mortgages are high, it's hard to make ends meet and if you can't keep a roof over your head the last thing you want to do is go out and eat and splurge," she said.   

"So we don't blame the customers, it is what it is but at the end of it, we also have mortgages and at the back of COVID we just don't have the savings left.  

"The savings are gone, there's not much left in the tank. So we really hope those people who are able to come out do come out and support hospitality."  

She said if Christmas doesn't pan out how she hopes, she expects lots of businesses to close.   

But she urged people who can afford it to make the effort to go out and eat when they want to splurge.   

"I do think there are some behavioural changes to be made. Some nights you just want to order UberEATS and sit at home and you've got a bit more used to that with COVID.  

"A lot of people are working from home. I notice there's no traffic on Monday and Friday but on Tuesday, Wednesday, and Thursday there is traffic. So I think because people are working from home, they forget to go have those Friday drinks that they used to with their mates. Maybe make that conscious effort, instead of just opening that wine at home, go out and have a drink with a friend....maybe instead of wondering takeaway at home go and support restaurant directly."  

Restaurant Association CEO Marisa Bidois.
Restaurant Association CEO Marisa Bidois. Photo credit: Newshub

She's not alone either. On Wednesday the Restaurant Association said its members are struggling with a drop-off in customers and increasing food and labour costs.   

CEO Marisa Bidois said the industry is heavily reliant on discretionary spending and is often the first to feel the impact when people tighten their budgets.   

A recent member survey showed the most pressing issue for an astonishing 35 percent of respondents is "managing the customer downturn".  

"We are becoming increasingly aware of the many businesses currently struggling to stay afloat. Many are still burdened with debt accrued during the pandemic, which amplifies the challenges they face," Bidois said.   

The survey also showed 20 percent found "managing labour costs" a significant concern, while 11 percent cited "managing food costs" as a pressing issue.  

Additionally, 10 percent were worried about "staff shortages," and 8 percent are grappling with "fixed operating costs."  

Business confidence has also plummeted with 43 percent of respondents believing conditions will remain unchanged over the next 12 months.   

Meanwhile, 30 percent think conditions will worsen during the same period. In contrast, only 27 percent of respondents maintain an optimistic outlook, anticipating improvements in the coming year.  

"In the spirit of resilience and innovation, many businesses are actively adapting to overcome the prevailing challenges. These adaptations include crafting enticing specials and creating unique dining events to attract and retain customers," Bidois said.  

"At the Association, we maintain a cautious optimism for the upcoming Christmas and Summer trading season, as domestic and international tourism are expected to regain momentum. However, the challenges our industry faces are immediate, and many businesses are currently navigating turbulent waters. 

"We know that times are tough for consumers at the moment but we do encourage people to support their favourite establishments however they are able. This support isn't just about a meal or a night out; it's about contributing to the very survival of these businesses and preserving their place in our communities."