The bleak reality for hospitality industry without wage subsidy through level 2

"Many are on the brink of liquidation and bankruptcy."
"Many are on the brink of liquidation and bankruptcy." Photo credit: Getty Images/ Supplied.

Bar and restaurant owners are pleading for the wage subsidy package to continue when Auckland moves down alert levels. They say without it, many establishments will not survive. 

John Lawrenson, CEO of The Lawrenson Group, has been in the hospitality industry for 21 years, 14 of those as a business owner. 

He told Newshub for some business owners in the sector, cancelling the wage subsidy at level 2 will be the "proverbial straw that breaks the camel's back".

"Many are on the brink of liquidation and bankruptcy, and their mental health is really suffering," he explained. 

"Other business owners are looking at months or even years just to earn back what they have lost over the last 18 months. For their staff, it also means increased uncertainty, reduced incomes, and in many cases redundancy." 

He says while restrictions are still in place some eateries and bars will remain seriously affected. And he is mind-boggled as to why the Government isn't more forthcoming with targeted support. 

"I can't understand the Government's logic of paying wage subsidy to businesses that are down 40 percent under level 3 or 4, but then offering no support to businesses that are down 50, 70, or even 100 percent under level 2," he explained. 

"Level 2 might be a return to relative normality for many, but it is not level 1."

Lawrenson owns Hamilton establishments Furnace, Keystone, The Bank, House on Hood, The Outback, Coyotes, Back Bar, The Factory, and Auckland's Bar101. 

Through level 2 in Hamilton, three of his venues can't open and the rest are operating at just 40 percent which means a decline in turnover of more than $200,000 a week. 

He says there are many businesses that remain closed at level 3 in Auckland, with takeaway outlets really being the only ones who reap any benefits, for the most part. 

John Lawrenson (owner of House on the Hood - pictured) explains the challenges bar and restaurant owners face during levels 2 and 3.
John Lawrenson (owner of House on the Hood - pictured) explains the challenges bar and restaurant owners face during levels 2 and 3. Photo credit: Supplied.

At alert level 2, hospitality businesses are restricted to 100 people which means some stand to take a significant hit. 

"A 500 person nightclub that can only admit 100 people is operating at 20 percent capacity. Many large eateries that can seat 200-300 people are still paying huge rents but operating at less than 30 to 50 percent capacity. Some landlords are helping, but plenty are not," Lawrenson says. 

Lawrenson says at the moment Finance Minister Grant Robertson seems "a little too focused" on reminding everyone about the 'freedom' New Zealand has enjoyed over the last 18 months. 

"We all acknowledge that New Zealand has done better than most countries, but that is a very low bar to clear, and he needs to be focusing on what is happening now.

"There are nightclubs in Auckland that have been closed for a total of 26 weeks since March 2020. They have literally lost half a year of income to COVID restrictions. Businesses outside Auckland have also lost several months of normal trade too. They cannot survive much more of this. They understand the need for restrictions, but if those restrictions are destroying hospitality businesses, then they need help to survive."

Robertson has been fielding questions over the past few weeks about whether or not hospitality businesses can expect the support to be carried through to level 2. 

Last week in Parliament he was grilled by National Party commerce and consumer affairs spokesperson Todd McClay who asked what Robertson would say "to the owners of the 1000 restaurants" reportedly about to close after following the Government's advice. 

"Does he think this sacrifice could be avoided with additional targeted support, not just more debt?" McClay asked the Minister. 

"What I say to those businesses is that, as the Government has done throughout the pandemic, we will continue to work with them," Robertson replied.

"One of the things I do know is that, when we saw similar predictions during the first lockdown, the actual result was that those businesses ended up busier than ever when New Zealand was at alert level 1, to the point that the same organisation mentioned in the member's primary question was approaching us about the fact that they didn't have enough staff to meet the demand that was happening during alert level 1.

"What the answer here is to make sure we continue to take the same response that the Government has taken throughout the pandemic, which is that a strong public health response is the best one for the economy overall," Robertson said. 

He went on to state the wage subsidy scheme "has always been related to levels 3 and 4", where there are a significant number of businesses who either cannot trade or trade significantly below where they would normally want to do. 

Lawrenson believes the Minister is being "a little disingenuous" in his response, and says businesses were largely able to make it through because the wage subsidy was available last year. 

"After New Zealand's first extended period at Levels 3 and 4 in April and May 2020, wage subsidy continued under Level 2. The initial 12 weeks of support was available until the 9th of June and a further 8 week extension was available until the 1st of September 2020," he explained. 

This was despite New Zealand returning to Level 2 on the 13th of May. It was only because of this wage subsidy extension that hospitality businesses were able to survive and undo some of the damage that was done by seven weeks of lockdown."

Bar owner Nikki Ahern feels let down by the response and says the Government's action has been "not fast enough, not good enough". 

"I've been supportive, I've stuck to the rules, I'm being a good team member - but I'm getting tired of this," she says. "It's hard staying positive when you've got staff who say 'hey we will reduce our hours to try and keep everything going', but you know they are finding it hard too.  

"It's hard being positive when I know I'm going to have to start the rounds of trying to get yet another loan to support a place and space we've given our everything to. 

Nikki Ahern says she has played by the rules, but is finding the situation extremely difficult and will struggle to get through without the wage subsidy through level 2.
Nikki Ahern says she has played by the rules, but is finding the situation extremely difficult and will struggle to get through without the wage subsidy through level 2. Photo credit: Supplied.

"It's hard trying to juggle cash flow and appeal to suppliers when you know they need the invoice paid from last month too. The thought of yet again making people sit, reduce our tables, and know that our heavily-reduced income in Level 2 is going to mean sleepless nights and extra hard work. It seems absurd that it's even a question of why do the wage subsidy in Level 2 for Auckland."

She's owned Fitzroy Bar Lounge in Ponsonby for the past four years and has owned businesses for the last 22 years. 

"We don't make a good profit in hospitality, I'm yet to make profit myself since starting Fitzroy, but I love people, love music and I hope I make a difference for my community," she says.

"All of us in the hospo and music scene definitely don't do it for the money, for all our hours there are more lucrative and better paying jobs, but we stick at it because these things matter to us and to people." 

She says the support is essential, even more so taking into account that the rest of the country has been receiving the subsidy throughout level 2 while Auckland remains in level 3. 

"We are a part of the 5 million-strong team, quite a lot of that team actually. Auckland alone from January to March 21 did $1.1 billion in sales in the hospitality sector and therefore contributed 100's of millions in GST, PAYE, tax.

"I made no profit at all during that time due to loans from my last lockdown, but yet the Government still takes taxes. Time to support us in return, please."