Aotearoa may be welcoming international visitors back through its airports and celebrating a rebound in tourism, but behind the glossy visitor numbers another part of the economy is struggling — with nearly 3,000 hospitality businesses reported to have stopped trading in just one year.
New figures highlighted by RNZ paint a confronting picture for restaurants, cafés, bars and takeaway businesses, where rising costs and cautious household spending are squeezing operators from both directions.
It exposes what is increasingly looking like a two-speed recovery across tourism and hospitality.
International tourism and higher-value visitor spending may be recovering, but the businesses dependent primarily on New Zealanders opening their wallets every week remain under significant pressure.
And when thousands of hospitality businesses disappear within a year, the question becomes bigger than whether people are eating out less.
It becomes a warning about the health of the wider economy.
Nearly 3,000 businesses disappear
RNZ reports that close to 3,000 hospitality businesses have stopped trading during the past year, while liquidations involving restaurants, cafés and takeaway businesses have risen sharply.
That matters because hospitality operates close to the economic frontline.
These are businesses exposed almost immediately to changes in household confidence and disposable income.
When rent, mortgages, electricity, insurance and groceries consume more of a household budget, discretionary spending is often the first thing reduced.
Dinner out becomes dinner at home.
The morning café visit becomes an occasional treat.
Another round at the pub is skipped.
One family making that decision barely registers. Hundreds of thousands of households making it simultaneously can fundamentally change the economics of hospitality.
The cost squeeze hasn’t disappeared
The difficulty for operators is that reducing prices to attract customers is not necessarily an option.
Hospitality businesses themselves have faced increases across food, wages, rent, electricity, insurance, finance and other operating costs.
That creates a brutal equation.
Customers want cheaper meals because their own household budgets are under pressure, while businesses need higher revenue simply to cover their costs.
Margins can become increasingly thin.
A café might still look busy at lunchtime, but a full room does not automatically mean the business is profitable.
And unlike some industries, hospitality has limited ability to absorb continual cost increases without eventually passing at least some of them onto customers.
Tourists are coming back — so why are businesses closing?
This is where the two-speed nature of the recovery becomes important.
Tourism has historically been enormously important to New Zealand. Before the pandemic, the visitor economy was worth almost $40 billion, with international visitors spending substantially more per day than domestic travellers.
The return of international visitors therefore brings significant money back into hotels, attractions, transport operators, restaurants and tourism communities.
But those benefits are not distributed evenly.
A luxury lodge, major hotel or tourism business in an international visitor hotspot can experience very different trading conditions from the suburban café relying on local families, the takeaway shop serving its neighbourhood or the provincial restaurant dependent on residents eating out.
That means strong tourism numbers can coexist with significant stress across everyday hospitality.
Hospitality could be telling us something bigger
The disappearance of thousands of businesses should also be considered as a broader economic indicator.
Hospitality is particularly sensitive to consumer confidence.
People may continue paying their mortgage, power bill and insurance even when money is tight because those expenses are unavoidable.
But spending at restaurants and cafés can be reduced almost immediately.
A prolonged downturn in discretionary spending can therefore show up in hospitality well before households feel comfortable describing the economy as recovering.
If consumers remain cautious despite improving headline economic indicators, that suggests the recovery is yet to reach many household budgets.
The Māori hospitality and tourism economy
There is another dimension for Māori.
Hospitality and tourism provide employment and enterprise opportunities across many Māori communities, particularly in regional Aotearoa.
Māori tourism operators can offer experiences built around whenua, whakapapa, kai, culture and manaakitanga, while cafés, accommodation providers and hospitality businesses provide important employment for rangatahi.
A business closure therefore represents more than one company disappearing from a register.
It can mean jobs lost, suppliers losing customers and less money circulating through a community.
In smaller towns, losing a hospitality business can also remove an important social space.
What help does the sector actually need?
The scale of closures will inevitably raise calls for government action.
But any intervention would need to address the causes rather than simply delay another round of failures.
Operators are likely to look towards the cumulative burden of compliance, energy, insurance, commercial rents, financing and other costs.
There is also a workforce question.
Hospitality businesses need reliable workers, but workers themselves need wages capable of meeting rapidly changing living costs.
Driving wages down to protect business margins simply transfers the economic pressure from the employer to the employee.
Likewise, permanently subsidising businesses that are no longer commercially viable is unlikely to provide a sustainable solution.
The more difficult challenge is creating economic conditions where household spending recovers while the cost of operating a business becomes manageable.
A recovery needs to reach the main street
International visitors returning to Aotearoa is undoubtedly positive.
Tourism brings export earnings into the country, supports regional economies and sustains thousands of jobs.
But international arrival numbers cannot be the only measure of whether the visitor and hospitality economy is healthy.
A genuine recovery should also be visible at the neighbourhood café, the local restaurant, the takeaway shop and the small whānau business.
Because if tourists are returning while thousands of businesses serving New Zealanders are disappearing, Aotearoa does not have one hospitality story.
It has two — and the gap between them may tell us considerably more about the state of the economy than the number of people walking through the international arrivals gate.
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