New Zealand’s café and restaurant industry is experiencing its first decline in over two decades, with the number of establishments dropping from 8,964 to 8,958 last year, according to Stats NZ. This marks a significant shift in an industry that had previously only seen growth or stability year-on-year. Despite the recent drop, the number of cafés and restaurants remains double what it was in 2000.
Economist Shamubeel Eaqub noted that the hospitality sector had grown more than 30% per capita since 2000. However, he warned that the rapid expansion, especially over the last five years, has led to an oversaturated market. The economic downturn, coupled with high inflation and rising interest rates, has made it difficult for these businesses to thrive.
Centrix data revealed that 47 café businesses went into liquidation in the past year, a 24% increase from the previous year. Cafés are now three times more likely to fail than the average New Zealand business. Additionally, 83 café businesses were listed for sale in July, highlighting the financial strain within the industry.
Winter has compounded the effects of the economic slowdown, leading to reduced consumer spending. Stats NZ reported a $17 million drop in hospitality spending from June to July, with inflation rates for restaurant meals remaining high at 3.7% annually. As a result, many consumers are cutting back on dining out, leaving businesses struggling to cover fixed costs.
Marisa Bidois, chief executive of the Restaurant Association, acknowledged the tough environment but emphasized the industry’s resilience. She noted that while the decline in the number of outlets reflects current challenges, it also presents opportunities for those entering the market.
The ongoing staffing shortage has further exacerbated the situation, with many operators hesitant to expand or open new venues. Despite these challenges, industry leaders remain optimistic that growth will resume once economic conditions improve. The current downturn is considered more severe than the Global Financial Crisis, as households face rising costs across the board, leaving less room for discretionary spending such as dining out. However, the hospitality industry’s adaptability suggests that it could rebound as the economy stabilizes.