Fuel is one of those things that's easy to overlook until it isn't. It doesn't show up on a menu or a wage bill, but it runs through almost everything we do: freight, refrigeration, supplier networks, and the cost of getting staff to work.
Nicola Waldren, General Manager of the Restaurant Association of New Zealand, said that when fuel prices move, hospitality feels it faster than most.
And we're feeling it now. The world conflict has been building cost pressure through our supply chains for weeks, landing on top of an already difficult moment, such as a cyclone in the middle of school holidays, the change of season as we head into winter, and a promising summer trade that flipped negative in March, right when businesses needed to be consolidating their reserves. Summer is the buffer that gets us through the colder months, but this year, for many, it simply didn't materialise.
The supplier picture has shifted in recent weeks. Costs are coming through to operations now, arriving in different forms, be it fuel surcharges on deliveries, increased delivery fees, ranging from a few percent to more than 10 percent, and direct cost increases on individual items. It’s understandable suppliers are looking to pass on some of the cost increases they’re experiencing, but they're dealing with businesses, not consumers. Hospitality sits at the end of that chain, facing customers who are already feeling the squeeze in other areas of their lives. Passing increases on isn't as straightforward when the person on the other side of the transaction is watching every dollar and making a choice where to spend it.
That's where the demand side is also having an impact; recent consumer spending stats are showing a shift toward higher spend on fuel and reduced spend in hospitality. When people are spending more at the pump, that translates to less left for eating out, and that's showing up in covers and spend per visit.
The situation is fluid, though, and we've already seen how quickly pump prices can move. When the Strait of Hormuz reopened briefly, prices dropped almost immediately. We may not get a clean resolution to the underlying conflict anytime soon, but when fuel costs ease, even temporarily, people tend to feel more open to spending. Those windows matter, and it's important we're ready to make the most of them when they come.
Here are a few things worth focusing on.
Supply chains are the most immediate lever. Having open conversations with suppliers, not just about current pricing, but about delivery schedules and what their contingency looks like, is valuable right now. If your focus is on locally sourced food items, there is a natural advantage. Shorter supply chains mean less exposure to freight volatility, and it's also a good story to share with customers too.
Menus are worth reviewing through a supply chain lens. Which items carry the most import or freight risk? Where are there local alternatives? Would a smaller menu be a better option at this time? Tightening a menu in response to cost pressure could make good sense.
On pricing, the instinct to hold the line for as long as possible is understandable. But absorbing every cost increase isn't sustainable on such small margins. Modest, incremental adjustments will land better than a single larger move down the track.
Fuel costs are also affecting the people who work in our businesses, particularly those in regional areas who rely on their own transport to get to work. Thinking about rosters and transport proactively may be necessary right now.
What remains uncertain is how this plays out for hospitality if disruption continues. We know members' concerns have increased significantly as this disruption moves from weeks into a more prolonged period, particularly around how customers will react in the long term. But our industry has adapted through a lot. The task right now is practical: know your exposure, make the adjustments you can, and reach out to us if you need support.
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