Hospitality multiplier effect reveals value of industry return

Hospitality New Zealand says a new Infometrics report revealing the industry’s large economic multiplier effect shows a return to profit is essential for over 232,000 workers and their families, and to spread billions of dollars GDP throughout the economy.

The report produced for Hospitality New Zealand (Hospitality NZ) shows the industry, which has been closed or heavily constrained over the past three months, usually generates $6.8b to GDP annually and another $14.6b via purchases from suppliers and staff spending.

137,000 hospitality workers, half of them under 30 years old, will be working under the COVID-19 ‘traffic light’ system from this Friday, with another 95,000 workers in other industries relying on their business.

Hospitality NZ CEO Julie White noted that the sector, particularly the 60% resident in Auckland, will not return to profit following the start of the traffic light system.

“Businesses will only break even under the red level, at best, exacerbated by an end to wage subsidy and resurgence payments, and a miserly one-off transition payment. We’ve been the biggest user of the wage subsidy because we’ve been the most affected by lockdown,” said White.

“The transition payment announced yesterday will amount to one payment of $7,500 for the average hospitality business, and they lose all other support. That’s a poor reward for trying to innovate and stay positive week to week waiting for a re-opening.”

While the certainty of a new system and start date was welcome after 100 days, as was an early decision on opening the Auckland border, the reality is disappointing.

“The optimism means owners are itching to open, welcome staff back to work, and to serve customers eager to socialise. The red traffic light rules severely limit how many customers can be served, making it unprofitable for many businesses to open, operate or even offer seating.

“If we knew reopening would take this long and be this restricted, most businesses would have hibernated rather than trying to limp through.”

White said the Government’s promise to look again in January at the issue of financial support was in line with previous messaging, it is extremely concerning it might yet again be another round of false hope that had dragged businesses through 100 days of mounting losses.

“Business owners have gone week to week hoping for support and clarity that doesn’t eventuate. January is one of the three lowest months of the year. Support will be needed, but it’s likely we’ll be disappointed, and further out of pocket or out of business.”

The Infometrics report shows that hospitality is the seventh-largest employer, with 137,098 full-time equivalents (FTEs) directly employed in 2020 (172,458 filled jobs in total - 6.7% off all jobs in New Zealand). The indirect employment effect is estimated at 39,099 FTE and the induced employment at 55,850 (a combined 95,000 FTE jobs).

Infometrics estimates $14.6b was spent on hospitality in 2020 ($3.8b of this is taxes and imports). The remaining expenditure generates $6.8b worth of GDP directly within hospitality. Indirect GDP is $5.6b, with an even larger induced GDP effect of nearly $9.0b.