“Finance Minister Grant Robertson said it all when talking about Treasury’s Half-Year Economic and Fiscal Update (HYEFU): 2023 is going to be “a challenging year” when balance will be key.
He could have been describing exactly the outlook for hospitality and accommodation because that’s what we expect to unfold across the sector.
Though the HYEFU is an update on the Government’s books, it includes broader commentaries on the state of the global and domestic economy as well as fiscal risks, and there’s no doubt hospitality and accommodation operators will face at least their fair share of those risks. Being one of the first to be affected when consumer spending slows, it’s likely to be more than their fair share.
2022 has been a year of some recovery after the Covid horrors of 2020 and 2021, with a stronger-than-expected rebound in demand as restrictions were removed and both internal and international travel built as confidence lifted and the borders opened.
And it would be true to say that as a starting point, things do look more optimistic than they did this time last year. Operators do have a lot of optimism for 2023, though that is coming off a very difficult two years where the bar was very low.
For a start, a strong line-up of events, international sport, and music is expected to attract big crowds in summer, and we expect the halo effect of that to continue to flow into the sector.
There is confidence consumers will use more of their discretionary spend in hospitality as they look to connect with people while tightening their belts in other areas as the cost-of-living increases. They are still keen to get a coffee, though perhaps not as many as previously, and social occasions remain important in these tougher times.
That confidence was reflected in our Summer Readiness Survey of hospitality and accommodation operators. It showed 55 percent felt either very or somewhat positive about the summer season, while 44 percent felt their business position would improve over the next 12 months.
But it wasn’t all positive, and their concerns pinpoint where we believe the big issues will lie in 2023: when asked what their top concerns were for the next 12 months, top of the list were staff shortages, inflation and the cost of goods, and wage increases. (Interestingly, ‘Covid resurgence’ ranked last). A big majority said they were very concerned (50 percent) or concerned (36 percent) about Fair Pay Agreements.
It has become clear alongside rising operation costs caused by inflation, energy costs and rising interest rates, that labour shortages – from front of house and wait staff to dishwashers, cleaners and chefs – will be the main dampener on the sector’s recovery in 2023 and beyond.
Though we had a victory of sorts in 2022 with the relaxation in immigration settings that removed the qualification requirement for chefs under the Accredited Employer Work Visa, this didn’t solve the shortage, and businesses are still competing with overseas markets for them.
A further blow in December means many businesses go into the new year still desperately short of skilled people. Despite our pleas over many months, the changes to the Government’s immigration settings Green List did not include chefs.
The Government answer was they could already come in, but that totally missed the point. The global shortage of skilled staff means we need more competitive and attractive immigration settings. Sure, chefs are allowed to work here, but to do so they must uproot their life to settle in a country where there is no certainty of residency – versus Australia, where there is automatic residency.
Where would you go if you were a chef looking for a new life with some certainty in it?
Under these settings, we expect shortages to continue to fuel the unpredictability of trading conditions, opening hours, and the number of days businesses will be able to trade, while accommodation operators will still be impacted as room availability depends on the operators’ ability to offer full services such as in-house dining operating hours, limited menus, and the like.
There are two simple things the Government could do to help: alter immigration settings to make it easier for people with the skills we need to come here and offer more targeted funding for Kiwis to enter the industry. These are crucial to keeping the recovery on track, but after months of trying, we’re not holding our breath.
The sector’s recovery in 2023 will also be under a cloud of regulation, starting with the Hospitality Fair Pay Agreement and the review of the Sale and Supply of Alcohol Act.
The problem with the Fair Pay Agreement is it will need to cover thousands of new and different jobs in 17,000 businesses that operate across vastly different formats, from accommodation to night clubs and specialty interests, and coming up with a single agreement covering them all will be scarily complex.
Unions will be surprised how far employees have changed. People proudly tailor the work to suit their needs, with some seeing hospitality as a career, some as a lifestyle, and some as casual or seasonal income, while others bank the skills for their CV.
The challenge will be to make it fair for everyone, and Hospitality New Zealand will be doing its very best to make sure that happens. But it will consume a huge amount of time.
As for the review of the decade-old Sale and Supply of Alcohol Act, we believe it’s time for a fresh look and will engage fully in it. We are concerned, however, with details in Sale and Supply of Alcohol (Harm Minimisation) Amendment Bill, which is before a select committee. Most of its proposals will create immense uncertainty for licence holders and the future of their business while doing very little to solve problems caused by harmful drinking.
While Grant Robertson is facing a balancing act in 2023, for the hospitality and accommodation sector it be more of a juggling act as operators juggle regulation with rising costs, staff shortages and wage pressures as they try to prevent profit erosion.”
By Julie White, CE Hospitality New Zealand