Three established Rotorua hospitality businesses closed within days of each other. Ambrosia Restaurant and Bar had been trading for 17 years, Hello Stranger Cafe for six, while Piccalo Cafe at the Government Gardens also shut its doors.
Each business had its own circumstances, but three closures in such a short period deserve more than another discussion about hospitality doing it tough.
The question for operators is how much room is actually left to respond when the next bill goes up.
For years, hospitality businesses have dealt with cost increases by making adjustments. A menu gets reviewed. A supplier changes. Rosters get tightened. Opening hours are reconsidered. A dish that is expensive to produce disappears, while another dollar is added to something that can carry it.
None of that is new. What has changed is how many of those adjustments have already been made.
Hello Stranger owner Bianca Nieuwboer pointed to higher food, wage, rent and utility costs when discussing the decision to close. She also spoke about the limit on what customers would reasonably pay, using the example of an eggs benedict potentially needing to reach $35.
That is where the problem becomes harder.
Food costs can be reviewed, but there is a point where reducing portion size or changing ingredients starts changing the dish. Rosters can be tightened, but somebody still has to make the coffee, cook the food, clear the tables and serve the customer.
Opening fewer hours may save wages, but it also means fewer hours in which to make money.
Then there is price. Putting another $1 on a coffee or $2 on a breakfast may look small on a spreadsheet. To a customer buying for two people several times a week, those increases add up as well. Operators are trying to recover higher costs from customers who are also watching what they spend.
Deloitte found labour costs across accommodation and food services increased by around 25 percent between the first quarter of 2020 and the first quarter of 2026. Over the same period, the minimum wage increased by about 33 percent.
Those increases matter, but wages are only one line on the accounts. Rent still has to be paid. So does electricity, insurance, cleaning, waste collection, repairs and all the other costs that rarely appear on a menu but still have to be covered by it.
At the same time, Deloitte found inflation-adjusted electronic card spending in hospitality was 6 percent below its late-2022 level in the first quarter of this year.
That leaves a fairly simple problem. The business needs more from every sale, while the customer is becoming more careful about how much they spend.
The Rotorua closures do not prove that one particular cost is breaking hospitality businesses. They do suggest, however, that established operators can reach a point where there are very few levers left to pull.
Centrix recorded 414 hospitality company liquidations over the past year, up 49 percent year-on-year. That makes the Rotorua closures part of a much wider conversation.
For operators reviewing their own numbers, it may be worth looking beyond which costs went up this month. Look instead at what you did the last time they increased.
Did you change the menu? Cut a shift? Reduce opening hours? Put prices up? Accept a smaller margin? And, more importantly, what option is still available when the next increase arrives?
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