Almost 20 percent increase in hospitality businesses closing with 2500 gone

Whether it’s award-winning Napier restaurant Pacifica closing its doors, or Wellington brewery Fortune Favours shutting down, it seems barely a week goes by where there isn’t a high-profile hospitality business closing.

Data supplied by Centrix shows there have been 297 hospitality businesses liquidated in the past 12 months, compared to 199 in the prior year.

In the past 12 months, 2564 hospitality businesses have shut, 19 percent more than the 2158 a year earlier.

Chris Wilkinson, of First Retail Group, said some businesses were reaching a tipping point that they could not get past.

Costs were rising and there was only so much that retail prices could increase.

“It gets to a tipping point where people can’t and won’t pay. That’s the biggest challenge that we’re finding everywhere. So you’ve got really good businesses that are struggling or going under. They’ve reached that tipping point.”

He said the craft brewing market had been hard hit as people pulled back on spending on “premium” products, which would have affected Fortune Favours.

But some were still doing well.

“What we are seeing is there is demand for good hospitality space and typically the ethnic businesses are the ones that are bullish… we’re seeing a number of Indian restaurants moving into spaces, businesses that are multiplying.

“They’re not taking a chance on a new business, but this is a business that’s already succeeding somewhere else. So they’re scaling up businesses.”

He said some restaurants were opting for scaled down versions to meet the market.

“I think Lone Star has got a new model which is much smaller … if you’re not going to be able to fill a big restaurant or pay the rent on a big restaurant, a smaller, more efficient restaurant is actually the way forward.

“It’s really all about evolution and it’s the businesses that aren’t evolving that are the ones that are really struggling and the ones that are caught in that mass middle – exactly like retail, all the retailers that are struggling are the ones that are caught in the mass middle.

“Where they’ve got an undifferentiated proposition, they haven’t sort of captured the hearts and minds of their customers.”

‘A lot of pain’

Chief executive of the Restaurant Association Marisa Bidois said there was a “lot of pain” in the industry.

“We’ve seen costs increasing exponentially, and a subdued customer market with rising expenses hitting people at home as well. So that impacts our industry too.”

She said changing customer behaviour was a factor.

The working from home and flexible working has impacted a lot of businesses.

“Many of them say that today trade has changed as result of that. We’re also not back up to our pre-Covid visitor numbers to the country as well. Oftentimes our city centres are places that our visitors will stop and check out.”

She said there were some “green shoots”, primarily in Canterbury, Otago and around farming communities. She said things should further improve as interest rates fell and the weather became warmer.

University of Auckland senior management lecturer Antje Fiedler said there was a risk that the failure of businesses made it harder for others nearby.

“If you walk along the street and there are a lot of shops for rent or closed, it’s probably, for consumers, not so desirable to go shopping. The same is true for other places.

“If we look at our economic books, you would see ok, if small business leave the market, it creates new opportunities. But actually, we need that positive energy, that something is happening in places to want to have that vibrant dynamic where people feel like it’s a magnet, they’re drawn to it.”

‘Outside boost’ needed

She said New Zealand’s relatively high level of private debt meant high interest rates had a big effect on spending.

“I mean interest rates are coming down slowly but people still can’t afford so much of the luxury goods and going out to restaurants – people don’t have to go out.

“It really needs a boost from the outside. If you could get more international students, more tourists into New Zealand that could revive the place. But in the short term I think it’s wishful thinking that it will just solve itself because interest rates have come down a bit … many people can’t afford to go out a couple of times a week.”

She said the number of people falling behind on their debts showed the strife that some were in.

“I think the consumer confidence is now low for four years.

“We have relatively low government debt, and I feel that the government, when the consumers stop spending, actually, the government should have that anti-cyclic spending pattern.

“They could have a mechanism that they just invest into infrastructure and make some bolder moves that give people a little bit of courage that they could really revive the places because if you have big infrastructure projects that really gives confidence in the place, creates jobs.

“So I feel there is like a border vision needed from the government to do some spending in certain areas to kind of stimulate that vibrancy again and bring some life back to the economy.”

Infometrics chief forecaster Gareth Kiernan said hospitality businesses seemed to be feeling economic pressure later than some other industries.

“It could be that parts of the hospitality sector have been somewhat insulated from the broader downturn by the ongoing recovery in international tourism following the border reopening – it’s only been the last year or so where that international tourism recovery has stagnated.

“Stats NZ’s retail trade survey suggested the smallest amount of relief is emerging in the hospitality sector. Food and beverage services spending volumes were up 0.2 percent from a year ago in both the December 2024 and June 2025 quarters – March was weaker – the first positive results since June 2023.

“Electronic card data is less upbeat, with four of the last six months showing sales down from a year earlier, although growth for the three months to July turned positive.

“Given that households still seem to be taking a cautious approach to their spending due to labour market weakness and cost-of-living pressures in some areas, areas of more discretionary spending such as hospitality will probably struggle to attract dollars for another six months. With the economic recovery looking like it will be agriculturally driven, businesses in urban areas could remain under pressure for even longer.”

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