Local eateries face challenges as increased food costs and a drop in customers impact profitability
Rotorua, a popular tourist destination in New Zealand, is known for its vibrant culinary scene. However, local restaurants are currently grappling with a double whammy of rising costs and dwindling foot traffic. The cost of living crisis has forced people to tighten their belts, resulting in fewer dining out experiences. Award-winning restaurant owner Ray Singh, who owns The Indian Star and Urban Gusto, shares his struggles as he witnesses a significant change in the restaurant industry.
Rising Costs and Reduced Foot Traffic
Ray Singh, owner of The Indian Star and Urban Gusto, highlights the challenges faced by local restaurants. Previously, The Indian Star could accommodate 130 customers, but now it struggles to seat 30. Singh mentions that customers used to wait in queues, but now it is the restaurants waiting for them. The drop in foot traffic has forced Singh to reduce his staff from 15 to 11. He emphasizes that the game has completely changed, and the focus is now on breaking even.
Soaring Food Costs
The cost of living crisis has resulted in increased food costs, adding to the burden faced by restaurant owners. Singh reveals that the price of soybean oil has more than doubled, from $32 for 20 liters to $80. Butter prices have also skyrocketed, with Singh now paying $8 for 500 grams instead of the previous 99 cents. These rising costs have forced restaurants to make difficult decisions, such as no longer providing free rice with curries due to the doubling price of rice.
Impact on Profit Margins
According to the Restaurant Association, food prices have increased by 8% in the past 12 months, with fruit and vegetables rising by 22% and meat, poultry, and fish increasing by 7% – the fastest increase in four decades. Marisa Bidois, the association’s chief executive, explains that profit margins in the industry are notoriously slim, typically ranging from 2-4%. However, many businesses are now struggling to break even due to the current customer downturn.
Challenges Beyond COVID-19
Small businesses in New Zealand are facing challenges greater than those experienced during the disruptions caused by COVID-19. A survey conducted by Buy NZ Made reveals a 40% increase in company liquidations compared to the same period last year. Additionally, nearly 70% of businesses surveyed believe that the next 12 months will be tougher than the previous year. Deepak Kundal, owner of six restaurants and one cafe in Rotorua, echoes the sentiment, stating that passing on inflation costs to customers is challenging while maintaining food quality.
Dependence on Tourism and Weather Factors
Rotorua restaurants heavily rely on tourism, especially visitors from Auckland. Kundal emphasizes that the weather over the winter season has not been favorable, as people tend to avoid holidaying during rainy periods. The absence of conferences and a decline in the number of cruise ships visiting Tauranga have further impacted customer numbers. While there has been a slight improvement in sales turnover in recent months, Singh and Kundal are eagerly awaiting the return of overseas and domestic tourists to pre-COVID levels.
Conclusion:
Rotorua’s restaurant industry is currently facing a challenging period due to the rising cost of living and decreased foot traffic. Restaurant owners like Ray Singh and Deepak Kundal are struggling to keep their businesses afloat amidst soaring food costs and slim profit margins. The absence of tourists, coupled with adverse weather conditions, has further exacerbated the situation. As they navigate through these difficult times, restaurant owners remain hopeful for a brighter future, relying on the eventual return of tourists and the resilience of the industry.
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