Increased food costs and a significant change in foot traffic pose challenges for local eateries
Rotorua, a popular tourist destination in New Zealand, is facing a crisis in its restaurant industry. The rising cost of living, including soaring food prices and a drop in foot traffic, has left many eateries struggling to stay afloat. Award-winning restaurant owner Ray Singh, who owns The Indian Star and Urban Gusto, laments the drastic decline in customers and the financial strain it has placed on his businesses. With increased expenses and dwindling profits, Rotorua restaurants are grappling with an uncertain future.
The Struggle of Rising Costs:
Ray Singh’s restaurants, once bustling with customers, now struggle to fill even a fraction of their capacity. Singh recalls a time when people would wait in queues for up to 30 minutes, but now it is the restaurant staff who wait for customers to arrive. Singh has had to downsize his staff due to the drop in foot traffic, and most nights, breaking even is the best he can hope for. The cost of living crisis has forced people to tighten their belts, resulting in fewer individuals dining out. Mortgage payments have increased, leaving people with less disposable income for leisure activities like dining out.
The Impact of Soaring Food Costs:
In addition to the decline in customers, Rotorua restaurants are grappling with skyrocketing food costs. Singh, who used to pay $32 for 20 liters of soybean oil, now pays $80, more than double the previous price. The price of butter has also seen a significant increase, with Singh now paying $8 for 500 grams, compared to the previous price of 99 cents. These rising costs have forced restaurants to make difficult decisions, such as reducing portion sizes and eliminating free offerings like rice with curries. The Restaurant Association reports an 8% increase in food prices over the past year, with fruit and vegetables rising by 22% and meat, poultry, and fish increasing by 7% – the highest increase in four decades.
The Strain on Profit Margins:
The Restaurant Association’s chief executive, Marisa Bidois, highlights the notoriously slim profit margins in the industry, which typically range from 2-4%. However, with the current downturn in customers, many businesses are struggling to break even. Small businesses, in particular, face challenges greater than those experienced during the disruptions caused by the Covid-19 pandemic. A survey conducted by Buy NZ Made revealed a 40% increase in company liquidations compared to the same period last year. Additionally, nearly 70% of New Zealand businesses surveyed believe that the next 12 months will be even tougher than the previous year.
The Customer Downturn Challenge:
Managing the customer downturn has become the biggest challenge for many restaurants in Rotorua. Deepak Kundal, owner of six restaurants and one cafe, emphasizes the difficulty of passing on inflationary costs to customers while still providing quality food. The survey conducted by the Restaurant Association supports this sentiment, with 35% of businesses identifying the customer downturn as their primary challenge. To cope with the decrease in customers, some restaurants have reduced staff hours, while others have had to lay off employees altogether.
The Role of Tourism and Weather:
Rotorua’s restaurant industry heavily relies on tourism, particularly visitors from Auckland. However, the recent weather conditions, including heavy rain, have deterred tourists from visiting the area. Kundal notes that the past few months have seen an unusually high amount of rainfall, discouraging holidaymakers from venturing out. The absence of conferences and the decline in cruise ship visits from Tauranga have further contributed to the decrease in customer numbers. While there are hopes for a revival in sales turnover, the return of overseas and domestic tourists to pre-Covid levels is crucial for the survival of Rotorua’s restaurants.
Conclusion:
Rotorua’s restaurant industry is facing a challenging time due to the rising cost of living, increased food costs, and a significant drop in foot traffic. Local eateries, once thriving, are now struggling to break even, with profit margins becoming increasingly slim. The future remains uncertain, but restaurant owners like Ray Singh and Deepak Kundal remain hopeful and determined to weather the storm. As the industry grapples with these challenges, it is clear that support from both locals and tourists will be vital in ensuring the survival and revival of Rotorua’s vibrant dining scene.
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