New Zealand’s hospitality sector experienced encouraging growth as rebounding consumer and business confidence played a major part in the (almost) tripling of the sector’s annual growth rate1.
The fourth annual Hospitality Report, the definitive guide to the performance of New Zealand’s hospitality industry is released today. Produced by the Restaurant Association of New Zealand the report is an annual update on an industry that plays a significant role in New Zealand’s economy.
Highlights of the 2014* Hospitality Report include:
- Nationwide sales for 2014* increased by 6.3 per cent to $7.6 billion
- Café and restaurant sales experienced strong growth, up by nearly 10%
- Revenue growth in Auckland, Manawatu-Wanganui, Canterbury and Otago outlets outstripped the national average growth rate of 6.3%
- Number of outlets is projected** to increase by 251 to 14,991 (2013 14,740)
- Number of employees is projected** to increase by 2,300 to 107,000 (2013 104,7400)
- Sales for 2015 forecast to reach $7.9 billion, up 4.1 per cent
Marisa Bidois, CEO of the Restaurant Association of New Zealand says that 2014 has been a good year for hospitality.
“It is pleasing to see what looks like the beginning of a strong growth trend. A large number of new restaurants have opened and our members are telling us that trading, while still competitive, is better than it has been for some time.
“The long hot summer, together with an increasingly optimistic economic outlook and more dining choices has re-invigorated the café and restaurant sector.”
The report breaks the industry into five key areas:
|% of total||2014|
|% of total||Incr in Revenue|
Among all hospitality outlet types, the strongest performer was cafes and restaurants with an annual increase in revenue of $345.4 million, up nearly 10% on the year before.
“This is the strongest growth in six years and outstrips the impact of the Rugby World Cup on Café and Restaurant sales. While takeaways revenue continues to increase, its growth rate has declined over the past two years. Perhaps this trend indicates that more consumers are now more willing to dine out, whereas a year or two ago they were opting for more cost effective choices” says Bidois.
By region, Manawatu-Wanganui, Canterbury and Otago experienced double digit sales growth up 11.5 per cent, 10.8 and 14.5 per cent respectively. Auckland sales grew 6.9 per cent, Waikato, 4 per cent and Wellington 5.1 per cent. Rest of the South Island sales increased by 6.2 per cent, sales in the Bay of Plenty and Rest of North Island contracted 1.1 per cent and 4.9 per cent respectively.
Challenges Facing the Industry
Managing labour costs remains the top challenge facing hospitality operators says Bidois.
“Wages continue to rise beyond customers’ expectation of price rises and that’s the challenge and balancing act that business owners must face. At the same time, the industry’s number three challenge is a lack of skilled employees, which can place upward pressure on remuneration. That’s why building and maintaining sales volume is the second most pressing challenge.”
The top five challenges operators expect in 2014 are:
- Labour costs (2013 #1 challenge)
- Building and maintaining sales volume (2013 #3 challenge)
- Lack of skilled employees (2013 #2 challenge)
- Competition from other businesses (2013 #4 challenge)
- Food costs (2013 #5 challenge)
The top ten trends shaping the food and beverage being served and the way that people dine include:
- The casualisation of dining – consumers dining more frequently, but spending less
- No reservations – pitching to the walk- in crowd and only accepting bookings for large parties
- The gastro bar – think of it as “pub with top grub” where food overtakes the importance of beverage sales
- Cuisine style – new Asian eateries, Southern American and South American are all making an impact
- Shared plates/small plates – keeps dining fun and social and often at a lower price point
- Healthy food – raw food, paleo etc
- Locally grown – more businesses are opting to grow their own
- Hospitality groups – a number of hospitality groups (typically running 10 to 20 different establishments) are going through a significant expansion phase
- Pop ups – expect to see more temporary establishments in the coming year
- Craft beer – consumers are embracing the options available from craft brewers.
Outlook for 2015
Expectations are for another good 12 months ahead, says Bidois, although at a slightly reduced rate of growth compared to 2014.
“While consumer confidence is rebounding we know that there are interest rate rises on the horizon and house prices and household debt remain of concern to many New Zealanders.
“We’re forecasting growth of four per cent, and total revenue for the sector of nearly $8 billion. We also expect the Auckland and Christchurch hospitality markets to dominate the sector’s employment growth which next year will see more than 111,000 hospitality employees working in more than 15,000 outlets.”
1 2013 Annual growth rate: 2.5%, 2014 Annual growth rate: 6.3%
* Year to 31 March 2014
** Projected number of outlets and/or employees as at 31 March 2014