The New Zealand hospitality industry is in a growth phase but is facing stiff challenges posed by globalisation, alcohol management and the cost of doing business. These are the key findings from an industry report prepared by business advisors Crowe Horwath in partnership with Hospitality NZ. Strong economic growth in NZ has given Kiwis the confidence to spend and travel and the number of international visitors is expected to grow through the next decade according to the NZ hospitality marke
t insights report.
However, not all hospitality businesses are well positioned to capture benefits from the expected growth.
Hospitality NZ CEO, Bruce Robertson, says there is a portion of the industry that is being affected by three key factors.
“Changes to the drink driving legislation, depopulation of rural communities and a lack of capital and capability to deliver to the increasingly demanding requirements of customers are challenges facing many in the industry,” he pointed out.
“Those that prosper in the near future will be those that reinvest in their businesses with appropriate refurbishment and positioning and those that are able to find, train and retain staff to deliver an outstanding experience.”
Managing principal at Crowe Horwath, Michelle Dykes, says recommendations for the industry based on the report include:
owners becoming bolder in their pricing models through value add given that tourism growth is expected at 25 per cent by 2020;
establishments changing what they serve, how they manage customers and how they deal with the rules in view of new alcohol laws;
hospitality providers aligning themselves more with the tourism industry and seeing themselves as part of a destination package catering for global needs and cultural nuances; and
meeting the need for an online presence, including a website and social media to streamline booking and gain valuable feedback as well as for marketing.
The NZ hospitality market insights report captures and translates data from a range of sources, including Statistics NZ, MBIE and Paymark and more. It translates the data in a way to better inform hospitality businesses as to trends affecting their industry.
The report says rapidly changing use of social media and referral sites means that to stay current and relevant the sector must adapt, embrace and utilise social media as a legitimate marketing channel.
Impacts from social media include:
catering to an increasingly diverse visitor ethnic mix who do not all necessarily want the same experience as NZ travellers;
online booking systems being important where availability, payment and confirmation are immediate;
business information being immediately available and engaging and social media needs being monitored and reacted to; and
hospitality businesses that attract tourists being seen as part of the tourism experience and therefore ensuring a quality customer experience.
Crowe Horwath’s hospitality health index reflects an overall positive trend for the hospitality industry at 101.9 from a 100 base in the first quarter of 2013.
Other findings from the report include: retail sales in the accommodation and food and beverage sector rose by around $94 million (or 3.2 per cent seasonally adjusted) to nearly $3.2 billion in the quarter to March 2015; individually the accommodation industry reflected 6.9 per cent growth while trade values in the food and beverage service industry rose 1.9 per cent in the same quarter (seasonally adjusted); guest nights rose nearly 7.5 per cent in the year to March 2015 and were 3.8 per cent higher in the December/January peak than in 2014; based on Paymark data, a little more than $600 million in hospitality transactions in February 2015 was nearly $70 million (12.6 per cent) ahead of February 2014; cafes and restaurants have the largest share of spend in the hospitality sector at around 47 per cent followed by pubs, taverns and bars (12 per cent) and clubs at around three per cent; and numbers of accommodation establishments were down from 3,247 in the quarter to December 2011 to 3,182 in the latest quarter (March), a decrease of 65 or two per cent.
However, possibly as a consequence, average occupancy rates increased more than 2.5 per from 39.3 per cent to 41.9 per cent.
The hospitality industry contributes around 2.7 per cent to NZ GDP (ServiceIQ report). An estimated 75 per cent of retail sales occur via electronic means such as EFTPOS.
The index combines weighted cost inputs along with other drivers to form an overall indicator of the health of a hypothetical hospitality business.