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Hospitality is broken, and the Covid-19 crisis gives us the chance to fix it

Restaurants were already teetering on the edge. If they’re to survive this, the industry must come together and take one crucial step…

We’ve heard about “the good old days” in hospitality – apparently, people wanted to work in the industry because they could make a decent living. Working conditions were great, people loved their jobs and had a good time at work. Customers valued the staff who fed and served them and were willing to pay menu prices because they trusted they were fair.

Owners enjoyed running their businesses too – they had a 20% profit margin so it wasn’t the end of the world if the dishwasher broke down or they had to train a few extra people that week. They didn’t need to spend half their time watching, counting and analysing their pennies, praying that the pounds would maketh themselves. They were focused on the bit they loved the most – the hospitality. It sounds like a completely different world! It was.

I’m not sure exactly when we went wrong, but we’ve backed ourselves into a corner and I’m calling for a recalibration. The Covid-19 shutdown will have a brutal impact on our industry, and that’s because it was teetering on the edge already. We’ve done everything we can to cling to the once-held glamour or grace that the industry held, but the truth is – it’s been over a long time.

We pay our staff minimum wage, and we expect them to multitask, work long hours, and understand “the business of food” by working to targets and filling out reports. We try to innovate our offering, but our creativity is stifled by the fact that our customers have been paying $4.50 for a flat white since 1999. We try to keep costs down by pressing our suppliers for the best possible deal, but they’re hardly making ends meet, and we negotiate with our landlords to help us maintain their buildings and treat rent reviews fairly. We attempt to ignite passion in the teams that we work with, but the truth is, we find it difficult to access our own passion a lot of the time – because we’re exhausted. Exhausted from trying to stay in business.

PHOTO: GETTY IMAGES

I’m in lockdown at my husband’s family Lockwood at Maraetai Beach in east Auckland and there is a fantastic Murphy’s Law poster on the back of the bathroom door. One of the adages on it reads “if it jams, force it – if it breaks, it needed replacing anyway”, and it got me thinking. Our whole industry’s business model is jammed, and we’ve been trying to force it.

Gabrielle Hamilton, owner of cult restaurant Prune in Manhattan’s East Village, wrote for the New York Times this week: The conversation about how restaurants will continue to operate, given the rising costs of running them, has been ramping up for years now; the coronavirus did not suddenly shine a light on an unknown fragility.”

As customers’ expectations have risen, we’ve allowed our integrity to prevail over profitability. We’ve succumbed to the temptation to keep improving the quality of the produce we use (we are so spoiled for choice in New Zealand), to transition to sustainable packaging (it’s amazing what’s out there), and we’ve added a whole extra layer of cost to our businesses in software subscriptions that provide us with data, bells and whistles. At our core we are hosts – and we’ve become hospitable to a fault. We’ve been “forcing it” for a decade because we’ve let price wars, not the price of food, dictate what we charge our customers.

So the second half of Murphy’s adage comes to mind: “If it breaks, it needed replacing anyway.” As we emerge from a pandemic-induced shutdown, many are predicting our industry will “break”. So let’s act first, and act now. Our industry’s business model needs replacing, and now is the time for us to replace it – with one that befits the values of our small business owners, our teams and our communities. To one that restores it and protects it in the future.

Joelle Parenteau is the owner of a German street food restaurant in Ottawa, Canada, and last week she wrote a fantastic article called Why restaurants are so fucked. In it, she explains why many won’t make it through Covid-19 (“razor-thin profit margins” mean they don’t have a month’s rent in the bank); and she calls for restaurateurs to a) own the part we have played in allowing the model to morph into what it is now (our failure to manage customer expectations over time has skewed and reinforced our perception of what food should cost), and b) to step into our power to fix it.

PHOTO: PIXABAY

The New Zealand hospitality industry is famously world-class, but more importantly, serves an important local role for us all. You only need to take them away to realise how much cafés, restaurants and bars are valued by our communities. Covid-19 has shown me that the way we have been valuing work is all upside down. When the virus hit, it became evident quickly that the low-paid care workers, shelf-stackers, police officers, cleaners, nurses, truck drivers and food producers play an essential role in keeping our lives, our society and our supply chains ticking along.

In his piece for the Guardian this week, Jonathan Nunn wrote, “in the same way clapping for nurses illuminates uncomfortable questions about their perceived value before this crisis, uncritically fuelling the demand for more and more restaurants at cheaper prices has masked the value of [hospitality] labour to our daily lives”. Now I recognise that preparation of food and beverage isn’t saving lives, but I feel strongly that it makes a significant contribution to the cultural fabric of our society.

Because of that, I’m happy to pay the ever-increasing minimum wage. I value the work that our teams do, and I believe that our customers do too. I want to attract young, smart, passionate people to work with us, and I want to be able to look them in the eye and tell them that they can make a decent living in hospitality. I want to retain them too. So my team can have 35c in every dollar earned, no problem.

But I also feel strongly an obligation to minimise our footprint on the planet, and we made a commitment to quality that I intend to keep. I wish to support suppliers whose ethics are aligned with mine, so it is my preference to serve free-range meat, pay for eco-friendly cleaning products and to prepare our menu in-store from scratch. It is impossible for me to lower my costs further without compromising my values, so our suppliers and producers take 35c of every dollar earned, and I have no qualms there either.

I won’t bore you with the details of where the other 30c we earn in the dollar goes, but let’s just say that by the time we have paid our rent, operating expenses, utilities, insurance, lawyers, accountants, maintenance, and replaced the broken dishwasher – there generally isn’t any change from that $1 of revenue. On a good month, we celebrate single-digit profitability. My proposed solution? We need to reopen the profit margin that we have allowed to close by putting our menu prices up now.

If Jacinda’s team of five million can stamp out coronavirus, then I’m confident the hospitality industry can reclaim its margin together. We have more than 100,000 food outlets in New Zealand, and with sustainable margins, it’s a big contributor to our economy.  Let’s reinstate our profitability by adjusting menu prices to reflect a fair margin. Let’s be the change we want to see.

I am acutely aware that many people’s incomes will be hit by the aftermath of coronavirus, but it gave me hope when I read last week that New Zealanders spent over $6 billion on international travel last year. If we just redirected just a small portion of this to support our hospitality and domestic tourism industries over the next year, hospitality might just get through this alive.

I want to emphasise Nunn’s point made in the Guardian though, that “the pandemic offers us an opportunity to shine a light on the less visible reaches of the restaurant ecosystem” too. On a bad day, it is an industry built on cheap labour, particularly migrants, and according to chef Thom Eagle, quoted in the piece, “an ethos that works ranks above personal and social needs”. Nunn proposes that “to move forward, we must start by examining what we would like to save about the industry, giving space to the things that nourish us and our communities, and discarding what we believe doesn’t deserve to survive”.

I’m sad to say I think it’s true that many restaurants won’t survive the aftermath of Covid-19, but I agree with Hamilton’s point in the New York Times that “few of us will come back as we were… The concerns before coronavirus are still universal: the restaurant as we know it is no longer viable on its own”. I also agree with Nunn that “the real danger the restaurant industry faces isn’t annihilation – the danger is that is comes back the same as it was before”.

To be clear, what I’m proposing is the equivalent of a $1-3 price increase on a pita or chawarma at Fatima’s or a burger at Burger Burger. I’m not foolish enough to believe that demand won’t be affected, I studied economics at university. I’m also not naive enough to suggest we won’t be criticised or even hurt in the short term. But to that, I say we are hurting anyway, and the alternative is “letting it break” on its own. Worse than a price rise would be our favourite restaurants, takeaways, cafes and bars all withering away, right?!

’m proposing that we give our customers the benefit of the doubt – that they would be happy to pay a few dollars more for the same if they knew it meant fair wages, supporting local suppliers, reducing our footprint on the planet and survival of their local restaurants, cafés and bars. My proposed solution envisages a strengthened hospitality industry that provides a compelling career for hundreds of thousands of New Zealanders and a beating heart to our communities. Never mind the glamour, let’s work on bringing back the creativity and the grace to an industry we can be immensely proud of.

But in the interests of making sure everyone plays their part, alongside this price increase, I’m also proposing radical transparency. A 20% margin isn’t exorbitant or greedy when compared to other business sectors, so we’d have nothing to hide. I’d be happy to disclose my profit margin to my customers – hell, I’d post it on the website!

We have an opportunity to change the way we do things. Having a more equitable society, in general, is something I hope emerges from Covid-19, and now is the time to fix hospitality before it breaks itself.

Sophie Gilmour | Guest writer

Sophie Gilmour is a hospitality consultant for Delicious Business, co-founder of Bird On a Wire and part-owner of Fatima’s. 

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The Spinoff’s food content is brought to you by Freedom Farms. They believe talking about food is nearly as much fun as eating it, and they’re excited to facilitate some good conversations around food provenance in Aotearoa New Zealand.

 

 

 

 

11 thoughts on “Hospitality is broken, and the Covid-19 crisis gives us the chance to fix it”

  1. I agree with the majority of what this article and would like to add another point.
    While price increase is the first fix I also need to think carefully about licensing for food premises. Having worked in the hospitality industry for over 30 years in NZ and abroad I was amazed on my return to NZ last year at the amount of premises open, and opening.
    This has I believe been a significant factor in the pricing plateau we have seen in recent years.

    I do not have an answer but feel it is something we need to investigate as 100000 premises for 5 million people just doesn’t add up.

  2. Anyone want to buy my restaurant? Gets a good client base, hard work, fits all of the story above, but rewarding if you do a 14 to 16 hour day 7 days a week. Social, but anti social at the same time. Bargain price 🙂

  3. Once people treated all restaurants as their home dining room we lost it. It is no longer a special treat to go “out to dinner” but it is a necessity like fueling up your car. And we traded 100 good paying customers to reach 1000 price cautious customers coming in the restaurant because they cannot cook at home. Don’t have the skill to make a family meal. People no longer save up for a nice meal. But go to restaurants daily. That is what needs to change. We need to charge for an experience not a necessity.

  4. These articles remind me of something I heard on NPR during a Ted talk ( or similar) several years ago: While sitting in your airplane seat at 30,000 feet up, and you realize that everything keeping your body up and safe was made with the cheapest goods by the lowest paid worker!
    How do you like capitalism now?

  5. I agree entirely that hospitality is tough but it’s time to wake up to the delusion that our standards our world class. Our staff often lack training in the basics or often can’t be bothered. Owners are often rude and inflexible and customers won’t pay for this kind of experience. What customers will pay for us quality – engaging service, quality experience and businesses that go the extra mile. We live in a global community who are used to overseas experiences which are a cut above NZ now – we must step it up.

  6. And then come pokies and reality tv ,McDonald’s and on and on then we had to make food as fast as we could and as cheap as we could just to get bums on seats .

  7. Agreed, prices must increase and yes, there will be less customers due to the increase. The public has had a wonderful crash course on how to cook at home and the work it takes. Hopeful that will translate to an appreciation of the craft. Big concern, owners determined to keep the old model, change is scary. Personally sick of the tyrant owners who want gold from rubbish. In this new phase can we please address food waste, sick days, PTO, health insurance and no more sexism. I also want to invite the classic way cooks and chefs are trained. Where reputation had value, not, how many covers can you do. Finally, reassure the public that cleanliness and safety were always paramount in operations and follow through.

  8. Great article. Point of view from a consumer here…

    I frequent restaurants where I get to know the staff and can see they are working hard and delivering good product. I’m fine with paying 2 to 2.5 times what it costs for me to make the same food, or drink the same beverage at home. I like leaving the biggest tips I can afford for these types of establishments, and the Covid situation has let me support these places even more than I usually would, leaving 33% tips. I do save up to go out to the really fancy restaurant and blow a wad once or twice a year.

    The flip side are the restaurants that charge a bomb for a specialty menu or theme that is really nothing special, overcharge for alcohol ($12 for a rum and coke that is more ice cubes than drink), then have the debit machine preset for 22%, 20%, and 18% tip options when the age long standard is 15% where I live. These places I generally avoid and I suspect were able to exist (and drive up local rents) by a tourism industry on steroids that is not entirely welcome by the local community anymore.

    Hope that helps. I don’t have solutions, but really do appreciate the hard working people in this industry.

  9. A huge problem is that when times are tough in our industry, some operators become desperate and discount their meals, giving the dining public the false view of what is costs to put a meal on the plate! These are the people that have ruined the industry!

  10. Sorry, but you lost me at” I’m happy to pay the ever-increasing minimum wage”. What industry wouldn’t be happy to pay the minimum wage? How about a living wage instead? Paid time off, sick days, health care, vacations, parental leave-like any other industry? Any business that relies on paying minimum wage is not a viable business model.

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