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s 2018 rolls into gear, we’ve taken some time to reflect on
the successes and challenges for the hospitality industry
over the past year to help with our planning for the next
12 months and to address areas of focus. The hospitality
industry has a very important role to play in New Zealand’s economy,
not only in the social fabric of kiwis, but also as a huge part of the
tour ism offer ing, which generates a direct contr ibution to GDP of
$14.7 billion (5.9 percent of GDP).
The first half of this year saw buoyant sales perfor mance for the
hospitality industry, with growth of 8.2 per cent for the year ended
March 2017 and forecasts to exceed $10 billion in annual sales in 2018.
Combined, hospitality and tour ism expenditure was $36.0 billion in
2017, an increase of 1.9 percent from the previous year.
Strong tour ism growth was achieved in 2017 for both international
arr ivals and spend in New Zealand, driven by strong growth in Asian
markets, especially China, and in established markets such as the US and
the UK. Overseas visitor arr ivals to New Zealand increased 8.9 percent.
International tour ism expenditure was $14.5 billion (contributing 20.7
percent to New Zealand’s total exports of goods and services), while
domestic tour ism expenditure increased 4.0 percent ($820 million) to
While hospitality and tour ism is in healthy shape, the industry is
not without challenge however, as a recent survey of our members
indicates. More than 230,000 people are directly employed in tour ism
(8.4 percent of the total number of people employed in New Zealand).
More than 120,000 of those are employed in the hospitality sector.
It is therefore a huge challenge to encourage and retain workers to
the industry and as such a labour intensive industry the lack of skilled
employees is ranked as the number one challenge for hospitality
business owners. Closely following this is managing wage costs, while
the third top challenge is building and maintaining sales volume. These
challenges are consistently positioned at the top in this annual survey
and are also forecast by members to rank first, second and third in 2018.
The Restaurant Association also measures business confidence and
over the next twelve months 27.47 percent of the industry is feeling
optimistic about 2018, 42.86 percent are neutral and 29.67 percent
have decreased business confidence for the year. Many of our members
express concer n about proposed legislation changes, in particular the
prospect that the new Gover nment will clamp down on employers’
ability to access overseas labour.
In addition, plans to lift the minimum wage by around 5 percent per
annum over coming years are a concer n to some of our businesses. This
would leave New Zealand with the highest minimum wage relative
to average income in the OECD.The main impact will be to improve
New Zealand’s lowest-paid workers but may result in some business
being unable to remain sustainable.While other industries may be able
to alleviate labour cost increases by further automating their service, the
personal connections made as part of the hospitality service offer ing come
with a heavy reliability on labour. Many members are concer ned that they
will simply not be able to afford the roll on effect of the increase.
Last year the Ministry of Business Innovation and Employment
(MBIE) estimated that a 5 percent lift in the minimum wage would
reduce employment by around 3,500 jobs, which would add around
0.1 percentage point to the unemployment rate. The unemployment
effect of minimum wages is a contentious issue in economics, but the
consensus is that there is some impact.
We’re also looking at other significant changes in the policy
environment over the coming years.This includes the coming introduction
of a suite of policies that will dampen the housing market and which will
likely have flow-on downside impacts for consumption spending. However,
in recent commentary from Westpac, it was outlined that the economy
had shown resilience through late 2017 leading us to fir mer ground as we
start the New Year. Among the more notable developments has been the
downturn in net migration, which we expect to continue for some time
and which will weigh on economic growth. At the same time, construction
activity has flattened off in the face of difficulties sourcing finance,
challenges accessing skilled labour, and rising costs.
One thing is clear, 2018 will introduce a number of changes and
challenges to hospitality businesses. The Restaurant Association will be
strongly advocating on the industry’s behalf for strategies that address
the needs of our flour ishing industry and promote economic and
business growth. n
“The hospitality industry has a
very important role to play in
New Zealand’s economy, not only
in the social fabric of kiwis, but
also as a huge part of the tourism
offering, which generates a direct
contribution to GDP of $14.7 billion.”
To Succeed! Marisa Bidois - Chief Executive,
Restaurant Association of New Zealand
20 | February 2018 | Hospitality BUSINESS
2018 HOSPITALITY LEADERS FORUM
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