Trying times indeed but we humans are nothing if not adaptable. There has never been an event like this affecting our cafes, bars and restaurants. Sure, we’ve had economic slow downs and crashes and earthquakes and other monstrous environmental and financial phenomena, but nothing has ever stopped me popping around the corner for a nice croissant and a flat white before.

Much will depend on the duration of this lock down. We pray, of course, for freedom after the 4 weeks but - we shall see. The hospitality industry is a pretty resilient beast. All indications are that this is a short, sharp, shock to the system. Once those gates are open most Kiwis will be racing to their favourite spot to get their social and gastronomic fix that they have been craving. 

Not everywhere will bounce back to full steam immediately. Those cafes, bars and restaurants that rely heavily on the tourist dollar will be slower to return although we must also bear in mind that the adventurous Kiwi still must travel and so domestic tourism will take a big upswing in months to come. 

There will be yet others, sadly, who will not survive this drought. The weaker of the herd may not be seen much into the rest of the year. Whilst there is unprecedented financial support available, even this will not be enough in some cases.   

Some in the industry may not see this is a bad thing, of course. Way back to the farthest depths of 2019 when a sneeze was, well just a sneeze, many in the industry were scoffing at the sheer volume of new hospitality businesses emerging. Cries of ‘oversupply’ could be heard over many a frothy lager and particularly in Auckland. This thinning of the herd is ‘natural selection’ some may say. Now this is something we have seen before in the industry and especially following the GFC. We will lose members of the herd. All in all, however, the hospitality is strong. It’s resilient. It’s vital. It’s not going anywhere. 

THE MARKET

So, to the market. The fact is that there will be many hospitality businesses coming to the market in the next 6 months. Some of these will be the aforementioned members of the herd that succumbed to the ravages of drought and who just couldn’t recover. Yet others will be solid businesses where owners have simply come through this pandemic with a different perspective on life. I’ve had 3 such calls since this awful situation arose. 

There will be bargains - of course there will be and there will be bargain-hunters and I have certainly had those calls already! 

Not much through history has affected the values of hospitality businesses, however, and I don’t see much reason for this to change in the medium to long term. Yes, there will be a bit of a feeding frenzy until we all settle back into our normal rhythms, but why would a pragmatic market look differently at a business in the knowledge that there was a global hiccup for 2 or 3 months?  If the business was strong before we went into this and it emerges strong after it, then the ‘hiccup’ and the effects of the hiccup will be worked around. 

The fact is hospitality has always been and always will be a savvy market to invest in. Sure, banks have never particularly liked it and some see it as a very trend-driven and transient sort of business but remember that every Kiwi needs that coffee fix that only a trained Barista can provide. Every Kiwi needs that hour of release from their normal life by going to cafes, bars and restaurant. This is a NZ$11.5bn industry, people!! 

BUYERS AND MORE BUYERS 

Another important factor to consider is that there will be buyers as a result of this and not only those bargain-hunters. The sad fact of the pandemic means that thousands of people have and will lose their jobs. Many of these, sadly, will be from the tourism sector whilst that recovers. Right through every level of business there will have been job losses. These people need something to do. 

After the GFC and other economic situations, people looked to take back control of their lives. Buying a job is about the most significant way to take back control and this will happen. In that NZ$50,000 to NZ$300,000 section of the market (where a hospitality basically provides an income for a working owner) we will see a huge amount of activity.

It’s not just at this level though. There will be others wanting to control their own destiny who have money and decent chunks of it. Some may be recipients of redundancy packages. Many people over the years that I have sold to have been ‘corporate refugees’ and I see no reason for this to change. 

So why look at buying a hospitality business?

• This is a short, sharp shock! Never in history has the industry been thus affected. Could it happen again? Fairly unlikely, I would say.
• The bounce-back, in the whole will be swift.
• Money is literally as cheap as chips if not cheaper! Banks are in a really strong position to lend and this is SO different to the ‘80s or the GFC. Money is there to be had.
• Hospitality has low barriers to entry. I’m not saying it’s easy at all. It’s just relatively easy to buy in to a hospitality business.
• So much choice out there! But there always has been. 
• I have made plenty of people really quite wealthy over the years. Many started with nothing.
• And … yes ... there will be some softer prices for a little while for you bargain-hunters.

Related reading:

How are we buying and selling now that the house is on fire?

Corona virus impacts: Why supermarket shelves WILL empty even more

How Byron Bay icon Raes on Wategos is adapting to covid-19 measures