The number that flatters to deceive
New Zealand’s hospitality sector hit $15.99 billion in total sales in the year to June 2025, a 1.4 percent increase that the Restaurant Association’s annual report positioned as a record. Strip away the inflation padding and the picture inverts. Food price inflation ran at 4.6 percent over the same period, nearly double the general CPI rate of 2.7 percent. Wage costs climbed to an average of 40 percent of business spending for the first time on record.
In October 2025, Restaurant Association CEO Marisa Bidois put it bluntly: “Every dollar of the 1.4 per cent sales growth over the past year has been earned against substantial cost increases that continue to pressure margins across the sector.”
Sales up 1.4 percent. Input costs up multiples of that. In real terms, operators are going backwards, and the record headline is obscuring the damage.
2,564 doors closed in twelve months
The toll is already showing. In 2025, the NZ Herald reported that 2,564 hospitality businesses shut in the year to June 2025, up from 2,158 the previous year. Liquidations, the hardest and most final form of closure, rose 19 percent to 297. Employment growth collapsed from 7.5 percent in 2023 to just 0.7 percent in 2024, a near-complete hiring stall.
The sub-sector breakdown tells you where the pain concentrates. In 2025, RNZ reported that cafes and restaurants grew sales just 0.3 percent to $7.8 billion, while takeaway food services managed 2.2 percent growth to $4.4 billion. Consumers are not abandoning eating out entirely. They are trading down. That is a structural behavioural shift, not a blip that resolves when interest rates fall another quarter point.
The operating model that no longer works
Hospitality has historically run on the 30-30-30 model: roughly 30 percent each for fixed costs, cost of goods, and labour, leaving around 10 percent as profit. When labour alone now absorbs 40 percent of spending and food costs have not retreated, the arithmetic leaves nothing. Operators are working full weeks to break even, and many are not managing that.
The Restaurant Association flagged this directly in its August 2025 analysis of New Zealand’s two-speed economy: “Operators are experiencing falling revenues at the same time as costs for wages, food, rent, utilities, and compliance continue to climb. For many businesses, this squeeze is unsustainable.”
Passing costs to customers is the textbook solution. It does not work when customers are already trading down. In October 2025, Bidois acknowledged the bind: “Hospitality cannot simply pass costs on to customers.”
Empty CBDs are not a hangover, they are the new baseline
The demand problem has a geography. Queenstown and Rotorua are thriving on tourist flows. Auckland and Wellington are not. The Restaurant Association’s October 2025 report put the CBD problem in hard numbers: office occupancy rates in Auckland and Wellington remain 35 to 40 percent below pre-pandemic levels. Five years after the first lockdown, this is not a recovery lag. It is hybrid work permanently removing the lunch trade and after-work drinks that CBD hospitality was built around.
International tourism offers only partial relief. Arrivals reached 3.38 million in the year to June 2025, close to pre-COVID volume. But in inflation-adjusted terms, international visitor spend remains roughly 14 percent below pre-COVID levels. The bodies are back; the wallets are lighter.
The Restaurant Association’s own October 2025 report flagged that changes in consumer behaviour may represent permanent shifts, requiring operators to rethink business models rather than wait for normalisation.
Winter arrives with nothing resolved
The data available from MBIE’s hospitality sales dataset and the Stats NZ Business Price Index confirm the cost-pressure picture has not eased heading into 2026. Immigration reform to address skilled kitchen and front-of-house shortages, which the Restaurant Association has repeatedly called for, has not materialised in any meaningful form. The thin labour pool continues to drive wage inflation from the supply side.
Winter 2026 arrives with liquidation rates running 19 percent above the prior year, real margins compressed to nothing, and the two biggest CBD markets structurally diminished. For operators deciding whether to hold on or close, the honest assessment is that none of the forces squeezing them have reversed. The ones who survive will be those who have already adapted to smaller, cheaper, and closer to where customers actually live. The rest are running on fumes, and the cold months will settle the question.
Sources
- Restaurant Association 2025 Hospitality Report (2025-10-15)
- NZ’s two speed economy — Restaurant Association (2025-08-29)
- Restaurant Association warns rising costs hitting profits — RNZ (2025-06)
- Restaurant Association warns cost pressures squeezing hospitality profits — NZ Herald (2025-06)
- Business Price Index December 2025 quarter — Stats NZ (2026-02-11)