3,000 Hospitality Businesses Close in One Year: Industry Crisis

Hospitality Liquidations Surge 42 Percent

In the hospitality sector alone, 422 companies entered liquidation over the past year, marking a 42 percent year-on-year increase according to Centrix data. That figure represents 1.3 percent of the entire sector. Restaurant liquidations jumped 43 percent, cafe liquidations rose 27 percent, and takeaway food service liquidations spiked 143 percent. Centrix chief operating officer Monika Lacey noted that slower consumer spending heavily impacts the industry. “If things get tough, you don’t necessarily go out for dinner every week, you might go once a month so it’s a hard part of the economic cycle, when people start hunkering down,” Lacey said, adding that “the confidence isn’t there.”

Lagging Indicators and Post-Covid Debt Strains

Restaurant Association general manager Nicola Waldren explained that while 1.3 percent may seem like a small proportion, every single liquidation directly impacts owners, employees, and local communities. “Liquidation figures are a lagging indicator,” Waldren said, noting they reflect the cumulative effect of several difficult years. According to Waldren, many businesses spent the post-Covid period trying to rebuild balance sheets and clear accumulated debt while simultaneously absorbing rising food, wage, energy, and compliance costs. While July hospitality sales climbed 7.8 percent year-on-year—marking the strongest monthly growth seen in some time—Waldren cautioned that a single strong month does not equate to a sustained recovery for operators still carrying legacy debt. Westpac chief economist Kelly Eckhold indicated that a genuine turnaround for the sector will likely depend on unemployment beginning to fall.

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Broader Corporate Insolvencies and IRD Pressures

Across the wider economy, total company liquidations reached 3092 over the past 12 months, representing a 14 percent year-on-year increase according to Centrix. July recorded 302 company insolvencies, compared to 276 during the same month last year. Construction accounted for 28 percent of these insolvencies, followed by property leasing and hiring at 13 percent, and hospitality at 11 percent. The 764 construction businesses liquidated over the past year accounted for just under 0.1 percent of that specific sector. Retail trade liquidations also saw a 50 percent year-on-year increase. Keaton Pronk, an insolvency practitioner at McDonald Vague, pointed out that winter traditionally marks a slow period for hospitality. Furthermore, Pronk stated that the Inland Revenue Department (IRD) is actively pushing recoveries against businesses falling behind on tax debt, pushing strapped operators into sudden default.

Consumer Arrears and Household Financial Pressures

Centrix data indicates that overall consumer arrears increased to 10.74 percent, with 424,000 people currently behind on repayments. Mortgage arrears rose 1.22 percent, leaving just under 20,000 home loans past due—though that figure remains 12 percent lower than a year prior. Renters account for roughly 69,000 consumers sitting 90 or more days in arrears. Lacey noted that while overall credit conditions continue to improve, winter brings predictable strain. “I just got my power bill, that was a bit of a shock so that’s going to flow through into everyday households,” Lacey said. New household lending declined 10.5 percent year-on-year during the July quarter, driven largely by weaker residential mortgage activity. Meanwhile, the Official Cash Rate (OCR) is widely expected to increase, which Lacey warned could tighten household cash flow further.

Frequently Asked Questions

How many hospitality businesses have closed in New Zealand?

According to Centrix data, approximately 2900 hospitality businesses ceased trading altogether over a 12-month period, while 422 companies entered formal liquidation.

Which sectors are experiencing the highest liquidation rates?

Construction accounts for 28 percent of company insolvencies, followed by property leasing and hiring at 13 percent, and hospitality at 11 percent, according to Centrix.

Why are hospitality liquidations increasing?

Industry representatives attribute the rise to a combination of constrained consumer spending, lingering debt accumulated since the Covid pandemic, and climbing food, wage, energy, and compliance costs.