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CoVid-19. Help needed for F&B and hospitality sectors

Publication: 
Peter Lee
chiefofficersnet

As more and more photos emerge of near empty restaurants and entertainment outlets, it's clear that governments are going to have to do something to help, even if it causes some political, even religious, dissatisfaction.

Banks around the world are offering help to many businesses which have seen a dramatic decline in business due to the Corona Virus CoVid-19.

Airports are deserted, aircraft are parked, shopping centres are wastelands, restaurants are full of empty tables.

But governments are failing to do the easiest thing in the world for them - reduce tax burdens.

It's horribly short sighted - as tourists stay at home, not even leaving their own houses, food delivery services and on-line groceries are seeing an increase in business. But for businesses that rely on passing trade and, even, bookings, the situation is becoming dire. Two weeks ago, a usually hectic restaurant in Kuala Lumpur's ultra-busy Jalan Alor was mostly empty. "It's been like this for two weeks," the owner told us. "We've had no Chinese tourists and our regulars are staying at home, too. In Manila, just recovering from the fall-out from a major eruption of a local volcano at the beginning of January, the owner of a food service business told us "we've had the volcano, and H1N1 so many chickens have been slaughtered and now have most of the pigs since African Swine Fever was found at the beginning of February - we'd had bans on pork from many overseas suppliers for several months. Now the borders are closed to visitors from quite a lot of countries, many of them our traditional businesses, we don't know how long we can survive."

In Singapore, the owner of a family-run restaurant showed a photo of the empty car park. "Every Sunday, the car park is full and there are queues to get in. Now there is almost no-one. In Sydney and Melbourne, restaurant, café and bar owners are using social media and the press to plead with people to go out. In Daegu in South Korea, a town where eating out is an everyday occurrence for many, thousands of CoVid-19 cases have worried the population so much that the usually busy streets are empty. In Chicago where the US is seeing its most deadly outbreak, webcams show quiet streets at all times of the day and night. In Chinatowns across the world, business has collapsed despite the fact that the virus is being spread almost entirely by non-Chinese outside China, after a shaky start where some infected people did manage to travel. But in London, it's reported that the dramatic downturn, said to be at least 50% in some restaurants, has spread to nearby districts and seems to be expanding further, a situation not helped by racist attacks on Orientals in some parts of the UK.

Governments are tinkering with interest rates - a quarter of a percent here or there isn't going to save a restaurant or F&B outlet which is suffering negative cashflow - and it's not going to save the jobs of the people that work there.

But there is a way - targeted tax and duty reductions from national government and business rates reductions or even suspensions for the time being from local authorities.

Restaurants, wine bars, pubs and small shops are at serious risk. To remove VAT, GST or other sales takes on businesses of less than, say, 3,000 square feet of public space would cover most independent F&B outlets and small shops. It would not include e.g. most wine warehouses, supermarket chains and nightclubs. There are two advantages: first, it militates against the practice of front-loading in which drinkers buy bottles cheap in supermarkets and drink at home before going out to places where the price differential is high. By reducing that differential, binge drinking is likely to reduce. Secondly, the most vulnerable businesses which do not have the economies of scale of larger outfits will be able to attract more customers and increase the chances of cross-selling.

People vote with their wallets. If governments recognised that, the threat to the sector could be reduced, although it is unlikely that it will be eliminated entirely.

There's no need to change licensing laws, no need to liberate no-public drinking zones. Businesses can keep the same margins as now while not collecting and accounting for tax. On duty-paid drinks, they would be able to put them into store for later and buy new duty-free stock, which would alleviate financial pressure in the supply chain.

Yes, there will be campaigners from a variety of causes who argue that this is a bad idea. This is where governments must lead - there are almost no options if there are not to be wholesale closures of restaurants, café and bars.

It gets worse: many MICE events have already been cancelled, so have many sports events and others are either under threat or being postponed. That's thousands of people that were expected to provide income for hotels etc. near venues, in some cases these are annual events that provide the profits for otherwise marginal businesses. The first race of the MotoGP season has been cancelled because Qatar has closed its borders to those travelling from Italy. The Formula E race scheduled for near Hainan was cancelled several weeks ago. The Chinese Grand Prix in Shanghai is under constant review. So, it has just been announced is the F1 race in Melbourne. Advance crews are expected to arrive any day and a not insignificant number will come from Italy. To start the season without Ferarri is unthinkable and if AUS closes its borders, as several Asian countries already have, to anyone who has been in Italy in the past two weeks, the cancellation or even postponement of the race could spell the death knell for many Melbourne F&B outlets.

In addition, again because of the large overheads including staff, hotels are at significant risk. They should be included in the scheme. One unintended consequence is that, around the world, hotels are staffed by foreign workers. If they are laid off, their work permits go, too. That would affect tens of thousands of people in many countries, a social and economic disaster for families in poor countries that depend on the income that is sent home.

Governments really do need to act immediately and decisively if they are to save both culturally important services and the livelihoods of many, many hundreds of thousands of owners and workers around the world.

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