It has been a busy summer and Whangamata has just recently opened its 26th eatery, according to TripAdvisor. Despite the flowering of new businesses, there seems almost relentless demand to be serviced. Hour long waits are very common and customers readily (if not happily) accept them during peak times over summer.
Which begs a few questions. Given that we have seen and experienced several years of boomtime as we re-emerge from the post Global Financial Crisis havoc, how much of the success of local eateries is due to the robustness of their business model, and how much is due the relentless boomtime summer economy?
The town has only 5,000 native residents, which swells to up to as many as 40,000 in summer. A large part of the economy locally is summer spending, which is really discretionary spending – money that people can afford to spend on unnecessary items while the times are good. It’s not a bad market to be in. But is it a viable long term prospect for a new cafe?
At present, the cafe where I work has been for sale for a while. I could never manage a motel in addition to a busy cafe all the way across the other side of the North Island, but I do sometimes muse over whether the cafe represents an attractive purchase prospect.
One imagines a tipping point. The point where supply outstrips demand. The remaining customers would then disperse into what would then become a damaging price war. Many of the local eateries would have to shut, and the few that remained would sell out for just about any price they could get.
Something that could easily cause this tipping point would be a housing crash. I was around during the global financial crisis and kept a close eye on what happened to the local property market. Beach baches are typically another high value discretionary item which fly up to millions of dollars in valuation at the peak of the market – but during economic crashes, people discover that they really have no value whatsoever, as everyone in the neighborhood desperately tries to flog their bach in order to cling on to the family home. This is reflected in the sales statistics for baches during the GFC – during the 2008 to 2009 period, over 14,400 baches were listed for sale on the market, with only 600 selling over that time.
Prices crashed through the floor. What then would happen to consumer discretionary cafe spending under such tight circumstances, when they eventually return again? It too would evaporate.
Which leaves me with the idea that no matter the attractiveness of the brand of the business, or the location of the cafe, or any other factor, what matters is not the sales as they currently stand, but what they could be if things reach their worst. One must pay close attention to where one is in the market cycle, insofar as one can.
But to each their own. Working in a commercial kitchen has taught me a lot, not least would be the ability to realise the value within a commercial kitchen somewhere, at some point in future.
