Planning for a resurgent hospitality market after COVID-19

Planning for a resurgent hospitality market after COVID-19
16 Apr 2020

There is promise after the storm, but good planning is needed by business owners in the restaurant, bar and events industry.

Impact

A recent impact assessment report by Fitch Solutions has painted a bleak picture in their prognosis of the alcoholic drinks and tobacco products sector. ‘During the lockdown, the sale of alcohol and tobacco products have been banned. This will be compounded by consumers not being able to purchase alcohol at bars, pubs and restaurants. While there was stockpiling before the lockdown, we do not believe it will be enough to offset the lack of spending during the lockdown.’

Investors and entrepreneurs could be forgiven for doubting the potential of the hospitality and beverage market in a post-coronavirus economy, but the truth is that the industry is too big and too important to fail.

Restaurants and hotels alone, are responsible for around 300,000 jobs in South Africa, and the government will almost certainly, focus their efforts on developing economic investment and incentive packages to ensure that the hospitality industry is resurgent once more. Added to that, landlords and property management companies will very likely offer rental incentives and payment holidays to current and prospective restaurant, bar and catering operators to balance their tenant mix and attract customers to their retail precincts.

So while the current outlook is dim, to say the least, there is great cause for hospitality companies and entrepreneurs to begin planning for invigorated demand, particularly in sales of alcoholic beverages.

Time to plan

The current lockdown period provides entrepreneurs with an excellent opportunity to plan for the expected increase in demand for alcoholic beverages as part of a new hospitality business.

For those who are looking for opportunities for short-term income gains, or are wanting to test the market near their potential location, a Special Events Liquor Licence is an excellent option. A special event/occasional liquor licence only takes an average of two (2) weeks to obtain approval for, and it could be used by almost anybody with a venue and the required consent. Once the relevant Liquor Board reopens and allows applications for special events licences, these certificates could be used as a one-off opportunity to raise quick capital in the hospitality industry. It’s also an excellent method to test the market in your area, to determine the viability of a new restaurant before laying out tens-of-thousands of Rands to plan and open a new restaurant business.

Meanwhile, for anyone thinking of opening a new restaurant, bar, club, liquor outlet or micro-manufacturing facility, the current economic lull presents the best time to begin getting the relevant documentation and plans together for your new venture. It will also be worthwhile discussing incentives with property owners.

It is further our considered view that while we cannot see the sales of alcohol and related substances being curtailed significantly in South Africa, given the lessons learned during the lockdown period and the broader socio-economic impact, we foresee that regulations regarding the sale and distribution of alcohol will be tightened. Furthermore, we believe that the authorities will focus their attention to enforcing compliance with the liquor regulatory environment in a far more focused and stringent manner.

Liquor licence consultants are preparing for an increase in applications following the lockdown, but it is predicted that local governments and liquor boards will be more rigorous in their reviews of applications.

As indicated above, we believe that further regulatory overhaul and oversight of the liquor industry can be expected in the short to medium term. It is therefore advisable to retain an attorney specialising in liquor law who will be able to quickly represent your interests before the liquor boards, or before the courts if necessary, and to generally provide you with advice so as to maximize your business potential while adhering to the regulatory environment.

See also:

(This article is provided for informational purposes only and not for the purpose of providing legal advice. For more information on the topic, please contact the author/s or the relevant provider.)
Christo van Niekerk
Christo van Niekerk

Christo van Niekerk is an admitted attorney and an Associate in GMI’s Commercial Litigation and Insurance Law Department. He completed his BCom Law degree in 2009 whilst working as a...

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