We are fighting for crumbs | Matthew Pace

The COVID-19 pandemic has had a catastrophic impact on the restaurant, entertainment and leisure industries. Yet for some, it has remained ‘business as usual’. MATTHEW PACE, secretary of the Association of Catering Establishments, calls for more ‘understanding’ in view of the crisis

Matthew Pace
Matthew Pace

In a press release this week, the Association of Catering Establishments – while welcoming the latest measures – argued that “a total lock down is not the way forward. Malta may control the pandemic with smart measures.” Do you still feel, then, that your sector has been treated as (to quote a previous press release) a ‘sacrificial lamb’?

When we issued the first press release, a week ago, our association was… ‘livid’ is the word, I suppose. Bars had been closed since November, and kazini too – and the reaction to the latest surge was to extend the ban to restaurants as well: even though there was no apparent evidence that restaurants were, or are, a main contributor to the rise in cases. So yes, at the time we felt as though we were being singled out as ‘sacrificial lambs’.

But to fair – and also to quantify the positives with the negatives – a lot changed within 24 hours. The Minister for Tourism was very helpful: allocating 1k per establishment, to mitigate the impact. And within five days, the wage supplement was restructured to help us weather this second storm. Because, as another commentator put this morning: all businesses at the moment - especially SMEs, which make up the bulk of our member associations – are basically on life-support. That is the reality of the situation.

We’ve been in this pandemic for a year; we are cash-flow depleted; we depend very much on the wage supplement, and on moratoria extensions… so the positive contribution from government is clearly there.

All the same, however: in both our press releases, we are asking the health authorities to clarify whether there is any scientific evidence, that can be independently validated, to prove that the spread is in fact happening through restaurants. Because the information we are getting is that the largest chunk of contact-tracing, resulting in positive cases, is actually stemming from households.

There may not be direct scientific evidence for restaurants contributing to the spread; but there is a widespread perception that many catering establishments were very casual in their application of the rules. From your own experience, how much truth is there to this?

Let me put I this way: last year, we were closed down on March 9; and we re-opened on May 22. So basically, it was a lockdown lasting two months and three weeks. Since then, I would say that restaurants have managed to operate very successfully, for 10 months, within the health and safety parameters laid down by the regulations.

There were, of course, a few enforcement issues here and there. But then, you have to elaborate what the problem actually was. Tables being 2.7 metres apart, rather than three metres, is one thing; people literally dancing on tables, is another.

One of the things we found most frustrating was that – when the ‘cowboys’ were mentioned (not to refer to any specific establishment by name) – rather than being made an example of, they were left to operate. And in the long run, all establishments ended up paying the price. So basically, the lack of enforcement, in those 10 months, resulted in an impact on the entire sector.

But in their majority, I would say that restaurants abided lawfully by the guidelines. So much so, that contact-tracing didn’t result in any particular spike associated with any one specific restaurant.  And even those ’cowboys’ I mentioned earlier… when you boil it all down, it only amounted to around 20 establishments, out of a total of 4,000.

You say that restaurants ‘operated successfully’… but how do the last 10 months really compare with the pre-COVID years? If you had to quantify the impact of the pandemic on your sector: how seriously has it been affected?

When I used the word ‘successfully’, I was referring to the COVID situation, not in business terms. As an association, we were obviously running surveys among our members, every few weeks; and – especially after we re-opened on 22 May – there was a period when people remained very sceptical about going to restaurants, and business was more or less at a standstill.

Then, the voucher scheme was launched; and we had a spike in activity. As a result, we were hitting a 60% average, across the island, compared to 2019 figures.   As soon as the vouchers were all used up, though… at the end of summer, with low season around the corner… the average dropped to around 35/40%.

So basically, we were on life-support: because we were not even breaking even with the wage supplement. Even now, we depend entirely on government hand-outs, just to keep operating.

At the same time, COVID-19 seems to have wiped out the tourism market for the foreseeable future; and the situation is not expected to improve before spring next year, at the earliest. Can your industry – especially the smaller establishments – survive that long, in practice?

I wouldn’t differentiate too much between ‘smaller’ and ‘larger’ establishments, at this stage. In truth, the sector has been hard-hit across the board.

In 2019, Malta received 2,7 million tourists: excluding cruise-liner visits. That’s more than five times our entire population. If you evaluate that in terms of monthly attendance, it works out at 250,000 people, per month, missing from the island. In other words, 250,000 fewer ‘mouths to feed’.

And there are many parts of Malta where catering is totally tourism-dependent. In Valletta, for instance, there was a noticeable absence of business because cruise-liners are no longer coming in. Places like Mdina, Rabat, Marsaxlokk, etc. - where the bulk of business comes from tourists - were also impacted far more than other areas.

Elsewhere, places like Sliema or St Julian’s were less affected, because there is a higher concentration of locals in those areas.  But on the whole, the loss of tourism had a catastrophic effect, if you ask me.

Another thing to bear in mind is that the pandemic struck at a time when the country was experiencing an economic boom. So in March 2021, when the crisis began: many people in catering – and not just in catering – were taking their decisions, on the basis of the economic bubble they were in at the time.

So when you drive around and see the sheer number of restaurants that have closed – because many restaurants have, in fact, shut down over the past year – was it all because of COVID-19? Certainly, it would have contributed; but I also believe that, in many cases, it is also the result of wrong decisions in the past: for instance, taking over an establishment at a hefty, direct rental cost… which, when there isn’t a ‘Plan B’, is not sustainable, at the end of the day.

Obviously, no one could have predicted something like COVID-19, at the time. But one thing we have learnt from this, is that you cannot make your projections only on the economic ‘feel-good factor’ of the present.

It is, at the end of the day, a cut-throat market. There are 4,000 licensed establishments out there, in a country with around 500,000 inhabitants: excluding tourists. That’s around one establishment per 125 population… which makes it highly competitive anyway: with or without COVID-19.

On the subject of ‘high, direct rental cost’: your press release also ‘calls on certain commercial landlords to show a better sense of understanding in these very difficult circumstances’. Can you expand on that? And are you suggesting that – as in the case of extended bank-loan moratoria – this is an area where government should intervene directly?

To be fair – and not to sound like a merchant of doom – many landlords have, in fact, been very understanding and supportive. I happen to have my own catering establishment; and in my case – on a personal level – they were extremely helpful. Rather than having to approach them myself, they approached us. And others have had more or less the same experience.

But then, we do have a few members whose landlords – even though they understand that we’re going through a pandemic; that sales are at an all-time low, etc. – are quite frankly doing the opposite. It’s as though nothing is happening around them at all. Some are even doing their utmost to oust tenants from their properties. And I think it’s grossly unfair.

One would expect certain landlords to be far more compassionate, under the circumstances. For instance, since last week, we are depending entirely on delivery service: which, on average, amounts to around 10% of the revenue we were generating before. That’s a 90% drop in revenue. So how can one incorporate all the costs – including rental costs – as if nothing had changed?

I won’t go into the issue of ‘government intervention’, however: because – to be honest - I don’t know the ins and outs of how the law works, in these cases. But to me, this is more an issue of negotiation. There are two sides involved in this equation; so let’s get together and discuss.

Hopefully – fingers crossed – we will start to emerge from this crisis, in – once again, fingers crossed – a few months’ time. From then on, we will be looking at a brighter future; but for now, let us concentrate on the present.

What we would like to see, for now, is a little more awareness of the reality of the situation. It would help if certain landlords – at least, the ones who are being difficult – could be a little more reasonable…

Turning to the new regulations themselves: you just mentioned one effect, i.e., that restaurants are now limited to delivery service. This practice, too, has changed considerably since the crisis began: with the rise of platform companies, acting as intermediaries between establishment and client.  How has this new reality impacted the sector?

Ironically, the perception out there is that, if catering establishments are surviving, it is because there is a delivery service. But most people do not understand the nitty-gritty behind how these third-party companies operate.

Yesterday, for instance, I had a company – not to mention names – asking me for a 33% chunk of the business they would bring to my doorstep. Basically, the commission paid by restaurants is around 30%: at a time when, as I said before, revenue is already down by 90%. That doesn’t leave any room for any profit whatsoever.

So when restaurants use those services – especially, the smaller, stand-alone ones - it is not ‘for profit’. They do it for two reasons, basically: to keep their brand alive; and to keep a little cash turning over.

Then there are the bigger chains - with three, four, maybe five restaurants – and those are in a position to negotiate down to, say, 20 or 23%. That might leave room for a margin of profit, but… it’s still a giant chunk of an already depleted revenue-stream.

The situation, to be honest, is that we are fighting for crumbs….

At the same time, some might argue that the service provided by catering establishments – especially through home deliveries – is itself ‘essential’: given that many people are stuck at home… and (let’s face it) not everyone knows how to cook. Do you yourself consider your industry to be a ‘front-liner’?

I think that, really and truly, the only people who can be considered ‘front-liners’, in this very difficult pandemic situation, are the people in the health authorities. Even though my own association may have been critical of some of their decisions, I think these ladies and gentlemen deserve our outright credit and praise. What they are doing, under the circumstances, is nothing short of remarkable. I can only say, ‘hats off to them’: both personally, and on behalf of the association.

So no, I wouldn’t even dream of placing ourselves at the same level. To call us ‘front-liners’ would be an insult to the people who are really on the front line.