Sluggish consumer spending, rising operational costs and changing dining habits have forced some operators to shut their doors.
Imperial Palace Restaurant, which opened in Mt Wellington in 2009, was placed into liquidation on June 4.
Dragonboat Restaurant was placed into liquidation in July. Photo / RNZ, Yiting Lin
One month later, Dragonboat Restaurant in central Auckland was also placed in liquidation after operating for 31 years.
By the end of August, renowned yum cha operator Sun World Seafood Restaurant in Newmarket had met the same fate.
According to the liquidators’ report, the restaurant suffered a severe cashflow deficit during the Covid-19 pandemic and had been unable to recover financially.
Despite efforts to stabilise operations, the business continued to be affected by the broader economic downturn and sustained increases in key operating costs.
Ocean Yu found it hard to close Star Cafe Seafood Restaurant. Photo / RNZ, Yiting Lin
Ocean Yu, director of popular Cantonese outlet Star Cafe Seafood Restaurant, said he had made the painful decision to close his restaurant on the North Shore on September 30 after six years of business.
Yu said the end of the lease and a sharp decline in customers from 2023 were key reasons behind the closure.
He said customers had begun dining out less frequently and become more selective about where they spent their money.
“Now people only go out for special occasions, like birthdays or wedding anniversaries,” Yu said. “Most of the time, household spending has tightened significantly.”
Yu said an increasingly competitive market had also contributed to the closure of many Chinese eateries specialising in yum cha.
“There’s been a wave of Chinese restaurants opening on Auckland’s North Shore,” he said. “There used to be just four or five yum cha places here – now there are nearly 10. However, the customer base is limited.”
Star Cafe Seafood Restaurant closed its doors in September. Photo / RNZ, Yiting Lin
He said shifting migrant demographics posed another challenge.
Most of his customers were typically older than 35 years old, mainly families and senior diners, he said.
However, that core audience had slowly shrunk as younger migrants arrived, he said.
“Yum cha restaurants will still be around,” he said. “But the shift in customer age could lead to fewer of them,” he said.
“Older diners used to go for yum cha every week, but the younger generation doesn’t see it that way.
“I’ve noticed the trend. That’s why I have decided not to invest any more money in it.”
Yu said while he planned to open a new Chinese restaurant, he ruled out starting another yum cha establishment.
Slashing prices
Zhuolun He, owner of Golden Rooster Chinese Restaurant in Auckland’s Rosedale, is originally from China’s Guangdong province and has a deep connection to his hometown cuisine, one of the main reasons he continues to serve Cantonese dim sum to his customers.
“Yum cha is more than just a meal – it’s a tradition and part of daily life,” he said.
“Many seniors, community groups and families like to come in the morning for dim sum and tea, forming a regular crowd.
“When the economy is good, I see these regulars almost every day. We would chat and catch up. … That’s how social bonds are built.”
Although his customers still enjoyed the food, he noticed a significant drop in foot traffic this year.
“Two years ago, most of my customers were middle-income professionals – they’re all gone now,” he said.
“Some returned a few months ago and told me they had moved to Australia or European countries. Most of them were young and had strong spending power.”
Dim sum is a traditional style of Cantonese cuisine featuring a wide variety of small, shareable plates, typically enjoyed with tea during brunch or lunch. Photo / RNZ, Yiting Lin
He said numerous small groups came in to dine during the recent Mid-Autumn Festival, but their spending was much lower than previous years.
“I sold only two lobsters last weekend,” he said. “In the past, I could sell eight or even 10, with 20 or 50 servings of fó tiaò qiáng (a rich Chinese soup made with abalone, sea cucumber and scallops also known as ‘Buddha Jumps Over the Wall’). Now, that’s impossible.”
He had reduced the price of dim sum dishes to $5 each since last year in an effort to attract more customers, a move he said reaped no profit but helped keep the business afloat.
“This isn’t something I want to do,” he said. “Five-dollar dim sum was the price 15 or 16 years ago.
“Many people have asked how my business can survive with $5 dim sum,” he said.
“The $5 dishes don’t make a profit, but if customers also order items like congee, rice rolls or stir-fried noodles, which we still sell at regular prices, we can earn a little from those.
“It’s just a strategy to help my business survive in such a difficult time.”
To cut costs, he has pared back his staff to a minimum and now works alongside his wife 12 hours a day to keep the business running.
Diners at Golden Rooster Chinese Restaurant. Photo / RNZ, Yiting Lin
Restaurant liquidations surge
The latest monthly report from credit bureau Centrix in September showed that business liquidations remained elevated, up 26% from a year earlier.
Construction continued to be the hardest-hit industry, leading all sectors in company liquidations.
The hospitality industry ranked second, with 300 liquidations over the past 12 months, up 49% from the previous year.
Restaurants were among the most affected. Centrix data showed that 108 restaurants went into liquidation in the year to August, marking a 77% jump from a year earlier.
Marisa Bidois, chief executive of the Restaurant Association of New Zealand, said the rise in restaurant liquidations was deeply concerning.
“We’ve seen wage costs increase significantly, food prices remain high and, at the same time, customer spending is down,” Bidois said.
“Many operators are also still carrying debt from the pandemic and, with margins already thin, these combined pressures are proving a lot for some businesses to absorb,” she said.
“No one is immune to the current trading conditions, and even long-established businesses with loyal followings are feeling the pressure,” she said.
Bidois said the huge shortfall in Chinese visitors to New Zealand was another major challenge weighing on Chinese restaurants.
“There are fewer tourists coming here compared with pre-pandemic levels, down about 44% as of February 2025, compared with the same month in 2019,” she said.
“Forecasts suggest visitor numbers may reach only about 85% of pre-Covid levels by March 2026.
“That kind of drop in visitor numbers would potentially have a direct impact on many of these businesses.”
Rate cuts take time
Economist Shamubeel Eaqub said the hospitality sector had been among the hardest hit during New Zealand’s prolonged recession.
“The big effect has been that customers are less willing to go out and spend money,” Eaqub said.
“People have been losing jobs but, more importantly, household budgets are under a lot of pressure. The cost of necessities like groceries, fruit and vegetables, electricity, insurance rates has gone up,” he said.
“So there’s less money available for discretionary spending.”
Economist Shamubeel Eaqub. Photo / RNZ, Cole Eastham-Farrelly
Eaqub said while an elevated number of hospitality businesses had closed, new ventures were also opening.
Still, he said, a strong rebound in hospitality spending was unlikely during the upcoming Christmas season.
“The main reason for that is we’re still not seeing a good recovery in jobs,” he said.
“When people have jobs and their incomes are stable and secure, they’re more confident of spending money. But, right now, I think we still don’t have confidence that it will take place.”
The Reserve Bank cut the official cash rate by 50 basis points on October 8.
Eaqub said it would take time for the effects of lower interest rates to flow through to the wider economy and to jobs and household incomes.
He said the longer the recession dragged on, the more job losses and business closures were likely to follow.
Bidois said the hospitality sector could see a modest lift in spending over the summer and Christmas period, but rising costs and shifting consumer habits meant any growth was likely to remain limited.
“What the industry needs now is real support,” she said.
“People choosing to dine out locally and support their neighbourhood restaurants can make all the difference in turning that optimism into a real recovery.
“If we don’t see things picking up, we will inevitably see more businesses closing, unfortunately.”
– RNZ