Business

Amid fears of 80% revenue loss due to COVID-19 outbreak, restaurants hope for rent rebates

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SINGAPORE: Restaurant operators in Singapore are bracing for a significant hit on their revenue – with some expecting as much as an 80 per cent drop – over the next three months as tourists stay away and locals avoid public places amid the outbreak of a deadly novel coronavirus.

To avoid “a big collapse” in the food and beverage (F&B) industry, the Restaurant Association of Singapore (RAS) said on Thursday (Feb 13) that it has written to 24 major shopping mall landlords requesting for a temporary cut in rent.

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“Looking at the situation right now, we are hoping at least 50 per cent rental rebate for the first 3 months,” said RAS president Vincent Tan

Rent and wages typically make up for more than half of a restaurants operating cost here. Meanwhile, profitability of restauranteurs has been low at about 1.7 per cent even before the virus outbreak, said Mr Tan, who is also the managing director of food service provider Select Group.

“If your sales drop by 50 per cent and your margin is about 1.7 per cent, you just imagine how difficult we are at this moment,” he told reporters.

READ: F&B, retail businesses in CBD feel pinch as people work from home amid coronavirus concerns

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The industry groups appeal to the landlords, including CapitaLand and Frasers Property, was sent out on Monday. Some landlords have responded, although none has committed to a rental rebate.

“So far, their response is towards wanting to understand this a little bit more and they want to speak to the individual tenants in more detail,” said RAS executive director Edwin Fong.

On the other hand, Jewel Changi Airport has reached out to its tenants with a 50 per cent rent rebate for February and March, Mr Tan told reporters, describing this as an “impactful decision” that will help restaurant operators to preserve jobs.

Katrina Groups CEO Alan Goh told CNA that its So Pho store at Jewel Changi Airport has seen an 80 per cent drop in business after authorities raised its Disease Outbreak Response System Condition (DORSCON) level to Orange last Friday.

Describing the rent rebate as a helpful move, he said: “We hope we can appeal to the rest of the landlords to take up Jewels initiative.”

READ: Coronavirus outbreak: Singapore raises DORSCON level to Orange; schools to suspend inter-school, external activities

Other restaurant operators at the press conference echoed that and appealed for landlords to partner them through this difficult period.

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RAS vice president Andrew Kwan pointed to how major shopping mall landlords in Hong Kong are offering cuts in February rent by as much as 60 per cent to help tenants ride out the effects of the coronavirus outbreak.

If there is no reduction in rent for local restaurant operators, it is likely that some players may have to close down “because it is not tenable to pay rent and wages while revenues are wiped out”, he added.

Noting that landlords have a “social responsibility to help (tenants) protect jobs”, RAS president advisor Andrew Tjioe said: “You can see how most of our landlords are performing financially – there is an imbalance of the distribution of income. Many of us are operating in the REIT malls and rents over there are increasing year by year. Its a very heavy burden for F&B operators.”

“If we dont survive, they too cant survive,” added Mr Tjioe, founder of the Tung Lok chain of restaurants. “Its better for us to work closely together.”

Apart from appealing to the landlords, the association said it has also been in constant dialogue with government agencies over the past two weeks.

In a letter addressed to Trade and Industry Minister Chan Chun Sing on Monday, it said it is hoping for help in the form of a suspension in foreign worker levy, wage support in terms of covering half the employers CPF contribution, higher access to working capital loans, as well as rental subsidies in government-owned and managed properties.

MEMBERS EXPECT 50-80% REVENUE LOSS OVER NEXT 3 MONTHS

RAS, which describes itself as the largest F&B association in Singapore, has more than 450 members that operate close to 4,000 outlets.

It had conducted a snap poll among its members since the start of the week. Among the 302 respondents as of Thursday noon, about 60 per cent indicated that they expect a loss in revenue of more than 50 per cent over the next three months.

For those that operate in locations that rely on tourist arrivals, the estimated loss in revenue could go up to 80 per cent, Mr Tan said.

READ: Firms must keep transforming even as they brace for hit from coronavirus, says Enterprise Singapore

READ: Singapore tourism to take 'significant hit' in 2020 due to coronavirus, up to 30% fewer visitors expected

In addition, close to 60 per cent of those polled said they are “not prepared or equipped” to deal with the COVID-19 outbreak due to several differences with the severe acute respiratory syndrome (SARS) outbreak in 2003.

These differences include the aRead More – Source