The COVID-19 pandemic hasn’t spared anyone, states Naim Maadad, founder & chief executive, Gates Hospitality. “Every business has felt the negative impact of the pandemic; our business is not an exception. People have lost jobs; many are on reduced pay package. Importantly, there is a lack of confidence. As a result, our business – like several other F&B concepts – is not only suffering but bruised, and we don’t know when that bruising will heal.”
According to Maadad, the situation is quite serious as 50% of F&B businesses in the UAE will possibly not survive the pandemic. Reports indicate that 40% have already shut down. “Think about the severe impact on livelihood – from people working with these brands to suppliers and landlords. Even the neighbouring venues will feel the negative ripple effect.”
There is also an indication that approximately 10% of the expatriate population has left the UAE owing to redundancies. Maadad feels many more could leave in the coming days. “We can only hope that the arrivals match the departures, like in the F&B business – earlier when one concept closed down, several others opened up. But now the situation is far more challenging as investors will do over due diligence to mitigate any risks associated with new openings. Even entrepreneurs will think multiple times before starting a new business in a challenging environment.”
Strongest brands are challenged
Even as F&B businesses are given a go-ahead to reopen, Gates Hospitality has chosen not to reopen two of its award-wining brands at Souk Madinat – folly by Nick & Scott and Publique – due to lack of reasonable response from the landlord and tourist footfall. “Some of our destinations draw heavy tourist traffic, so until this section of visitors returns, these addresses will struggle,” Maadad admits.
“In addition, the landlord expects us to maintain the erstwhile contractual obligations, without understanding that a lot of changes have happened over the last few months. While we aren’t expecting anyone to bear our losses, we have to work together to tide over the crisis and make the economy sustainable,” he adds. “This year was supposed to be big for the UAE owing to the Expo 2020 Dubai, but we ended up with a pandemic. In order to reignite the industries and re-engage with people, we have to seriously look at our shared responsibility.”
“Our P&L for June has to cover March, April and May – three months of zero revenue,” Maadad continues. “We have to take a hit in order to reactivate our businesses. Hence, every stakeholder – government agencies, landlords, aggregators, suppliers, businesses – has to shoulder a part of the pain for the survival of F&B brands through 2020. We will not make any money this year, but we can still find ways to not bleed excessively until we see signs of normalcy. We don’t want freebies; we are looking for support from the stakeholders keeping in mind the long-term, as opposed to short-term, benefits.”
Is there any support forthcoming in the form of a stimulus package?
“We haven’t received any,” he responds, “which will in the long run determine our investment decisions, based on first-hand experience. We have businesses in the UK and Australia; we had to furlough our people at Red Farm in London and the UK government pledged to pay 80% of their salary. The landlord has given us a written commitment to pay only single-digit turnover rent when we reopen towards the end of the year. In the UAE, the attempt to offset losses is impacting our team, numbers and cashflow. We are doing what we can to help our people to tide over the crisis, through subsistence allowance for those working in venues that aren’t open yet and finding them opportunities to join restaurants that are open based on skill. We’ve committed to them that as our venues reopen and we regain stability they will be rewarded and pay scale will eventually resume. Amidst all this, thankfully, we aren’t working with capital from the bank.”
Uncertainty restrains spend
Not knowing what tomorrow holds is preventing people from spending money. “Personally, I’ve seen a decline in my spending pattern,” Maadad agrees. “The ‘next norm’ will be challenging for businesses, including us amidst a climate where people are being cautious about their spending patterns.”
However, even amidst uncertainty, two of Gates Hospitality’s neighbourhood brands – including Reform Social & Grill – are “ahead” of the same period last year. “The support from the local community – that would otherwise travel during summer – has been phenomenal in the success of these concepts,” says Maadad. “On the other hand, one of our concepts at Emaar Boulevard is suffering due to dependence on traffic from the commercial towers. With the workforce in offices being rotated, our business model in such locations will have to change drastically.”
Even in the best years, summer is always quiet. This year is even worse. “We will have to wait until September to understand the impact,” Maadad says. “The decision of educational institutes on continuation of e-learning or resumption of on-campus learning will determine if expatriates will return to the UAE and that will impact our business too.”
“I don’t really know what’s next,” admits Maadad. “The pain is very deep at the moment.”
However, there are bright spots as, historically, the F&B industry has been buoyant due to the social nature of human beings. “This time the difference is that everyone across the globe is impacted by a health pandemic – not limited to one sector or industry. The impact is really deep,” he points out. “But if we are able to innovate and engage with our audience meaningfully, we will survive the storm.”
In summation, Maadad says “Based on Expo 2020 Dubai scheduled for second half of 2021, we can expect some kind of normalcy in the next 12-14 months. However, a lot will depend on whether people are confident enough to travel to witness the world expo. At the same time, if we don’t start reactivating, we won’t be able to re-engage with people.”