Whale Cottage Portfolio Blog

The Department of Labour has announced the new Minimum Wages for the Hospitality Industry, for the period 1 July 2010 - 30 June 2011, a 7,5 % increase over the previous twelve month period.

The new Minimum Wage for employers with 10 or less employees is R1981,48, the weekly minimum rate is R457,30,  and the minimum hourly rate is R10,17.

Employers that have more than 10 employees must pay a minimum wage of R2209 per month, R509,83 per week and R11,33 per hour.

The minimum wage rates are calculated by adding 1 percentage point to the current inflation rate of 6,5 %, and is therefore the lowest wage increase since the Sectoral Determination for the Hospitality Industry was promulgated in 2007, setting minimum wage rates for the first time for this sector.

Chris von Ulmenstein, Whale Cottage Portfolio: www.whalecottage.com

A recent blog post by chef, Eat Out Top 10 restaurant judge and owner of Wild Woods restaurant, Pete Goffe-Wood, is the inspiration for evaluating how ready Cape Town’s restaurants are for the World Cup, a mere three months away today, and for becoming world class.

Goffe-Wood wrote that the local restaurant industry is “teetering on the brink of greatness”, and encouraged his colleagues to “make the leap” to offer the “foreign market waiting to be fed, educated and entertained and we must make sure that we give them what they came for”.    Goffe-Wood identified complaints about high food and wine prices, poor service, and inconsistent food quality as being reflective of problems facing the restaurant industry.

He explained how wine-markups of 200 %, whilst creating outrage, are the norm, and that restaurants have to follow wine producers when they increase their prices every year.   Goffe-Wood is critical about the lack of restaurant reviews in “print media”.  He believes that the industry needs “positive input from informed and educated sources”.   Service , he says “is not to be subservient”, and he seeks a “more professional attitude towards the service we provide”.

So what do we as customers say to restaurants in response to Goffe-Wood’s self-analysis, and to guide them to greatness:

1.  First, well done Pete, for acknowledging that not all is perfect, and for wanting to lift the standard for the restaurant industry in Cape Town.

2.  We expect consistency in a restaurant’s food quality, service, and value-for-money, plus an attractive and interesting decor, and an undefined feel-good factor of “I like it here - this is a restaurant for a person like me - I will be back”.

3.  Please answer your phones when we call to make a booking, rather than letting us speak to an answering machine, which may or may not return our call.  Have friendly staff that understand the language we speak, and that can spell a basic name like “Chris”!   Even better, recognise and acknowledge our voice as regulars when we call

4.   Trust us as customers when we have made bookings at your restaurants - confirmation calls are soooo irritating.  Allow a 15 - 30 minute cut-off time, for late arrivers, and then offer the table to the next walk-in.  By all means ban customers if they are habitual late-arrivers, or even worse, non-arrivers!

5.  Retain your staff - we see staff turnover even in the best of establishments, and it is often the staff relationships that maintain the relationship consistency and that influence the service perception we have of your restaurants.  Please do not let your new waiter train on me!   Start an industry initiative, to not appoint the waiter/kitchen person running off (often without notice) from one restaurant to another.

6.  Train your staff - start with the wines.  When the waiter does not understand the word “vintage”, I shudder, and wonder why you did not start at the beginning with your training, or why your winelist cannot list this important detail.

7.  Why do we as patrons have to pay the salaries of your staff via tips?  It is the only industry where the onus lies on the client to make such a payment.  Almost two years ago the Department of Labour promulgated the Sectoral Determination for the Hospitality Industry, and it demands that staff be appointed on a full-time basis, with a monthly salary.  I know of few restaurants where this legal requirement is being applied. 

8.  Charge fair prices.  It’s tough for everyone at the moment.  Price increases of up to 50% (Reubens) and exorbitant World Cup prices (Beluga and Sevruga) alienate customers and make you look greedy.  The days of hoping that tourists alone will fill your coffers because of their foreign currency are over. 

9.   The marketing of restaurants is very poor.  Blond sexy “poppies” in ads does not crack it for most of us!  Few restaurants have websites, and the fewest restaurants seem to understand search engine optimisation, in making sure that patrons can find more information about their restaurants on the internet.   If one does a Google search, restaurant websites often are ranked lower than reviews written about them by industry websites such as Eat Out, or by bloggers.   This means that prospective clients are not hearing the restaurant marketing message directly.   The fewest restaurants in Cape Town understand the power of Social Media (Pizza Club, Cafe Max, Nook Eatery, Arnold on Kloof and Jardine are the few on Twitter) and Goffe-Wood Twitters and blogs very occasionally only.  I am not aware of any restaurant which has an integrated social media marketing strategy! 

10.   Your customers have become your reviewers, horror of horrors, and they say it as it is.  No more white-washing, no more ‘incestuous’ relationships between reviewers wishing to remain best mates with the chefs.  Bloggers are evaluating restaurants as the man/woman in the street would experience them, and the more honest they are in writing about what they experience, the more their evaluations are valued.   Banning them from your restaurants, as Le Quartier Francais, Carne and Beluga have done, if they have given you a critical review or feedback, is not productive, and it means that the restaurants will not improve if they cannot accept feedback.

11.  Treat us with honesty - do not con us with a marketing claim on your website, that is not true - as does Carne, which claims that all its meat is organic and comes from the Karoo, which has proven to be not true.  The dishonest claim remains on the website!

Restaurant patrons will forgive a restaurant many sins if they feel comfortable and “at home”; if they feel respected, even if the feedback provided is not always positive, provided in the interest of making it better;  if they are kept up to date with information from the restaurant; and if restaurants learn to say thank you for regular patronage, for a review, or for business sent to them by a regular client.  Not too much to ask, is it?!

Chris von Ulmenstein, Whale Cottage Portfolio: www.whalecottage.com

A recent letter to the Cape Argus by reader Merle Kaplan about rising prises and decreasing levels of service in Cape Town over the Festive season was food for thought.   Our response to her letter, sent to the Cape Argus, was as follows:

“While not a restaurant owner, but a frequent restaurant user, I cannot agree with Ms Kaplan about price increases.  I want to commend our restaurants for holding their prices in these difficult times - they probably have no choice anyway.  I must immediately exclude the mad prices charged for New Year’s Eve dinners and entertainment, with up to R 2 000 per head charged for 3 or 4 courses, 2 free glasses of  bubbly, and some entertainment.  

A sensitive point raised is that of staff.  If Ms Kaplan had any idea about how difficult it is to run a hospitality business, then she would be more sympathetic to the staffing problems our industry experiences.   Realities are no-shows of staff - something else comes up or they want to go out with their friends, who are all on holiday.   Staff move from one job to another on the basis of a few Rands, without giving the required notice period, as per their contracts and the Department of Labour’s Sectoral Determination for the Hospitality Industry.   Students are a fantastic source of help, but they need to be trained.  Students do not appear to be as “hungry” as they used to be, and they too would prefer to spend the Christmas and New Year’s days with their family and friends and forego the income.   Unfortunately not arriving at work is not a “dismissible offence”, as Ms Kaplan claims - one can issue 3 letters of warning and then hold a disciplinary hearing before one can even contemplate firing an employee.  Then the restaurant owner is still guaranteed to be called to the CCMA, or the Department of Labour. 

But hardest of all, is the extreme short-term nature of customers’ decision-making.  Last minute bookings, or arrivals without a booking, must be a restaurateurs’ worst nightmare, as they cannot predict how many customers they will have each day - this affects planning for stocks and staffing.   Restaurants experience good and bad days, and there is no pattern to predict when they will be busy and when not.

I also think that after a quiet year due to the credit crunch, during which everything went at a slower pace, it is hard for restaurants and their staff to pick up the pace and deal with full restaurants again.   All our businesses have become leaner, due to the credit crunch.  Cape Town’s hospitality industry must get out of the credit crunch mode, and must gear up to face the busiest June and July ever during the World Cup.”  

Chris von Ulmenstein, Whale Cottage Portfolio: www.whalecottage.com

The hospitality industry is under severe pressure to survive financially, given the decline in occupancy, and the reduction in rates to attract bookings and to conserve cash flow.

The increase in telephone costs, electricity costs, in the price of petrol and diesel, and in the Minimum Wage, combined with the lack of a cut in the interest rate by the Reserve Bank last week, is a severe blow to the industry, but also affects every South African household, the main source of income for the industry.

The worst shock is the increase in the price of electricity by 31 % from 1 July.   The increase is justified on the basis of new electricity infrastructure that is required, to prevent electricity load-shedding, as was experienced in 2007 and 2008.   Eskom had requested a 33 % price increase.

The price of petrol is set to increase by 40 cents a litre from 1 July, raising the price to R 7,90 a litre in Gauteng, reports Reuters.

TELKOM boasts about a minimal rise in its costs to consumers, but has sneakily left out the call cost increases of 11 %.

For hospitality establishments with fewer than 10 employees, the Minimum Wage increases by 11% to R 1 843,23 per month, R 425,43 per week and R 9,45 per hour from 1 July.   The formula for calculating the annual increase has been laid down by the Department of Labour ( consumer price index + 2 %).   Many staff may be prepared to hold their salaries to ensure that they maintain their jobs, but this flexibility is not allowed by the Department, who could not have foreseen the credit crunch when it introduced the Minimum Wage for the hospitality industry in 2007.

FEDHASA is an association purporting to represent the interests of the hospitality industry.  However, the association pays lip service to its Small Accommodation segment, consisting of B&B’s, Guest Houses and Self-Catering establishments, and in essence therefore is nothing more than a hotel association. 

Currently four of the six FEDHASA Cape Board members (Phillip Couvaras from the Table Bay Hotel, Nigel Pace from the Cape Grace Hotel, Nils Heckscher from the Winchester Mansions, and Susanne Faussner from the Greenways Hotel) are from the Hotel segment, despite roughly equal numbers of hotels, small accommodation establishments, restaurants and allied suppliers making up the roughly 550 membership of FEDHASA Cape. Currently there is no Small Accommodation owner to look after the interests of this segment on the Board.  

In June, Faussner allowed herself to be nominated in the Small Accommodation segment, despite her hotel not meeting the description of B&B, Guest House or Self-Catering establishment.   This nomination was condoned by then-Chairman Nils Heckscher, who motivated his decision on the basis of the Greenways Hotel being “small”, clearly not  being aware that the FEDHASA Cape website clearly defines which type of establishments are represented in the Small Accommodation segment.  Hotels are a separate segment within FEDHASA Cape. 

Couvaras was elected as the new Chairman of FEDHASA Cape at the AGM in June, against a Guest House owner and a Restaurant representative.  He had only been in the country for four months when he was elected, an unknown entity in the local hospitality industry.   He naively admitted that he had been encouraged by the FEDHASA Board to stand as Chairman, to prevent the control of FEDHASA Cape from falling into non-Hotel hands!   After his election, he admitted that he did not know anything about Cape Town Routes Unlimited and Cape Town Tourism, and what they stood for. 

The recent press release sent out by FEDHASA Cape about MATCH is testimony to the big hotel perspective that FEDHASA propogates, especially as it has a MATCH representative on the National FEDHASA Board.  FEDHASA has encouraged all its members, including small accommodation establishments, to sign up with MATCH, despite hearing that MATCH is not favourable for Small Accommodation establishments.  Faussner was dead against the MATCH terms a year ago, when she was the Alternate Director of FEDHASA Cape! 

Couvaras angered his Alternate Directors by keeping them from the 1 August Board meeting by means of a dishonest e-mail, announcing the postponement of the Board meeting to a later date.  However the Board meeting did in fact take place.  An e-mail written to Couvaras 9 weeks ago, with subsequent reminders, to question the reason for the dishonesty, and the reasons for excluding the attendance of Alternate Directors at the Board meeting, remains unanswered, as do telephonic messages left with his efficient-sounding secretary.   Support for a reply from Couvaras was sought from National FEDHASA Board Chairman Eddy Khosa, who promised to return calls, but never did, and from Brett Dungan, CEO of FEDHASA’s national office, who refused to discuss the matter and rudely put down the phone.    Khosa remains Chairman of FEDHASA’s national board, despite having been suspended as CEO from the Johannesburg Tourism Company earlier this year. 

None of the Board members of FEDHASA Cape were elected constitutionally at the AGM, but this was written off to a “technical omission” and has been ignored.  Past Chairman Nils Heckscher and Couvaras have a very elastic interpretation of the Constitution, to suit their needs.

FEDHASA Cape recently tried to exaggerate the restaurant robbery situation is Sea Point, probably because one of its Director’s restaurants was affected, for the sake of obtaining publicity for the association.  The Sea Point police expressed its dissatisfaction about the misleading information in FEDHASA’s media statement.

For many years FEDHASA has set itself up as the lobbying body for the hospitality industry, and its media releases claim that it is “.. the lobbying body and watchdog for the South African hospitality industry nationally, and in all tiers of government on tourism, legislation, trading conditions, taxation, education and related industry issues.”   This is a hugely overstated claim, as no such discussions take place in FEDHASA Cape board meetings.  The Association did not manage to achieve any success in getting its input to the Sectoral Determination for the Hospitality Industry to be adopted by the Department of Labour.   Surprisingly, the Department of Labour is not represented on the national Board of FEDHASA, being one of the most important stakeholders for the industry.

Since its inception four years ago, Cape Town Routes Unlimited (CTRU) had one Board position for a FEDHASA Cape representative, taken up by Previous-FEDHASA Cape Chairmen Neil Markovitz and Nils Heckscher.   Heckscher resigned from the CTRU Board earlier this year, but would not tell his FEDHASA Cape Board why he had done so, other than citing “personal reasons”.   His letter of resignation from the CTRU Board was subsequently leaked to the Cape Argus, and cited the Board politics as one of his reasons for the resignation.  It is surprising that Heckscher did not persevere, in using his often-quoted strategy of “quiet diplomacy” to sort things out.  His resignation is detrimental to the hospitality industry, as it no longer has representation on the CTRU Board, now chaired by ex-Sun International CEO Peter Bacon.  FEDHASA Cape and CTRU have had an incestuous relationship, in that CTRU Executive Director Bekithemba Langilabele has been co-opted on to the FEDHASA Cape Board for the past few years. Despite the industry’s criticism of the ineffectiveness of CTRU in marketing Cape Town and the Western Cape, discussions about CTRU and how it could be given input by FEDHASA to meet the industry’s needs better were not encouraged by Heckscher.

Last year Heckscher and Langalibalele set about a rewrite of the Constitution, and their most important change was the introduction of a clause giving the Board the power to eject a fellow Director from the Board, despite directors being nominated and elected by the FEDHASA membership. 

Many FEDHASA members have questioned their membership benefits, and complain about being bombarded with e-mails from the association.   The administration and the marketing of the Association leave much to be desired, but this is condoned by the Board.   The fiduciary duty of the Board directors, prescribed by the Companies’ Act, cannot be exercised as the financials are never discussed in Board meetings.  The organisation’s finances are not very stable, with more members resigning than joining. The 2007/2008 financials were presented to the Board one week prior to the AGM.  Questions were refused, and directors were told to ask them at the AGM!

Couvaras, his Board and Executive Officer should be asked to resign, given their dishonest and discourteous behaviour towards the Alternate Directors.

The unprofessional and dishonest behaviour by Couvaras, and condonation thereof by his fellow directors, has led to the resignation of this writer as Alternate Director from the Board of FEDHASA, and the termination of the membership of all four Whale Cottages as FEDHASA Cape members. 

Comments that the World Cup will negatively effect the incomes of hospitality staff are unfounded, says Whale Cottage Portfolio owner Chris von Ulmenstein.

The hospitality industry has been accused that it will allegedly benefit from “…a get-rich-quick scheme at the expense of their hard-working employees…”  by a letter writer in the Cape Times.

As the owner of a number of guest houses in the Western Cape, I wish to point out the following:

1.   Many accommodation establishments have signed up with FIFA’s MATCH booking agency.  Rates for 2010 were set at a formula of the 2007 rate +16% inflation.  We all know that the inflation rate this year alone is 10 - 12%, which means that in 2010 all profit will have been eroded due to the rising costs of petrol, food, electricity, and interest rate increases.

2.   The World Cup event takes place in our winter months.  Traditionally many staff do not work in this period, and therefore do not earn an income.    In 2010 all willing and able staff will be employed, meaning that workers will generally be better off.

3.   As of 1 July, the Minimum Wage for the hospitality industry was increased to R 1,659.08 for small accommodation establishments, and to R 1, 849.65 for establishments with 10 staff or more, based on the formula of the inflation rate +2%.    Overtime must be compensated by extra time off or extra payment.

4.  The Department of Labour sends inspectors to establishments throughout our province, and checks payment records, and compliance with the other requirements of the Sectoral Determination governing our industry.

5.  The biggest constraint to the growth of our hospitality industry is the lack of supply of experienced and loyal staff.   If staff are prepared to work hard, to not have unrealistic expectations about their capabilities, are prepared to learn on the job, and to honour their employment contracts by giving notice instead of running away on payday, we will grow our businesses 

Chris von Ulmenstein

Whale Cottage Portfolio