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Cook Brothers Bars chief executive James Arnott said Alibi was closing on April 9 because of a crackdown on the appointment of temporary duty managers.
The crackdown, a high staff turnover and a shortage of duty managers, meant it had been forced to fly in a duty manager from Christchurch so its staff could work out their notice period, Mr Arnott said.
He operated bars around the country and believed no other authority interpreted the rules over temporary managers as harshly as in Dunedin.
Dunedin City Council licensing inspector Tony Mole said there had been no change in the rules.
"It comes down to having suitably experienced and qualified staff working in a high risk premises in the Octagon.
"Mr Arnott has been unable to have continuity of staff to be able to provide experienced people at high-risk times of the day," Mr Mole said.
Bar owners were still able to apply for temporary managers to fill in for duty managers.
It had only opposed two of about 20 temporary manager appointments applied for in the past month.
It was not appropriate for people who had only been working in a bar for a "matter of weeks" to be appointed temporary managers during high-risk times in a high-risk area.
The bar closing was an unfortunate outcome, but there were no other premises in town that the authority had been as "hard-nosed" on about temporary appointments, Mr Mole said.
Police and the District Licensing Committee had agreed with its position.
Asked if the law was interpreted in a harsher way in Dunedin, he said: "We have high standards."
Mr Arnott said it had been advertising for duty managers since January, but no applicants with a duty manager certificate had come forward.
Previously, the council had allowed it to appoint temporary managers, but had just changed the rules so the company could not appoint them until they had six months’ experience.
Given it was already a "tough market" in Dunedin, the crackdown was the final straw.
"It’s hard work and the council are making it harder."
It was investigating selling Alibi or opening it in another location, but in the present format it was not sustainable.
He believed there were some good alcohol initiatives in Dunedin, but being too hard on bar owners would result in students buying alcohol at supermarkets and drinking at home.
There had also been a lack of communication over the change in stance, which meant it was difficult to plan.
The Terrace Bar owner John MacDonald agreed that finding duty managers was a "major problem".
He had been advertising for three weeks and received applications only from people overseas.
"I do know there are a number of businesses right across the spectrum of hospitality that are really struggling to find qualified staff," Mr MacDonald said.
He believed the issue could be serious enough that other bars in Dunedin could be forced to restrict opening hours or close entirely.
He had heard of a duty manager in Dunedin working seven days a week and 80 hours because of the shortage of staff.
This week, Commercial Tavern owner Richard Michael told an Alcohol Regulatory and Licensing Authority hearing that finding people to work as duty managers was a "serious issue" in the industry.
The role came with a lot of responsibility for "not enough money" because struggling bar owners were unable to pay very much.