A COVID-19 outbreak has decimated Wollongong's nightlife, creating chaos for business owners navigating the new reality of "living with COVID".

After a difficult year, Illawarra nightspots have enjoyed a bumper trade since reopening.

But business at four of the city's most popular bars has ground to a halt after they were linked to multiple COVID-19 cases.

The Prince, Pepe's on the Beach, the Towradgi Beach Hotel and The Illawarra were all declared COVID-19 exposure sites, with staff and patrons forced into isolation.

The Illawarra was hoping to remain open after its employees initially tested negative — but those hopes were dashed when two staff tested positive for the virus overnight.

"We have had to stand our staff down and isolate them for a week," owner Ryan Aitchison said.

"This means like a lot of venues we can't open our doors until they come out of isolation."

Mr Aitchison said it was disappointing that they seemed to be back to square one after a strong reopening which saw them claw back some of the losses from the lockdown.

"We have had a great month of living on cloud nine operating at a large capacity," he said.

Closure scuppers 'record week'

The Illawarra will close for a week and is expecting to lose "tens of thousands" of dollars during one of the busiest trading periods of the year.

"We are looking at what was going to be a record week for us," Mr Aitchison said.

Under current health guidelines businesses which are exposed to a COVID-19 case are not directed to close.

But staff are usually considered close contacts who are required by NSW Health to get tested and isolate.

Mr Aitchison said under these conditions it is almost impossible for hospitality venues like his to operate.

'We know now that we are all very vulnerable to COVID cases coming into our businesses," he said.

"We have just found out that living with COVID can only be done if there is no COVID around."

The situation is also likely to become a lot more complex for business owners on December 15, when unvaccinated patrons are allowed to return to venues.

Mr Aitchison said following the outbreak in Wollongong he expects businesses to take a harder line allowing patrons into their businesses if they are unvaccinated.

"I would not be surprised if some businesses turn around and say our house policy is to not allow unvaccinated people in for that reason."

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