Restaurant industry poised to survive downturn
Eating out, takeaways and nights in the pub will be among the first activities to be chopped by UK consumers in the wake of the downturn but restaurants are better placed to survive the economic turbulence than fifteen years ago, research by PricewaterhouseCoopers LLP has revealed.
In a study that surveyed 1000 people, 27 per cent confirmed the first items they would cut back on would be restaurant meals, takeaways or fast food, and visits to the local pub, compared to 18 per cent who would cut back on holidays and weekend breaks.When asked specifically about how they would cut back on eating out spend, 20 per cent said as opposed to reducing on restaurant visits they would stop going all together – in favour for cooking at home. A further 46 per cent reported they would simply eat out less often, 13 per cent will spend less at the same restaurants, and 11 per cent will eat out at a cheaper restaurant.
David Trunkfield, Director, PricewaterhouseCoopers LLP, believes restaurant customer levels will fall but spending per customer is likely to remain constant. “Wallets and waists are getting thinner as consumers tighten their belts and prioritise what they spend their dwindling disposable income on,” he said. “Footfall will drop for restaurants across the UK but spend per head should be less affected.”
“Lower socio-demographic groups are more likely to stop eating out altogether and families with high mortgage repayments will also be reluctant to eat out,” Mr Trunkfield added.
Second time lucky for the restaurant industry
Consumers are clearly getting more nervous with spending growth predicted to slow to just 0.5% in 2009. Nearly 60% of consumers surveyed this summer think their household will be worse off in the next 12 months. This is a clear deterioration since PricewaterhouseCoopers April survey when 37% of consumers polled thought they would have less disposable income (money remaining after household bills and credit card payments) in the next year.
In the early 1990s, restaurants struggled in the wake of the recession but since then we have seen significant cultural changes and, with that, certain categories of consumer spending have arguably shifted from being discretionary to essential, such as eating out.
The UK, like Australia, became wealthier during the boom and enjoyed high employment rates. As people now work longer hours and more women work, eating out has slipped into the essential as opposed to luxury bracket.
During the previous downturn one in five people ate out regularly, by 2008 that figure had trebled.
“There is a wider range of restaurants this time around and much wider choice of casual dining options for consumers. Eating out used to be a more formal, three course meal but is now a habit for many consumers enjoying affordable choice,” Mr Trunkfield explained. “The credit crunch will not change the course of this cultural behaviour.”
During the last recession, branded restaurant chains were both smaller and primarily based around traditional food or pizza offerings. Branded restaurant chains in the current market are both larger and more varied in offering.
Australia, too, has witnessed a noticeable recent trend toward casual dining options, with a shift away from fine dining in the current climate. The competitive nature of the restaurant industry, difficulties in finding and retaining qualified staff, rising food prices and increased economic concern of consumers have stimulated the heightened interest in casual dining.
Food for thought for restaurateurs
People will not compromise eating out altogether but they will be smarter about how they do it, according to PwC. They will still want to eat out but will be looking for a chance to spend less money or make the same amount go further.
“The challenge for restaurants is to try and keep the same customers through promotions, discounts and good set menus, but more importantly through excellent customer service,” Mr Trunkfield advised. “Customers need to walk away with more than a full stomach – they will be looking for a good experience that provides value for money. If they are dropping visits patrons must make sure they drop them from other restaurants.”
“The good news is that the under 25s, who are not tied to a mortgage, are still spending and enjoying the hospitality scene. In addition the AB (upper-middle class) demographic will also keep the restaurant cash tills ringing as they downgrade and dip into the varied, casual dining scene, but continue to eat out,” Mr Trunkfield concluded.