San Diego’s hospitality industry got off to a bang in June at the beginning of the peak travel season, thanks to some big events, including the Rock ‘n’ Roll Marathon, U.S. Open and BIO International Convention.
Complete data for hotel occupancy last month isn’t in, but preliminary weekly reports showed healthy increases, and the outlook for the summer is good, say local tourism officials, despite rising gas prices that have taken a toll on the national economy.
But local restaurants aren’t exactly cooking on all four burners.
“It varies from place to place,” said Steve Zolezzi, executive vice president of the San Diego County Food & Beverage Association, which represents about 3,000 eateries, vendors and distributors.
Based on anecdotal information from the association’s members, however, Zolezzi estimates that traffic at eateries has declined by 10 percent to 15 percent while check totals are off by 20 percent to 25 percent.
Higher fuel prices have raised the prices of food and supplies and restaurateurs are also paying increased surcharges for deliveries, he said.
One strategy that some owners and operators have employed to weather the economic downturn, he said, is to offer “value meals” that include greater portions of vegetables and starches and smaller protein portions.
“I think the real key to this is to re-engineer the menu with the purpose of decreasing the portion of protein but balancing the plate out,” he said. “This way you still have the customer leaving satisfied.
“To raise prices is a mistake. People’s pockets are already empty from the money they’re spending on gasoline. This is definitely a market where lower-priced restaurants have an advantage and those that are closer to where people live.”
Statistics Don’t Tell The Whole Story
Though the county’s unemployment rate stood at 5.5 percent in May, up from 5.1 percent in April, the leisure and hospitality sectors added 4,500 jobs year over year in May, according to the state Employment Development Department. A category noted as “accommodation and food services” represented 76 percent of the gain.
But there was no breakout for restaurant jobs per se, and Zolezzi said he expects layoffs due to economic conditions. How that would affect the overall job count, however, is uncertain.
According to Mike Mitchell, president of the San Diego chapter of the California Restaurant Association and general manager of the local The Oceanaire Seafood Room, “business has been challenging, but San Diego is buffered better than the rest of the country.”
“We don’t have any statistics that I think are a hundred percent accurate,” he said.
Some dining establishments are experiencing a downturn while others are seeing increases in business, he pointed out.
“But even if sales are up, the cost of goods is up and the minimum wage has increased, which decreases the ability to show a profit,” he said.
Zolezzi said he has seen an unusually high number of restaurants go out of business within the last several months. However, that presents opportunities for new operators to enter the market and take advantage of asset sales and lowered leases or reduced-rate property purchases.
“It just depends on whether they have cash and know what they’re doing,” he added.
