'Tisn't the Season

Bars, restaurants take divergent paths through dismal fall

Steve Kelly describes 2001 as a series of irresistible shocks smashing against a once-solid food-service industry. "We went like gangbusters last year," recalls Salve's executive chef. "Then this year the convention-center remodeling drove convention business away, then September 11, and then down, down, down."

It's no wonder Kelly feels as though he experienced a yearlong Linda Lovelace film festival. First Dallas decided to remodel the convention center, then the first faint images of the recession appeared. Through the summer months the economy slumped for the first time in eight years. Then September 11 ushered in an economic disaster. In October, American companies slashed 468,000 jobs. Another 331,000 people lost work in November. As fear of financial tumult roiled up, Remy Cointreau issued a profit warning. Shortly after that, Robert Mondavi dropped its sales projections by 20 percent.

One can forgive new bar owner Mike DeMarco, who started Mike's Treehouse earlier this year, for shaking his head in dismay. "We picked a good year to open, didn't we?"

Subtle sarcasm doesn't obscure a trying year in the restaurant industry. "In September, October and November, food service was down 20 percent from last year," says James Slaughter, owner of the Firehouse. Business at Salve fell by 30 percent compared with last year. Other restaurants report similar results, especially in the weeks after the terrorist attacks. "Immediately after the 11th we had a lot of restaurant cancellations," explains Alex Kreth, manager at Cool River in Las Colinas. "We lost a lot." Mondo's, near the Galleria, also suffered a slump in traffic, but for more immediate reasons than events in New York and Washington. "There were always bomb scares in the Galleria area, and we have a post office across the street," says Jay Sanchez, Mondo's night manager. "It didn't help to have fire trucks in our parking lot. On a daily basis I was getting cancellations."

According to the Census Bureau, national restaurant sales fell 2.4 percent in September. And fall proved equally bleak, with restaurants reporting a sales shortfall of $1.3 billion nationally. The damage from September 11 roared through the industry. "Flat growth would be the best case for a lot of them," confirms Tracey Evers of the Greater Dallas Restaurant Association.

To make matters worse, the dramatic drop-off in travel as a result of the terror war struck hard at some area restaurants. Hotel concierges drive a significant amount of business to area restaurants during good times. This fall, however, concierges reported hotels at 45 to 55 percent capacity at best. "Major corporations were immobilized immediately because of the slump in airline traffic," explains Joanne Bondy, chef-partner of Ciudad. "With no travel, what business we used to get from concierges decreased."

Some key indicators suggest that people turned to comfort food in the aftermath of the attack. Sales of Oreos rose 18 percent over last year. Frozen pizza sales jumped 8 percent. And Kraft macaroni and cheese picked up 7 percent. Some experts predict a resulting boom in the dental, dermatology and weight-loss industries within the next few years, but that's an aside. The consumer turn toward "comfort foods" affected some restaurants more than others. "Middle- to low-end restaurants aren't hurt as much," Slaughter notes. "Casual-fine to fine are hurt the most." Even worse, many companies have scaled back their once-lavish Christmas parties.

"This has been the slowest Christmas season I've ever been through," Kelly says.

Oddly enough, The Dallas Morning News suggested just the opposite in a story recently, reporting that "diners are packing Dallas area restaurants, which normally see a slight slowdown in December." And indeed, it's a confusing time. The National Restaurant Association reports that the food-service industry outperformed the overall economy in 2001, showing a sales growth of 4.5 percent for the year. Restaurant employment, too, steamed ahead of the general economy, adding jobs at a 1.3 percent clip, compared with a 0.5 percent overall job growth rate. "People are still going out," explains Phil Natale, bartender at Steel, "but they're not as adventurous. They're going to places they know." To further compound the confusion, bar traffic actually picked up as restaurant sales drifted. ACNielsen reported in a retail study that wine and spirits sales numbers have been up every week, compared with 2000, since September 11.

"The bar business is up from last year," Sanchez says. "I don't normally see patrons until 5:30, but we're pretty good right now [4:30]. We're usually at a 60-40 split between the restaurant and the bar. Now it's almost a flip-flop." Over at Cool River, Kreth confirms the trend. "Lunch is down a bit, dinner down a bit, but the bar is great."

Many area restaurants report an increase in wine and liquor sales, even as food service struggled. Some sold wines that sat untouched in their cellars for years. "People are drinking more, ordering more expensive bottles of wine," Bondy says. "People are treating themselves."

"People use alcohol as entertainment," Slaughter muses. "They get bored at home and want to be out. They cut back on expensive food; a $20 piece of fish isn't feasible anymore, but things aren't so bad that they don't have some money to spend."

Perhaps that explains the disconnect between current drinking patterns and social science. Economists Christopher Ruhm and William Black recently released a study suggesting that alcohol consumption drops during recessions. A one percentage point rise in unemployment claims, for example, generates a 3 percent drop in alcohol sales. But this is not a normal year. "After September 11, people are drinking a lot more liquor," claims Ryan Tolentino, manager at the Green Room. "Our beer sales went down compared to liquor. And liquor sales are still higher compared to last year."

Restaurants and bars are cognizant of this year's turbulence and its effect on consumers. "People are looking to stretch their dollar more--looking for specials, bargain-hunting a bit," DeMarco states. "We're offering $2 Tuesdays (anything is $2), free games, free pool, free jukebox and $1 drafts on Wednesdays, buy one get one free food deals, stuff like that." Other establishments also examined cost-cutting as a way to invigorate business after September 11. "Early in October we did a full cost analysis," says Slaughter at the Firehouse. "We cut brunch menu prices and redid the wine menu, cutting prices by $5 to $12. We have an $18 bottle of wine. I've never had an $18 bottle on the menu before."

"I can't affect the economy," Kelly adds. "The only thing I can affect is the quality of food and service. We try to give guests a little bit more at this time."

Local restaurateurs prefer not to wallow in the recent past. The new year, and the promise of a recovery, looms ahead as long as they can tread water. "People are still dining out," Bondy points out. "But fine dining is taking a hit. Monica's is better than ever because of the drinking crowd. [At Ciudad] we've been hanging in there."

At least publicly, then, most people in the industry express cautious optimism. Some like Steve Kelly, however, prefer full-blown optimism.

"We'll all bounce back."

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