The expense account economy
Free-spending politicians and executives help keep Canada’s restaurants afloat
For 83 years, Café Henry Burger was one of the unofficial centres of Ottawa power. The high-end eatery hosted everyone from Wayne Gretzky to air ace Billy Bishop, not to mention every prime minister since Mackenzie King.
Treaties and laws that affect Canadians to this day were hammered out on the restaurant’s white tablecloths, and its staff knew how to exercise the maximum discretion.
“My staff were the best trained in the region, and they were taught to read the client very carefully and react accordingly,” said former owner Robert Bourassa, now a restaurant consultant.
But then came the Gomery commission, with its images of sponsorship scandal conspirators huddled around Café Henry Burger tables.
“We became a bit of a pariah — none of the politicians or high government officials wanted to be seen near the place,” said Bourassa, who was forced to close in 2006.
In a Canada without government or corporate expense accounts, whole swaths of restaurants, car services and luxury hotels would cease to exist. The hospitality sector depends heavily on customers who are not picking up their own tab, and without them, many of the country’s most storied institutions would be cast onto the rocks: Hy’s steak houses and the chateau-like Fairmont hotels, among others.
It’s why, amid revelations that as many as a quarter of Canadian senators are abusing their spending privileges, another reckoning may be at hand for Canada’s vast “expense account economy.”
“Customers certainly act differently when they are spending their employer’s money rather than their own,” said David Yermack, a business professor at New York University who specializes in executive compensation.
As expense account travellers seek out nicer accommodation and finer dining, restaurants, hotels and even entire neighbourhoods are spurred to inflate their prices, he said.
Restaurants don’t keep statistics on which customers are using corporate credit cards, but sources contacted by the National Post guessed that at least a third of Canadian finedining was on expenses.
Without expense account spending, “I would estimate that 30 to 40 per cent of top-rated hotels and restaurants would either fail or have to drastically change their tactics,” said Bourassa.
Indeed, many chains admit expense accounts are their bread and butter.
“We believe the majority of our weekday revenues are derived from business customers using expense accounts,” wrote Del Frisco’s Restaurant Group, a Texas-based steak house conglomerate, in its 2012 annual report.
Morton’s, a U.S. steak house chain with a Canadian location in Toronto, reported much the same in 2010.
A “vast majority” of its weekday revenues — and a “substantial portion” of its weekend revenues — were due to “business people using expense accounts,” the company noted in its 2010 annual report.
Similarly, hotel chains like Marriott, Sheraton and Hyatt pull in huge swaths of their revenue from expense accounts.
Certify, a software program that tracks expense spending for companies, reports Marriotts are the most expensed hotels in their networks, with the average stay costing $239.02 US.
Travel books and online restaurant guides are replete with specialized suggestions for the “expense account” diner.
“Excellent, but use your expense account,” reads a recent online review for The Chase, a rooftop small-plates establishment in Toronto.
Across town, a review for Etobicoke’s Via Allegro Ristorante suggested “for those not with a hefty expense account, be prepared to pay handsomely for the fine attributes.”
And when expense accounts stand on the brink of being curbed, it quickly makes the front page of restaurant trade publications. In 2008, as the Great Recession took hold, the U. S.- based Nation’s Restaurant News warned subscribers with cutbacks on the horizon, the “days of unlimited expense account dining have gone the way of the three-martini lunch.”
Most brazenly, in 2009 New York restaurant Maloney and Porcelli tried to combat the downturn by launchi ng ExpenseaSteak.com. Diners would enter their exact tab, and the website would spit out a series of fake receipts for taxis, office supplies and cheap lunches they could submit to accounting.
“Now you can eat at Maloney and Porcelli as often as you like and never worry about your expense report raising any eyebrows,” it reads.
In Ottawa, clients holding government of Canada credit cards were almost never as lucrative as those with corporate credit cards, said Adel Ayad, the former owner of Claire de Lune, a By Ward Market hot spot that closed around the same time as Café Henry Burger.
Even among the ranks of Bay Street bankers or Calgary oil executives and the other golden geese of the expense account crowd, restaurateurs complain they will never recapture the free-spending, $1,000-a-cheque world of a generation past.
The first blow came in the late 1980s, when business meals and expenditures could no longer be written off at their full value (they are now taxed at 50 per cent. Since then, there has been a general belt-tightening over dining out.
Yesterday’s IBM executive may have frequented steak houses and martini bars, but today’s tech employees are content with a brown-bagged lunch from a food truck.
“Almost nobody spends $100 to $200 on a bottle of wine anymore,” said Bud Kanke, the former owner of Joe Fortes Seafood & Chop House, Vancouver’s highest-grossing restaurant.
“If a vice-president of sales rolls in with a dinner for two and it’s $400, he’s going to get a slap in the face.”