F&B Story:
We are almost open
Not again! - Something that all F&B owners said (or thought) with a sigh when the suspension of entertainment activities and tighter restrictions were announced by the Dubai government and the Department of Tourism and Commerce Marketing (DTCM) on account of the increasing number of reported Covid-19 cases and violations of guidelines by hundreds of restaurants and hotels across the city.
A lot of F&B owners have been on edge since December as the numbers slowly started spiking. But they were also in a state of desperation to make up for all the lost revenue from the previous year.
Initial predictions by KPMG revealed that nine out of 10 operators expected sales to decline by more than 20% in 2020, one-third of whom were expecting more than
40% decline in sales. However, as the year progressed that number started looking bleaker. Another report by JLL showed restaurateurs in the Middle East experienced an annual decline in in-store sales of -55% for the month of March and expected it to drop to a -77% drop during the month of April last year.
“The market has seen 40% closures amongst the F&B businesses over the pandemic period which lasted a major part of the year 2020. A lot of the hotels did open their accommodation– but not all the F&B outlets within their premises were opened”, said Naim Maadad, Chief Executive and Founder of Gates Hospitality.
The new directive from the government and the Department of Tourism and Commerce Marketing (DTCM) – although clear – has created some confusion among operators when it was announced. The only solution at this point would be to act responsibly and follow the guidelines put in place so the industry can go back to doing business as usual soon.
It must also be noted that the costs incurred by the outlets have gone up tremendously given the situation. Social distancing, while manageable, has a significant impact on the economics of the business – reduced capacity will lead to reduced transactions and consequent bottom-line impact. Less immediately addressable is reduced consumer demand (both tourist and domestic) due to Covid-19 and the resultant issues around cash flow and costs.
“Our contingency plan would certainly be to strictly abide by the rules and regulations stipulated in the directives and keep an eager watch on any updates coming in future. It is the stage of the pandemic when all should be prepared for a long-term strategy for recovery permanently rather than rush for short-cuts to gain short-term benefits putting the business to risk”, he concluded.
Having said that, it isn’t all doom and gloom for operators within the region. Despite the closure of many restaurants across the city, which
has one of the highest restaurant footprints per million residents, second only to Paris, there have been some commendable strides.
“There have been a lot of new openings in the restaurant sector during this period. As the market opened up since the peak of the pandemic, there were a lot of projects which were already in the initial stages before the pandemic put things out of gear. This was for some by choice and others, because they had no other options”, he said.
F&B operators have been creative and coming out with innovative solutions focusing on experiences. Since the new restrictions were announced in January, some players have even been announcing timely discount drives for those who have been vaccinated. Three restaurants under Gates Hospitality announced that they will offer a 10% discount to customers who have taken the first dose and 20% who have taken both doses of the vaccine.
Sunset Hospitality Group is another big F&B retailer that is stepping into 2021 with optimism and a load of ambitious projects in the pipeline. With two new concepts, one hotel and resort, a clubhouse project, and at least 20 other projects in the works, they’ve got their schedules packed for 2021.
“In January, we have introduced two new concepts – Goldfish Sushi & Yakitori and RAISE Fitness & Wellness. We have also partnered with Nakheel Hospitality & Leisure and will be operating the Jumeirah Islands Clubhouse that will serve the communities of Jumeirah Islands, Jumeirah Park, Jumeirah Village Triangle and Springs. In April, we will be welcoming guests to METT
Hotel & Beach Resort Bodrum.
With over 20 projects in the pipeline, we will continue to pioneer new openings in the market and add new brands to our portfolio”, said Antonio Gonzalez, CEO of Sunset Hospitality Group.
During the pandemic, consumer behavior underwent a near-term dramatic shift and the majority of consumers reduced dining out and started ordering in. Although once the restrictions were eased, there was an appetite for going out, caution still prevails. If there is an option of getting the same (or similar) products and experiences online – or in this case, by ordering in – then consumers would be opting for the safer option and staying indoors. And that is the core and crux of retail’s transformation today.
It is no longer important to get out of the comfort and convenience of one’s home for purchases or transactions as e-commerce facilitates that. People are looking for experiences that make it worth their time, money, and energy.
“Today, people have moved away from collecting “things” in favor of collecting “experiences. People will go out for a truly memorable dining experience where they feel safe and can expect an experience, not just a meal”, he said.
“I see dining destinations where customers can have a high-quality experience with a bit more space to themselves booming. Between the need for open spaces and restrictions on international travel, I think that domestic and drive-to destinations will become much more popular in 2021”, he added.
F&B retailers will now have to be creative and innovative in their offering where they are not just thinking about the food they serve but also the ambiance, facilities, and more importantly a “wow-factor”.
With malls across the region realising that and treating their spaces not just like real estate but as venues open for events and programming, F&B will have a key role to play in that.
“F&B outlets are now being identified by mall developers around the world as the next wave of making shopping centres stronger and a vital component of its sales growth. It has been the case in the UAE where we’ve seen new malls creating spaces for stand-alone restaurants where customers can dine before and after shopping. In some cases, new dining concepts that end up in malls are being visited for their F&B offerings”, he said.
The pandemic changed the way consumers shop, socialize and entertain, according to Gonzalez, but it did not change their view of dining out. Although cautious, consumers would want to go out and dine as it has become a fabric of Dubai's culture.
However, it is only the operators and players that keep up with the trends that will survive in an oversaturated, over-competitive, crisis-stricken market.
“The pandemic delayed some of our projects and we had to stop operations during the lockdown, but we managed to open new outlets like the Black Tap in The Dubai Mall and the Mall of the Emirates, Azure Beach in Lebanon and launched a new dining concept, Cloud Restaurant and Lounge in Dubai Studio City”, he said.
“The crisis has crippled many businesses across the globe, and I believe that it will take some time for the economy to recover but it doesn’t mean we ignore the most important elements of the business – our people and our customers”, he concluded.