Restaurants come back from the brink

Crowded eateries point to a strong rebound in the F&B industry. But are things really that rosy?

BARELY two months ago in August, restaurateur Wang Yanqing was in dire straits. The former Chinese TV newscaster had pumped in almost S$1 million to open Yan's Fine Dining Shanghai Cuisine in Mandarin Gallery in May last year, but she had yet to turn a profit when she and the rest of the F&B industry were swept into the financial tsunami caused by Covid-19.

Hers was a familiar tale of woe - business plunged 50 per cent during Circuit Breaker, inching up to 40 per cent at the start of Phase 2, as people were still wary about dining out. She could only serve 40 per cent of the restaurant's menu, and each day she opened, she was incurring costs she couldn't recoup, even with rental rebates and other support schemes. She was resigned and prepared for the worst - to lose the restaurant and all the work she put into it.

Fast forward to today, and Ms Wang is breathing easier now. The restaurant is busy from mid-week onwards, and packed on weekends, so advance bookings are a must. She's seeing more people now than at the same time last year, and some of her recent promotions have been a hit. She doesn't expect to make a profit this year - "we will still lose a little bit, but we will survive", which is much more than what she expected.

Shape of the recovery

Like the K-shaped recovery that Singapore's economy is said to be in, the rebound in the F&B industry is relatively strong but not across the board. Although things look bright from luxury to mass market outlets, there are still plenty of struggling operators around. Industry observers note a general pattern: luxury dining is the strongest performing sector with more people willing to spend more; eateries with a following are flourishing regardless of whether it serves burgers or a tasting menu by an 'it' chef. Established restaurants in the CBD are seeing more activity, at least in the evenings and on weekends, even if lunch is a struggle. Smaller restaurants or larger eateries which are able to get around social distancing measures also do well. But bigger outlets, especially Chinese restaurants which are geared to serve larger tables, and those which previously depended on large scale corporate and events business, are still on shaky ground.

"Singaporeans are all locked down here because they can't travel," says Desmond Lim, chairman of the Les Amis group, of the reasons for the better than expected post-circuit breaker bounce in business. With its range of mid-market casual to fine dining eateries from Peperoni Pizza to the three Michelin-starred flagship Les Amis, it's one of the stronger players in the industry, holding up well during lockdown with home delivery, tweaking slow performing outlets and opening new concepts.

"When you can't go away on weekends, during school holidays or business, there are few alternative options apart from shopping - and eating!" adds Mr Lim. "So if you're not dependent on tourists, are not located in the CBD which remains a ghost town given that 50 per cent of companies' staff are still working from home, chances are that your business is doing as well as it was pre-Covid."

Return to the CBD

Mr Lim also notes that better known restaurants in the CBD areas such as Amoy/Keong Saik/Stanley Street locations are doing good business for dinner. "It could mean that because of work-from-home (WFH), coming into the city for a meal seems more like an 'outing'. But business for fast-casual lunch concepts will continue to be challenging."

Having a steady base of supporters also helps if you're deep in the financial district like Willin Low's mod-Sin outpost Roketto Izakaya in Frasers Tower. Since Phase 2, "we've been seeing brisk business every night except for Monday," says Chef Low. Lunch is still quiet, but the evening business helps to compensate. An omakase-only menu that chef Low offers three nights a week for just 12 diners is consistently oversubscribed.

He says, "I'm not sure that we will end up with a positive balance sheet by year end as the loss suffered (during and before CB when WFH took effect) was brutal. But, if this trend continues through the festive season, we should be able to cheer by Chinese New Year."

Zafferano in Collyer Quay, meanwhile, looks set to at least break even, "especially if certain restrictions are lifted and we're able to host a New Year's Eve gala dinner", says managing director Vadim Korob. "Thanks to government support, we may probably gain some profit."

Although CBD remains a 'danger zone', Martin Bem of LeVel33 and Erwin's Gastrobar says that "despite being down by around 30 per cent to 35 per cent in sales, we are doing considerably better now than what I would have thought for the end of this year".

Dinners and weekends are very strong, but weak lunch business and the non-existent happy hour crowds set them back. "We also have to do without nearly 50 per cent of our capacity (because of safe distancing), the cap of five people per group, and the 10.30pm cut off for alcohol consumption which, for a microbrewery like LeVel33, means we have to close early." He foresees more restaurant closures in the CBD if WFH remains the default operation for companies. "If not for experiential rooftop dining venues or similar concepts, who goes to the CBD for a casual dinner or lunch?"

Success stories

Having a strong brand is key to recovery, believes Loh Lik Peng, director of Unlisted Collection, which includes the likes of Zén, Cloudstreet, Nouri and Salted & Hung. "Recovery appears to favour restaurants with a distinctive positioning, and higher end concepts. Especially with fine dining Japanese restaurants which require you to book months ahead. I must confess it has caught me by surprise because I thought it would be a much longer recovery, but at least for now, business has bounced back strongly for most of our restaurants."

Most of Unlisted's restaurants are in the CBD, so "lunch remains tricky", but "dinner has picked up very strongly in the Amoy/Telok Ayer enclave," adds Mr Loh. "We have Jing at One Fullerton, which required very attractive promotions to drive traffic. But Majestic is still strong despite being in Marina One, which is almost completely deserted. This tells me loyalty and quality matters more now than ever."

Meanwhile, wealthy Singaporeans who would otherwise be flying first class to Japan are instead dropping thousands at top tier restaurants such as the brand new Sushi Kou. With its April opening derailed by CB, it opened in Phase 2 with some apprehension over diners' response to its S$350 and up omakase menus. Now, with seating limited to six seats per service, "we are fully booked for both lunch and dinner until the end of the year", says its spokesman. "Customers have to wait until after mid-February 2021 for an available session, and we recommend that you book at least three to four months in advance."

On the other end of the spectrum is Hong Kong import Joy Luck Teahouse, which played on Singaporeans' travel withdrawal symptoms with its bolo buns and milk tea - and attracted opening queues of three hours. "The response was fantastic and exceeded our expectations," says a spokesman. Affordability and a brand name have since helped them sell more than 2,000 egg tarts, 1,000 pineapple buns and 300 cups of milk tea a day.

While there are more restaurants reporting a profitable year, few will say so publicly. But they would mirror the experience of the Cicheti group, whose partner Ronald Kamiyama is optimistic that they will be comfortably in the black after suffering a "more than 50 per cent" loss during Circuit Breaker. Now, "some outlets fill up one to four weeks in advance, although we do get some no-shows. But overall we are consistently full every day of the week."

Hotel business

There may be no tourists in sight and their guests are more likely to be serving out their stay at home notices, but there's growing activity in hotel's F&B operations, albeit not at normal levels because of reduced capacity. The Ritz-Carlton, Millenia Singapore's Mark Aldridge says, "For Colony and Summer Pavilion, Fridays and the weekends are sold out a minimum of three weeks in advance. They've also been partially or fully booked for smaller wedding receptions since Phase 2."

Marcus Hanna, general manager at Fairmont Singapore & Swissôtel The Stamford, concurs, saying that there's been a "tremendous" uptick in interest in the hotels' eateries, particularly Skai and Jaan by Kirk Westaway. The Michelin-starred Jaan is a particularly hot ticket, along with high teas at Antidote and Skai.

Meanwhile, afternoon teas, Sunday brunch and weekend dim sum are drawing diners to the Fullerton hotels, notes Cavaliere Giovanni Viterale, general manager of The Fullerton Hotels and Resorts. But all three agree that reduced capacity is a major issue, and the absence of office workers. "Business hasn't returned to pre-Covid levels because there's a reduction in the number of guests we can accommodate," says Mr Viterale.

Not there yet

All restaurateurs stress that recovery would not have been possible without the government's intervention with various support schemes.

"Rental rebates, wage support, foreign worker levy rebates and other measures injected much needed cash flow to keep the industry afloat," says Les Amis's Mr Lim. "Without the strong support, the majority of restaurants would have closed months ago," concurs Mr Bem. "With zero revenue and full overheads, no business can survive for long."

"Most of our restaurants will end the year below our projected revenue, although our bakery and cafe concepts stand a better chance of returning to pre-Covid levels," says Cynthia Chua of the Spa Esprit Group which owns Tiong Bahru Bakery, Forty Hands, Open Farm Community and The Butcher's Wife, among others. While the quick rebound came about "when the WFH model led to higher patronage in neighbourhood areas", it's tough to build up from the 90 per cent drop in business the eateries suffered during CB. The bakery and cafes, on the other hand, suffered a minimal drop of 20 per cent, which accounts for their faster recovery.

With three outlets of zichar-centric eatery New Ubin Seafood, co-founder SM Pang saw business dive by 60 per cent to 90 per cent during CB, and easing slightly to 30 per cent and 50 per cent when dining in was allowed. "Sales haven't gone back to pre-Covid levels because of the cut in corporate diners and tourists, and safe distancing measures that don't sit well in a business model that depends on communal dining," he says.

Chinese restaurants also have it tough because of the cap of five people per table, says Andrew Tjioe of the Tung Lok Group. "People are not really spending more, they're still looking for bargains which is why you see so many promotional offers out there. Business is still difficult otherwise you won't see so many discounts."

Mr Tjioe is still happy with his group's performance, which he says is 70 per cent of pre-Covid levels, although Tung Lok Seafood and Tong Le Private Dining have already hit or exceeded them. But his casual restaurants are still struggling with a reduced capacity, which he feels will be an issue since "your rent is the same whether the number of seats is reduced or not". Footfall is also another problem especially in suburban malls where weekend crowds cause them to limit the number of people who can go in. His restaurants are affected when customers with reservations aren't even allowed to get into the mall because of the crowd limit.

What's next?

There are still challenges ahead, chief of which are manpower and no-shows, says Beppe De Vito of the il Lido group. While his Michelin-starred Braci is the top performer with business ahead of pre-Covid levels, it's tougher for his bigger concepts like Art and Amo, which don't have the big groups, functions or corporate business that they used to. "Just the other day at Amo, we had 20 no-shows out of 120 seats which is about 15 to 20 per cent," he says, adding that he's also having trouble hiring Singaporeans, estimating that 150,000 foreign F&B workers have since left Singapore. With business returning but not enough people who want to work in the industry, the tussle for workers continues.

Also, "the true economic cost has yet to show and post-CNY will be a tricky time," feels Unlisted's Mr Loh. "If job losses continue and we don't resume sustainable business and travel, it will eat further into business confidence, which will mean more caution with spending. There is a huge pent up demand but it can't continue indefinitely."

Phase 3 and a potential loosening of safe distancing restrictions are on the cards but, in the meantime, Mr Loh feels it's imperative to capture the local market "because visitors are not returning for a long time". One way is to offer great value for money. "You've seen restaurants like Peach Garden, Jumbo or Palm Beach - and even Jing and Majestic - doing very generous promotions. I see more of such deals coming and this is the way to survive."

Still, even with potential dark clouds in the horizon, "Singapore is an exception," he says. "The hospitality trade in other parts of the world is in a black hole. In Singapore, we may have many closures but the majority of the quality operators are in a good position to survive."

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