Hybridization Hurts Big City Restaurants, Bars: Study

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  • Employees spend three days a week on food and drink back at the office.
  • But it’s not enough for big city bars and restaurants that have been forced to cut hours, rethink their business models and even close.
  • Hybrid jobs are costing cities and their businesses billions of dollars a year, according to a new study.

Passengers November 17, 2022 Arrive at Manhattan Oculus Station and Mall in New York City.

Spencer Platt | Getty Images

Many downtown restaurants and hotels are seeing sales return to pre-pandemic levels — but only on Tuesdays, Wednesdays and Thursdays.

In cities like New York, Los Angeles and Atlanta, the three-day in-person work week has challenged hospitality businesses. With fewer employees in the office on Mondays and Fridays — their strongest sales days for some businesses — many businesses have been forced to change work schedules or launch initiatives to attract customers at the beginning and end of the week.

Amalie, a restaurant on the edge of midtown Manhattan, is pulling in about a quarter of its midweek business on Mondays and Fridays, said managing partner James Mallios.

Hotels are seeing slow start and end of the week for business travelers. However, according to Pete Hillan, a partner at Singer Associates, a public relations firm with clients in the hospitality industry, hotels in California are seeing more opportunities for combined business and leisure travel.

WFH Research, which conducts surveys and research projects on work arrangements and attitudes, released findings last week that show telecommuting is costing cities billions a year. According to data collected from June to November, the per capita cost reduction in New York City was $4,661, in Los Angeles it was $4,200, and in Washington, DC it was $4,051. by one person.

In-person workdays are down 37 percent in Washington, compared to pre-pandemic levels, followed by Atlanta at 34.9 percent and Phoenix at 34.1 percent. The information, financial and professional and business services sectors lead to working from home.

According to Jose Maria Barreiro, co-founder of WFH Research, 28.2% of workers are hybrid – some days in the office and some days working remotely – compared to 12.7% who are completely remote. Although 59.1% of workers work full-time onsite, hospitality businesses that cater to office workers are still struggling to make ends meet, Barrero said. WFH research found that only 5% of paid work hours were remote from pre-pandemic.

Andrew Riggi, executive director of the New York City Hospitality Alliance, said people are more likely to go out for breakfast or lunch or happy hour after work when they’re in business districts, compared to spending money at restaurants and bars in their own neighborhoods when they work remotely.

Although the need for corporate dining and nutrition has not gone away in many cases.

“We’ve found that there’s a lot of demand from the business community, both from a lunch standpoint but also a really fun after-hours, many degrees more than pre-pandemic,” said Steve Simon, a partner at Atlanta-based Fifth Team. Restaurants.

This month, Manhattan’s only Ruth’s Chris Steakhouse announced it would close in April, and several downtown Manhattan restaurants, including the Thai-inspired Random Access, have closed.

“Even if you’re busy on Wednesday and Thursday, Monday and Friday can be very slow,” Riggi said. “If someone walks by a restaurant at lunch or dinner time on a Thursday, they might say, ‘Wow, that restaurant is packed, it’s really busy,’ but it’s not like that every day.”

A study by the Bureau of Labor Statistics found that increased telecommuting would lead to fewer trips to city centers. A 10% decline in foot traffic in a census tract results in a 1.7% decline in food service and lodging employment, as well as a 1.6% decline in wholesale and retail employment.

Areas that saw positive growth in traffic had an increase in employment in the same sectors.

“As census tracts with particularly high increases in foot traffic are suburban, away from dense urban areas, employment appears to be doing better in these additional restaurants, bars and retail businesses. Suburban, less dense census tracts,” in August. Michael Dalton, a research economist at the bureau who led the study published this month, said.

WFH Research’s Barrero said high-cost spending has moved to areas outside of downtowns, hurting urban centers.

“To the extent that this moves from New York City to counties in the metro area, that means a loss of sales tax for the city,” he said. “That goes along with the loss of transit rider income and the like.”

According to Barrero, over the past six months, data shows that less than 30% of stable total days worked at home for the entire economy. While telecommuting is forecast to not fall below 25% in the near term, telecommuting was down to 27% from 29% in January.

“The bad news for these restaurant owners and others is that I don’t think we’re going back to normal, and we’re probably very close to where the new normal will be,” Barreiro said.

Riggi, of the New York City Hospitality Alliance, says full-service restaurants can have more consistent business over the long term than fast-casual, limited-service restaurants because of tourists and people who go to shows. People. But higher-cost full-service restaurants will continue to face labor shortages, he said.

“If employees are finding out why I’m at this restaurant when it’s not busy most nights and I’m not making a lot of money, they might go to a restaurant in another neighborhood at the beginning of the week,” he said. .

Emily Williams Knight, CEO of the Texas Restaurant Association, said restaurants in downtown Texas are seeing two types of workforce recovery. With Houston reporting an office vacancy rate of 60% with a 30% vacancy rate, Austin is leading the nation physically.

On a recent trip to downtown Houston, Williams-Knight said, “I’ve never seen streets as empty as I’ve seen them in the middle of the week, in the middle of the day.” She added that the return of conventions and business trips in particular has been slow.

Houston and Dallas, with an average commute time of about half an hour, have experienced fewer weekday lunch and happy hour crowds in the past few months. She said four decades of high inflation and labor costs that have risen more than 20% in the past two years have forced some restaurants to close or relocate.

“When you had five, six, seven restaurants within walking distance of each other and you could choose, you’d go into town and try to eat at your favorite restaurant,” Williams-Knight said. “Now that lack of choice is keeping people at home, and it’s not being dovetailed for that cost.”

Nick Livanos, owner of the Livanos Restaurant Group, has two restaurants in Manhattan and two in Westchester. While Westchester’s restaurants have more consistent lunch and dinner service, Oceana in Midtown is “very busy” on Tuesdays, Wednesdays and Thursdays, but less so on Mondays and Fridays.

Molyvos, the group’s upscale Greek restaurant, left downtown in November and moved to a smaller location. The new location has attracted longtime residents who are more loyal to the Westchester crowd, he said.

Riggi said downtowns should focus on attracting not only office workers, but also tourists and residents of nearby neighborhoods, as well as improving hours, cutting costs and building relationships with local businesses as remote work continues.

And while there have been discussions about converting many low-rise office buildings into residential units, restaurants may not benefit from that for years.

A few independent single restaurants in Houston and Dallas are moving to the suburbs.

Tracy Vaught, who owns five restaurants in the Houston area, said business from downtown office workers only takes place during the week. Four of its restaurants are now closed on Mondays and another is closed for lunch on Tuesdays and Wednesdays. As spring approaches, she expects business to pick up everywhere.

“Suburban restaurants are suffering from the same things that downtown or office park-type restaurants are suffering from, and it’s not all back to work,” Voth said.

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