SPECIAL REPORT: F&B trends & challenges

Following the success of the new format introduced in 2016 for the Caterer Middle East: Food & Business Conference, Caterer Middle East will once again host an all-encompassing conference, serving as a one-stop source for the latest trends, innovations and analysis needed to succeed in today’s market.

The sixth annual Caterer Middle East: Food & Business Conference will combine all areas across the F&B arena and offer strategic debate. As is customary ahead of the conference, Caterer assembled a panel of F&B experts from various backgrounds to ascertain what hot topics should be on this year’s agenda.

VAT and recruitment
One of the biggest topics of conversation among the panelists was challenges facing the industry in 2017 — with rising costs and the introduction of VAT considered by many to be a key concern.

Emma Banks, general manager, Jumeirah Restaurant Group, said that operators are already facing high prices when buying alcohol, so the addition of VAT is causing concern.

“December 31, 2017, is going to be a nightmare for operators unless they’re organised in terms of VAT — what you’re paying VAT on and what you’re not, and what you’re passing onto the consumer and what you’re not. Look at the big hotels; they’re doing 80,000 transactions on on a busy day so, with the switch over to VAT, big hotels won’t be able to allow it to slip because all of a sudden they’d have a massive backlog that would be impossible to reconcile. The challenge this year is the price of a alcohol is going up and the impact of further taxation on that,” she said.

Alex Economides, managing director, M Management Company, added: “With VAT, it’s not clear what we are going to be charged and I don’t think we have received any guidelines. It’s another issue to face in addition to all the other challenges.”

In terms of what other challenges are, Banks said recruitment remains an issue, specifically finding “human capital with the image, charisma, table presence, confidence and guest interaction skills” required.

She added: “And they need the scope to take on and understand all these cuisines, and the technical specifications behind the cuisines. I think the industry is going to demand that more.”

Again, Alex Economides agreed, and felt that everyone in the industry is facing is “the human resource factor”, not least because of “the vast number of retail openings”.

He said: “There is a bigger demand for good human resources and that’s draining the market. Retail is growing in such a big way here; we all know about the different developments coming up. All these venues that are opening and you have staff who are moving around from one place to another.”

Colin Clague, executive chef, Rüya, remarked: “That obviously brings it down to footfall then — we’re all vying for the same business. Brexit isn’t helping; the British pound is so low that you’re not getting the British coming over like we used to.”

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Henk Bruggeman, executive director, HJA Hospitality, made the point that the inevitable result of this situation is not discussed. He pointed out: “We’re always talking about new restaurants, especially in Dubai, and so many more to come. Nobody is talking about the restaurants that are closing — we all know how many are closing, or not making any money. It’s a big challenge for our industry, given there are another 5,000 restaurants to come by 2020.”

Sanjay Murthy, shareholder, Figjam, stated: “There’s only ‘X’ amount of people and footfall isn’t growing in line with the number of outlets.”

Cost and competition
The panel agreed that consumers are keeping an eye on what they spend on luxuries in today’s climate, and are less willing to make a huge effort just to go for dinner or drinks.

As Fay Economides, executive managing director, M Management Company, put it: “Customers are more cost-conscious and people are leading busy lives — so they don’t want to going out of their way to drive several kilometres to a destination and pay high prices for an experience.”

Stefan Breg, director of F&B Europe, Africa, Middle East, Starwood Hotels & Resorts, remarked: “I think if you ask each of us now, ‘what would you invest in tomorrow — Peruvian, sushi, Korean?’ No — value.’”

The panel noted that value goes hand in hand with the increasing competition in the regional F&B arena.

While Alex Economides made the point that existing businesses welcome the growth, he commented: “Overwhelming growth is concerning investors and making them more thoughtful and more reserved with expansion in this market. If growth was steadier, there would be more appetite from investors for expansion. The increase of supply dampens hotel rates and footfall, and even non-F&B retail is affected, especially higher price retail, for the same reasons.”

Banks highlighted a need for the hospitality industry to say “let’s get real”.

She explained: “We have had 10 years of over 90% occupancy in hotels and we think that’s the norm. We all think we’re going to have a crash because the forecast for the next five years, or up to Expo 2020, is 75-80%. So, occupancy rates and standard room rates that the rest of the world is quite happy with but here, it’s seen as [signs of] a recession.

"All of a sudden, we’re realising that consumers can’t afford to spend 200 euros (US$215) a head on a meal. Again — get real because this is just how the rest of the world operates. This has just become the norm — whether you’re an independent owner and your business model is built on that norm or whether you’re an operator for a large business where that expectation every year is ‘you will maintain margins’ despite costs increasing, the reality is that at some point it is not working.

“It is almost like that reality creeping in is like coming into a perfect storm because we have had Brexit and we have problems with geo-politics in this part of the world, and the clever operators are realising that not everybody who visits the region is a Russian oligarch. There are a lot of normal people coming who can’t afford £10 ($13) a pint and can’t afford to stay in a five-star hotel.”

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Murthy agreed, and added: “That perfect storm you’re talking about — that I agree with by the way — won’t come from the operators or the government; it has to come from the consumer. Consumer have to start voting with their feet in terms of just not paying [high prices].”

Drawing on his own experiences, Clague shared: ”We made a choice when we opened Rüya not to offer any truffle, scallops or Wagyu for the first three months. It’s only when we stabilised and got the numbers in, and people were asking for it, we have added some. But it’s still incredibly affordable — our menu isn’t expensive at all. And that’s what people want.”

Alex Economides pointed out that there is pressure to have a more solid concept as it is “not as easy to succeed as it once was” in the F&B industry, which isn’t helped by “the cost of living going up for customers”.

Continuing, he touched on the subject of rent, and said: “I hope that with the influx of so much retail in the market that developers will think about dropping their rates.”

Bruggeman said he did not see that happening as landlords have been used to “getting high rents for any space they lease out for the past 10 years”.

Neighbourhoods
The panel was in agreement that certain parts of the region, such as Dubai, are evolving to have various ‘silos’ that act as destinations in terms of attracting people.

“I think the neighbourhoods areas are having an impact, especially if you look at hotels, which are still building 400 or 500 rooms, and still having eight or more restaurants. The perception is that hotels still need to have that many restaurants because of alcohol licensing [rules]. But if you think about places like the Palm, there are six restaurants next to each other that all have alcohol licences but no hotels in that neighbourhood, so why would they go anywhere else when they can go easily there? Those neighbourhood areas are getting more important and hotels need to re-think if they actually need to have 10 restaurants.”

Health is here to stay
As Caterer’s advisory panel stated last year, health-consciousness is growing among consumers around the world.

Banks stated: “Health is a big trend; I didn’t think it would be hitting the region like it is. The challenge facing operators will be is when we have to start doing nutritional analysis for menus. That is coming and unless you are supported by chefs who are incredibly savvy or you are supported by nutritionists, it will be difficult.”

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Breg made the point that healthy eating “affects your margins”, and added: “We make money from booze and steak, so if people are pushed towards healthier items, and people eat less, that erodes our income”.

Offering a beverage perspective, Brandon Grusd, operations manager, Fling Bar Services, commented: “We are navigating the health explosion and we are seeing customers be very conscious of that. In terms of the cost of being healthy and the carbon footprint of moving ingredients from here to here, it is a big problem. We’re finding that we are moving towards shrubs, vinegars, and acids instead of lime juice, and we’re seeing that we can save on costs.

"With value, people are more aware — they want to know that they are getting the better products for that price. They may still order an expensive drink because we are in an environment where people are happy to pay for it, but there has to be value for it and if that’s not coming through the drink, it needs to come through the experience.”

Changing preferences
The group reflected on the evolution of how people socialise, with Fay Economides saying: ”Restaurants and nightlife [venues] are morphing, so people want to have food and have a night out. It’s more comfortable. In Greece, this has been the preferred way of going out for the last 10 years. It’s about convenience.”

Alex Economides said: “If you look at the nightclub industry, it’s not really on an upward trend; I feel that there’s decreasing interest in nightclubs or pure beverage venues. And it’s not just a local trend — I was in Mykonos last summer and saw the difference there. The nightlife has decreased very visibly.” Putting a label on the trend, Breg added:

“There’s a name for it — vibe. You’ve got a vibe restaurant here [referring to Rüya]. Vibe is global.”

Entrepreneurship
The conversation covered start-ups and “the need for more female entrepreneurs and restaurateurs,” according to Breg.

In response, Banks remarked: “If you’re an entrepreneur, owner-operator or work in a big hospitality business, it’s long hours and very demanding, so to get that balance between family life, if you want it, a personal life and a career, means this is not the easiest industry to achieve all that in.”

The panel agreed that recent changes in the UAE are encouraging for the industry. “The change in bankruptcy laws about a year ago means that you can be more adventurous,” Breg stated. “That’s how you get innovation and young entrepreneurs to take a risk because they are not as unprotected as they once would have been,” Alex Economides added.

The Caterer Middle East: Food & Business Conference 2017 will take place on March 7 at Grosvenor House Dubai. More than 170 delegates have confirmed their attendance so far, coming together to discuss the opportunities for growth and debate key challenges facing the regional industry.

Some seats are still available and anyone interested in attending should email louby.maktari@itp.com.

For sponsorship opportunities please email stephen.price@itp.com