Restaurants amidst the Economic Crisis

Since everything in the last few weeks has been tied to the “World Economic Crisis” or “Financial Meltdown” or “Global Slowdown”, I too have decided to discuss this subject in relation to Dubai’s hospitality industry.

As oil wells run dry, Dubai’s CEO, H.H. Sheikh Mohammed Bin Rashid Al Maktoum, has decided that Dubai’s income has to come from various other sources; hospitality & tourism being the major sources of future revenues.

The Palm Islands, The World Islands, The Burj Dubai, The Burj Al Arab, DubaiLand, Dubai Mall are some of the major projects that are a result of the CEO’s directive to increase future income from tourism. As you can expect, hundreds of hotels have been and will be constructed to accommodate the millions of tourists expected every year. “Build and they will come” being the bold philosophy of the leader in command.

With such gigantic projects and limitless future plans, even the small cafeteria owner down the road has started to think big. He knows that if Dubai’s ruler’s plans are to succeed, then his field of business will grow tremendously. Thus he ponders a location for his next cafeteria/ restaurant. Similarly, entrepreneurs all around the world want a piece of Dubai’s boom. As a result, Dubai now has over 1200 restaurants all over the city spoiling the foodies for choice. Many of these restaurants have opened in the last few years and are located in Dubai’s prestigious new areas, some being part of the best hotels in the world.

In fact, in a recent conversation with a newbie in Dubai, she explained that her favorite way of acquainting herself with the different districts of Dubai is by visiting popular restaurants in these areas (by browsing by location on www.MenuPages.ae ). In fact, if you are keen to experience any new real estate developments, whether it be a new hotel or a new mall (or even a new island J), the best way to do so is to dine there. That is of course, if you manage to get a table at your restaurant of choice. Whether it is a weekday or the weekend, restaurants have been busy all year around as Dubai’s residents have, in simple terms, become wealthier. Considering the basics of economics, as investments poured in to Dubai, jobs were created, demand for products and services increased, businesses were booming, thus increasing each earning individual’s spending power. Shopping and dining were where the residents splurged their extra income. In fact, shopping and dining are sometimes termed the two main “national pastimes”. Tourists visiting Dubai also splurge on shopping and dining.

So now what? Meltdown, crisis, collapse – how’s this going to affect restaurant business? Being the part time economist that I (and most people today are), I will offer my theory with a disclaimer that I could be wrong.

My theory:
The simple answer to my question would be that restaurant revenues will definitely be affected. However, you would probably shoot me if that was the objective of my entire article. So, I have a twist to my insight.

The culture of eating out cannot be washed away so quickly. It may reduce a little but I believe there will be a slight downgrade in the choice of restaurant rather than refraining from eating out altogether. Location will be another key element to ride out the recession. In my opinion, there may just be a certain segment of restaurants that may actually benefit during the current crisis. A reasonably priced restaurant close to an above average neighborhood might just see a surge in business, particularly because “value for money” is now the most important attribute. A reputation for good food at a good value may actually increase its popularity overall because all of a sudden the royal service requirements, the right lighting or the exquisite interiors for the jobless real estate broker aren’t important anymore. It’s suddenly all about VFM. This might just be the chance for such restaurants to propel themselves into lifelong popularity using the recession as a spring board for future success. If they build a name now, they would have a chance to build a strong brand for the future. Ever thought about how Al Mallah might have become as popular as it is today? You’ve got the spendy population in Jumeirah looking for some reasonably priced food in proximity of their residence. Voila!

So for all the entrepreneurs itching to exploit the low costs during a recession, my recipe for success is a slice of vision, a pinch of effort combined with my VFM theory mixed with proximity to an upper class location. If it doesn’t work, just look for the disclaimer in my article :)