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Upscale Eateries Feel Pinch Of Slow Economy

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By MICHAEL SASSO

The Tampa Tribune

Published: July 25, 2008

TAMPA - Eighty-nine bucks is hardly a pittance to pay for a meal for two, but in the world of prime steakhouses and market-price seafood restaurants, it may qualify as a "value meal."

Faced with a tough economy, some fine-dining establishments around the Bay area have begun offering discounted fare, either through summerlong specials or dining clubs with price breaks.

Fleming's Prime Steakhouse and Wine Bar has a $99 filet-and-lobster combo for two, while Brazilian steakhouse Boizao has created an E-Club offering Internet specials. Ruth's Chris steakhouse has one of the cheapest meals of the bunch, offering a three-course meal for two for $89.

The deal is intended to bring in new customers in these "challenging times," a Ruth's Chris executive told investors July 8. Fleming's representatives did not return calls this week about whether its value deal is tied to the economy.

However, industry analysts say that behind the deals is a steep drop-off in customers at high-end restaurants, especially among "aspirational" customers who spend $100 on dinner only on special occasions.

A few holdouts such as Tampa stalwarts Donatello and Bern's Steak House have no plans to offer discounts, but they aren't immune to the industry's slump.

"My profit is very low as it is, and if I lower the price, I would work for nothing," said Donatello owner Guido Tiozzo, whose restaurant's sales are down about 8 percent this year when compared with last year.

Some high-end restaurants, such as The Palm, have offered discounted meals during the slow summer months in the past. However, the new discounts and the introduction of lower-priced entrees and lounge food appear to be more widespread this summer and motivated, at least in part, by the hard times, analysts say.

For a while, high-end places seemed to be holding up better than mid-tier restaurants.

By summer 2006, with gas prices taking off and adjustable rate mortgages resetting upward, casual-dining restaurants such as Applebee's and Tampa-based Outback Steakhouse had rolled out lower-priced entrees and smaller portion sizes. But when The Tampa Tribune interviewed local fine-dining restaurants in September 2006, they were still posting strong, if unspectacular, sales and were continuing to introduce expensive menu items.

At the time, Orlando-based Ruth's Chris was test-marketing an $80 appetizer called the "chilled seafood tower."

Things have changed drastically in the last two years as middle-income customers and at least some business customers cut back their spending. Finding recent sales figures for the nationwide fine dining industry is difficult, but Chicago-based research firm Technomic estimates the industry had revenue of $7 billion last year. That is flat from 2006.

Fleming's Prime Steakhouse and Wine Bar, owned by OSI Restaurant Partners of Tampa, posted superb financial results earlier this decade as the upscale counterpart to OSI's Outback Steakhouse chain. However, Fleming's now trails OSI's other brands in "same store sales," which measures sales at OSI restaurants open for at least 18 months.

Same store sales at Fleming's were down 6.8 percent for the three months ended March 31, according to an OSI filing with the U.S. Securities and Exchange Commission. Among OSI's other brands, same store sales were down 3.9 percent at Bonefish Grill and 2.6 percent at Outback. Carrabba's Italian Grill was the top performer, with an increase of 0.7 percent. An OSI spokeswoman did not return calls this week about Fleming's' $99 steak and lobster deal.

Same-store sales at rival steakhouse chain Ruth's Chris were down 6.9 percent in the first quarter of this year when compared with the same period last year. Even longtime, privately held restaurants are starting to feel the heat, although to a lesser degree than the chains. Sales at Bern's, for example, are down about 5 percent year over year, owner David Laxer said.

"Instead of buying the $100 bottle of wine, they are buying the $75 bottle or the $60 bottle," Laxer said. "On the plate, instead of the more expensive porterhouse or T-bone, they are going for a smaller filet or Delmonico."

In response to the lean times, high-end restaurants have taken a series of steps to recapture customers. Among them:

•Ponte's Tuscan Grill. This Clearwater restaurant, where entrees run $15 to $31, has seen its revenue fall at least 25 percent since last year. Partly responding to the economy and partly to offer its chefs a new creative outlet, Ponte's has debuted small plates of Venetian-style tapas called cicchetti. One plate is a "hanger steak with celery root potato puree and fig Malbec sauce," for $9. The cicchetti so far is available only in the restaurant's lounge area, general manager Tim Thompson said.

•Ruth's Chris. Representatives from Ruth's Chris, which has a Tampa location, did not return calls this week. The company has been advertising a Summer Celebration three-course meal for two, including a choice of five entrees, for $89.

•Boizao. This Brazilian steakhouse on Tampa's Boy Scout Boulevard is in a bit of a bind over prices. It has a single set price, $41.90, for its Brazilian barbecue-style dinners, so it can't offer specials on various entrees as other restaurants can, general manager Paulo Guimaraes said. But with its sales off 20 percent this summer, Boizao has launched an Internet-based club that offers diners discounts, such as 25 percent off a meal, Guimaraes said.

A meal for two for $89 or $99 at a high-end restaurant may not seem like a huge discount, but for some items involved, such as filet mignon, "those are measurable discounts from normal pricing," said Bryan Elliott, a restaurant industry analyst for Raymond James & Associates.

For now, it's not clear that lawyers, accountants and other professionals are cutting back on their entertainment expense accounts, Elliott said. If that happens, it could be another blow to the high-end restaurant industry. So far, Ponte's Tuscan Grill continues to book pharmaceutical industry dinners, Thompson said.

However, one local banker, NorthStar Bank chief executive officer Monty Weigel, said his company is a little more restrictive toward its employees' entertainment expenses. These days, before signing off on a meal at Malio's Prime Steakhouse, located downstairs in his bank's office building, NorthStar will want to know that it will pay off in more business, Weigel said.

Some restaurateurs are putting a lot of faith in the upcoming Super Bowl, which is coming to Tampa in February.

"It's going to jump-start restaurants in the Tampa Bay market," said Frank Chivas, chief executive of a company that operates Salt Rock Grill, Island Way Grill and other restaurants in Pinellas County.

Until then, "I think we're in for five rough months," he said.

Reporter Michael Sasso can be reached at (813) 259-7865 or msasso

@tampatrib.com.

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