Pro-union agitators tried to disrupt the National Restaurant Association’s annual industry convention in Chicago, but they needed to do more than yell and wave a few signs if they wanted to badger attendees out of a good mood. Those who sat through certain of the conference’s 100-plus education sessions had reason to exit with smiles and considerable optimism. Among the revelations that may have buoyed their expectations for the near future:
1. The summer will likely bring an upswing in domestic travel
Because gas prices have stayed relatively low, the number of miles Americans are traveling by car is growing again for the first time since 2008, according to Hudson Riehle, senior economist for the NRA’s Research & Knowledge Group. He predicted strong tourist traffic this summer, which translates directly into increased restaurant sales. Out-of-towners are the source of one of every four dollars that go into a restaurant’s till.
The chances of increased domestic travel by plane also looks good, a slice of good news for cities and resort destination areas, aid Sarah Quinlan, SVP and head of market insights for MasterCard. She notes that airplane reservations are soaring, yet only 27 percent of Americans have passports. “The rest can’t get off the island,” she said.
2. Gas savings = more restaurant sales
Some experts had disputed that lower costs at the gas pump are translating into increased discretionary spending. They contend that the found money is used for essentials, like paying down credit-card debt, not for splurges like dining out. Not so, declared Riehle. “We have confirmed that one out of two car owners is likely to spend more at restaurants because of the lower gas prices,” he said.
3. More disposable income overall
Economic improvement may be slow, but Americans are seeing a larger balance left in their checking accounts after the bills are paid, Riehle indicated. “We’re looking for a 3.6 percent increase in real DPI [disposable personal income], which is perhaps the best economic indicator for restaurant spending overall,” he said. It’s the strongest growth the industry has seen in a decade.
4. Some easing in costs
Food costs are still a kick in the shins, but the pain is milder than it was a year ago, Riehle said. He also noted that it’s not a rising-tide situation. The cost of some commodities, like dairy products, are actually ebbing, he said.
5. A silver lining
There’s strong evidence that restaurateurs are finding little resistance in passing along costs to customers. “This year, menu prices are up 3 percent. That is the highest annual growth rate in six years,” said Riehle. “That signals that the consumer is in a better condition to accept these increases.”