Financing

Washington operators have a rebuttal for those who say restaurants are too busy to be hurting

Industry leaders took reporters behind the numbers for a clearer, more nuanced picture of hospitality's ongoing rebound from the pandemic.
Part of the state's challenge is bringing back conventions. / Photo: Shutterstock

The restaurant industry has clearly bounced back from the grimmest business days of the pandemic, right? Why else would it be impossible to get a table right now for a Friday or Saturday night?

A pin was put in that theory Tuesday by the Washington Hospitality Association. The trade group provided local and national media with what it termed a more accurate snapshot of how restaurants and hotels are doing in the West Coast state, pulling in dynamics that affect dining establishments throughout the country.

The association cited research findings that the typical restaurant in Washington owes about $160,000 to landlords and other creditors if it wasn’t one of the lucky operations that landed a Restaurant Revitalization Fund grant.

If inflation wasn’t raging at its current level, an average establishment would need about four years to pay off that debt, said association CEO Anthony Anton. But with margins eroded by inflation, dropping profits to a mere 3% of sales, a typical Washington restaurant will need more than five years to dig itself out from the deficits it ran in 2020, 2021 and 2022, according to the group’s data.

In addition, though sales for the first half of this year were running 4%, about the comparable level of 2019, that number is the result of an average increase in menu prices of 20%, Anton said. Customer counts are still down 12% from the pre-pandemic benchmark.

“At the end of the day, these are still unprecedented, difficult days for the hospitality industry,” said Anton.

Yet an impression has taken hold among many consumers that the industry has blown past the sales and traffic levels of earlier days, signaling a complete recovery for the business.

That perception is due in no small part to eating places being slammed on the weekends, Anton explained.

What those observers aren’t noticing  are all the dining room seats that remain empty during the rest of the week. Operators are closing on more weeknights than they did pre-pandemic because the workday demand isn’t there. Or they’re closing at 8 p.m. instead of 9 or 10, Anton observed.

Hotels have even further to go in their recovery, Anton stressed. Occupancy rates for Washington lodging properties are down 12% on average, Anton said. Room rates have risen by about 6%, but inflation for that hospitality sector is raging at about 8.5%, meaning margins are being crunched.

The labor shortage is also particularly severe for lodging businesses within the state, with the average inn unable to fill about 205 of positions. For properties in Seattle, the shortfall is about 305, according to Anton.

Hotels’ recovery will likely be hampered by the loss of convention and big-group bookings to areas like Florida, which spend appreciably more on marketing to meeting planners. Even if Seattle’s tourism trade won back some of that business, large-scale bookings are usually made three years in advance, so operations won’t feel the effects short-term, Anton said.

“The good news is that we’re better, If you compare us with ’20 or ’21, ’22 is much better, and we’re thankful and excited about that,” he continued. “We’re still well behind 2019, and if there’s a recession on the horizon, we are not well-suited going into it. We still have a lot of debt to recover from, and we’re still not seeing the kind of traffic we need to be healthy.”

The perception that restaurants have fully shaken off the ill effects of the pandemic has hurt the industry in its efforts to secure additional government financial aid. That mindset was a major reason why the U.S. Congress refused to re-up the Restaurant Revitalization Fund when that direct assistance program ran out of money—nearly $29 billion—in three weeks.

“We will be asking our state elected officials to support our recovery next session,” Anton said.

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