Amid the cluttered news of inflation and menu prices continuing to rise, New Yorkers this week no doubt heard about the bargain of the year:
Old Homestead Steakhouse is offering a 38 oz. prime porterhouse for two for just $99.
In an ad campaign that has taken to airwaves across the city, full pages in The New York Post, digital billboards and LED signs on taxi tops, brothers Greg and Marc Sherry, the third-generation owners of Old Homestead, insist, “Nobody beats our price! Nobody beats our quality!”
It's the sort of kitschy-but-endearing old-school marketing once used to hawk cars or mattresses, but in this case the restaurateurs are trying to draw attention to their relative value positioning compared with the highest of high-end steakhouses in Manhattan, where a prime porterhouse for two can cost from $130 (Peter Luger) to $180 (Porter House Bar and Grill).
The Sherrys don’t mention, however, that porterhouse for two is a bit more affordable at Ruth’s Chris ($115) and STK ($119 for a 28 oz.) in Manhattan. But Old Homestead doesn’t see itself swimming in the same pool with chain restaurants.
Old Homestead is a restaurant founded in 1868 in the meatpacking district, when it really was where meat was packed. It boasts of being the oldest continuously operating steakhouse in America, though there are now newer Old Homestead locations in Atlantic City, N.J. and Las Vegas.
The $99 porterhouse deal, however, is only available in New York City, where the dish for two was previously $155. It’s a limited-time offer that will run through October and maybe early November, depending on customer response, a spokesperson said.
The Big Apple is a town that takes its steaks very seriously.
That’s why the value-positioned ad campaign feels a bit like a canary in the coal mine of fine dining. Is it a sign that inflation pressures have crept into the well-heeled world where diners are willing to throw down triple digits for a steak dinner?
“People are feeling the pinch as inflation continues to be an issue,” said Greg Sherry in a statement. “We wanted to do something exciting for our longtime regulars and newcomers alike to share our hospitality and welcome people in for a great night out—whether it’s a special occasion, or if you’ve never visited us before, or if you simply just miss a fantastic steakhouse dinner.”
Greg Sherry, meat supplier Pat LaFreida and Marc Sherry at Old Homestead. / Photo courtesy of Old Homestead.
Foodservice prices overall were up 8% for the year ending in August, according to the U.S. Bureau of Labor Statistics this week. But at full-service restaurants, prices were up 9% for the year, while menu prices at limited-service restaurants increased 7.2%.
In the fine-dining steakhouse world specifically, entrée prices have grown about 7.6% nationally over the past year, according to Technomic Ignite menu data.
The average price of a porterhouse nationally, by the way, is $103.03, which is an 11.2% uptick over the past year, though sizes probably vary.
The top seller among steakhouses is actually a rib-eye, with an average price of $89.07, up 14.5% over the past year, according to Technomic menu trackers.
And that’s likely for one person.
Those menu price increases, however, and the 40% increase in inflation overall, do not seem to have hurt traffic at fine-dining restaurants—yet.
At the end of the third quarter, average same-store sales on a three-year basis at fine dining chains were up 28%, though, of course, that could also reflect menu price increases.
Ruth’s Chris enjoyed double-digit comps for the second quarter, though company officials did note that sales began to soften somewhat in June.
Emanuel Hilario, on the other hand, CEO of STK-parent The One Group Hospitality Inc., in August said STK’s high-end consumers are “holding up, frankly, rather well,” according to a transcript from financial services site Sentieo.
For those diners, the appetite for premium offerings remains unchanged, he said. At STK, a Wagyu promotion was so popular in July, the company decided to extend it.
STK’s same-store sales were up nearly 20% for the second quarter. Prices have increased “modestly,” he said, though Hilario maintains the chain still has pricing power.
Hilario said STK’s guests were actually trading up, especially when offered a relatively low entry point, like a $7.99 cheeseburger for lunch, with which they happily add $5 fries and pay for the addition of bacon.
“So we’re actually seeing the consumers, although they’re coming in for the low price points, I think that, in-store, we’re doing a nice job of trading them up,” Hilario said. “I have not seen any material trends where people are actually trading down or taking less items on the menu.”
And that could be exactly what Old Homestead is plotting with the bargain-basement $99 giant plate of steak.
Sauces and sides will likely add to the bill, as will the recommended glass (or bottle) of wine and preprandial martini. If guests feel they’ve “saved” on their entrée, they may be more likely to add on dessert.
Justin Pridon, vice president of North America for consulting firm Revenue Management Solutions, based in Tampa, said the old-fashioned loss leader approach works.
“If you’re going to do a discount like that, you just scream it to the four walls” to get them in the door, he said. “Once they’re in there, they’re not just spending the $99 on that entrée, they’re compounding their purchases.”
In consumer surveys, however, RMS is seeing some trade down as wallets continue to get pinched, and consumers across all segments are looking for value.
Boomers, for example, who are likely to be higher income, indicate they are dining out less. Gen X and younger say they’re still dining out, but they’re choosing less pricey options.