By Ed Moosbrugger
April 13 -- Downtown Santa Monica's restaurants continue to suffer a bit of indigestion from economic weakness that showed up early last year and got worse toward the end of 2008. As was the case a year ago, restaurant owners count themselves fortunate if they can post even a small sales increase.
“Restaurants are down 3 to 30 percent,” said Jeff King, co-founder and chairman of King’s Seafood Co., which has 17 restaurants in Southern California, Nevada and Arizona, including i.Cugini and Ocean Avenue Seafood on Ocean Avenue in Santa Monica. Business is down at least 12 percent at King’s Santa Monica restaurants.
Indeed, keeping sales level is a big accomplishment in today’s difficult times, said the former chairman of the California Restaurant Association.
“If you’re even with last year you are up,” King said.
In mid-December the National Restaurant Association forecast a 2.5 percent sales increase for the industry this year (or a 1 percent inflation-adjusted decline), but that may prove to be a bit optimistic unless there is a pickup as the year progresses.
“The economic situation is hurting everyone,” said Stuart Montalvo, director of operations at Yankee Doodles on the Third Street Promenade. “The main area hurting is corporate events. There is a lot of pressure on companies not to do parties.”
Walk-in traffic is also down at Yankee Doodles, although weekends remain strong, he said.
At Broadway Deli on the Promenade, business is down substantially, said Roman Cortes, general manager. Business has dropped more at night than during the day. For the first time in all his years at Broadway Deli the restaurant has had to lay off a couple of people, Cortes said.
Broadway Deli has been hit by a double whammy: the weak economy and the temporary closure of Santa Monica Place across the street. The restaurant fed off visitors going back and forth from the shopping center, which is not scheduled to reopen until 2010.
Now, Cortes said, some shoppers are hesitant to walk that far south on the Promenade because the shopping center is not open.
The visitor industry, which is important to restaurants, has been weakening. Santa Monica’s hotel occupancy rate plunged 16.8 percent from a year earlier in January to 63.9 percent, and the average daily room rate dropped 9.2 percent to $252.42, according to PKF Consulting. That followed declines in November and December.
Despite the tough times, there are some glimmers of hope. King expects things to start improving. “I look for our year to do nothing but get better,” he said. “If we're not at the bottom we are close.”
Santa Monica restaurants should benefit from the 100th anniversary of the Santa Monica Pier, the return of Cirque du Soleil in October and perhaps events marking the 25th anniversary of the 1984 Summer Olympics in Los Angeles, King said.
Montalvo expects a good summer for Yankee Doodles and Santa Monica as people stay closer to home rather than traveling out of the area.
Even with the difficult times, some restaurants are holding up pretty well. “Generally, business is still quite good,” said Lisa Powers, operations manager of Ye Olde King's Head Pub & Restaurant on Santa Monica Boulevard. “I've noticed it’s quieter during the day.”
Although business is down slightly, the restaurant has benefited from being in the moderate price range.
At Locanda del Lago at Arizona Avenue and the Promenade, owner West Hooker was “very happy” with a slight increase in sales in January compared with a year ago, but expected business to be off about 5 percent for February.
With operating costs rising, the restaurant is taking steps to achieve cost savings without compromising the product. It may bring more of its food preparation in house to save money and retain staff.
Lago already is making all its pasta and desserts in house, as well as 30 percent of its breads. The latter may increase to 100 percent.
On the customer front, “we are making people more comfortable with ordering less expensive items on the menu” and the restaurant is using its seasonal menus to offer less expensive items, Hooker said.
That helps to deal with the fact that some diners may be shifting to lower cost restaurants in the recession. In fact, restaurant operators see an increased focus on value as the top trend for 2009, according to the National Restaurant Association.
Hooker believes Lago is also attracting a younger crowd. “We feel that the younger guests are going out more often and are not as concerned with how much they spend,” he said.
To boost business, which has been dampened this year in part by rainy weather, Yankee Doodles may do some special coupon-based offers, but it is pretty much staying with what it has, Montalvo said.
Meanwhile, the leasing market for new restaurants has slowed down. “There are a couple hovering, but nothing yet,” said Robert O. York, a real estate development consultant for the Bayside District Corporation.
Some places have been opened in recent months under leases signed last year.
Alexandria Café has recently opened, and Pourtal wine bar is set to open this month.
King sees better things ahead. “I think Santa Monica is going to be fine,” he said.
