Technomic examines the future for restaurants through the lens of 40-plus years tracking the industry, and sees 11 top trends emerging in 2011.
As the nation begins to emerge from recession, restaurants are seeing lapsed customers return. Same-store sales are inching up, signaling the industry’s initial rebound to health; hiring is also up, signaling positive expectations for 2011. But this isn’t the same restaurant industry as before. Big changes are on the way—on menus, in concept development and in the competitive landscape.
Technomic, the leading foodservice research and consulting firm, examines the future for restaurants through the lens of 40-plus years tracking the industry, and sees 11 top trends emerging in 2011:
1. Action in adult beverages. As Americans decide they’re once again ready to celebrate, we’ll be seeing lots of action in “Mad Men”-style retro cocktails, high-cachet gin and bourbon, craft beers and punch (including sangria). Look for cocktails with herbal and floral ingredients; “skinny” cocktails; even more adult beverages in fast-casual eateries to set them apart from traditional limited-service competitors.
2. Beyond bricks-and-mortar. Food trucks, facilitated by social media that notify foodies of their whereabouts, were an L.A. and Manhattan fad a year ago; now they’re proliferating around the country. “Land-based” restaurants are using food trucks as brand extensions and catering aids; food-truck districts and “rodeos” are starting to appear; regulatory agencies are scrambling to keep up. Also unmooring restaurants from their traditional street corners: temporary or seasonal pop-up eateries and kiosks.
3. Farmers as celebrities. Once, it was all about celebrity operators; then star chefs rose to prominence. Now, the back-to-the-source mentality sends farmers and producers into the spotlight. Restaurants will feature their celebrity suppliers by offering special menus, inviting them to comment on blogs, even hosting visits. More often, farmers and artisans will be saluted in highly detailed menu descriptions. More attention to the supply chain also means more attention to food safety and product traceability as well as local sourcing.
4. Social media and technology: evolutionary spurt. We’ll see constant changes in applications for marketing and operations in 2011. Kiosk ordering, wine lists on iPads, tableside payment systems—which technologies will revolutionize operations? Couponing websites and location-based social media will grow, while the apps fad will continue to evolve, while facing new competition from developing formats and technologies. Front-of-house and back-of-house technology and social media are evolving so fast that rewards and risks are high—but the biggest risk of all is failure to innovate.
5. Korean and beyond. The Korean taco—an only-in-America synthesis of Korean-style fillings and a Mexican format—signals the rise of Korean barbecue and Korean food in general; multicultural tacos with world ingredients, sometimes in surprising combinations; and portable street food and small plates from around the planet.
6. Frugality fatigue. Penny-pinching was a novelty when the recession began; now it’s gotten old. Anyone who can afford it will dip back into luxury dining in 2011. Look for flashy high-end restaurants and some extravagant, indulgent specials even on staid menus. Meanwhile, the middle class will gravitate to reasonably priced but high-experience-value, thrill-a-minute concepts with memorable menus. Pricey full-service concepts will continue to push bar menus, bringing in new customers at a lower price point, and gastropubs will proliferate.
7. How low can you go? Consumers will continue to demand price deals, everywhere they eat. As food input prices heat up next year, sustaining the bottom line will continue to be a crucial issue for operators. Look for more restructuring of price deals—for example, “everyday low price” positioning favored by retailers.
8. Carefully calibrated brand action. As the restaurant industry emerges from recession and capital spending picks up, we’ll see more fast-casual brand extensions by full-service restaurants and even non-restaurant brands; more ultra-niche eateries with narrowly focused menus and high-concept ambiance; investment in brand refreshes and remodels instead of unit growth. What new units we’ll see will be smaller, sustainably built, with more efficient layouts, often in nontraditional locations.
9. Back to our roots. The durable hunger for comfort food develops an appetite for homestyle Southern fare, from grits to seafood; retro Italian, including meatballs; gourmet donuts and popsicles for dessert; family-style service formats and family-size portions that would look right at home in a Norman Rockwell print.
10. New competition from c-stores. Retailers have been encroaching on restaurant turf for some time, but now the hottest action is among convenience-store operators upgrading their foodservice, where margins are 40-60 percent instead of the 5 percent typical for gas. Consumers are responding positively to upgraded offerings, variety and ambiance.
11. Healthful vs. indulgent: the little angel says one thing, the little devil another. As federal menu labeling requirements take effect in 2011, the issue of healthful vs. indulgent fare—on the menu and in menu descriptions—gets complicated. Look for more items and detailed descriptions on “healthy” menus—including gluten-free fare as well as more “under x calories” items. Limited-time offers (including seasonal fare) will trend up, not only because they attract attention, but also because they don’t require posting nutrition data that consumers would rather not know. “Eating a little better” will translate into menu modifications such as slightly-lower-sodium, slightly-more-glamorous sea salt; “eating better some of the time” will lead to more innovations like “Meatless Mondays.”
For additional food industry trend-tracking insights from Technomic.
Developers looking at intimate properties as the segment makes a comeback.
It turns out that rumors of the luxury segment’s death have been greatly exaggerated.
Now, after that near-death experience, luxury developers have refocused, changing the size, style and mission of their properties.
Pierre Charalambides is a co-founder and partner at Dolphin Capital Partners, a private equity firm that invests in real estate in emerging markets. Its assets include 13 major leisure-integrated residential resorts and a number of smaller projects.
“We buy the best coastlines,” he said, “and work with the best architects, golf course designers and hotel operators.”
The company built its portfolio from 2006-2008 but stopped investing after the financial collapse. Now Charalambides said it’s time to start investing again.
“Development financing remains scarce for luxury hotel development, especially in emerging markets,” he said. But at the same time, “the global tourism market is growing again. International tourist arrivals are beating expectations.”
Dolphin is in six countries and is looking to expand, he said. The company is looking at Panama, the Dominican Republic, Brazil and Colombia. The new projects likely will consist of small hotels with fewer than 150 rooms. Anything larger would make the property too dependent on groups and change the mission of the hotel, he said.
Dolphin’s two current projects illustrate that thinking.
The first is the Aman at Porto Heli, Greece, an area he compared to the Hamptons in New York. Under the guidance of architect Ed Tuttle, the property will have 40 suites and open by the end of 2011.
The second project is the Nikki at Porto Heli, Greece. This beachfront conversion is slated to attract a younger clientele. Before the conversion, there were 160 rooms. When the property opens by the end of 2011, it will have 25 rooms and 60 apartments.
James Erlacher, senior vice president of development for the Americas at Jumeirah Group, confirmed that the big box hotel is no longer the favored style for new super luxury developments.
“There’s a trend toward smaller, more intimate resort environments with indigenous architecture,” he said.
In Dubai, Jumeirah has a 900-room beach property, but he said that’s not what Jumeriah would build in the Americas. He likened new projects to the style of resorts in the Maldives, where the company features small villa-style guest rooms. There are other ways to generate fees besides room count, he said.
“Based on my pipeline and conversations with developers, the trend is toward smaller,” he said. “The box is on the wane.”
He added that luxury properties that have to chase group business faced the most trouble during the downturn.
Erlacher said Jumeirah currently operates about a dozen hotels worldwide. It has about 26 projects in the development pipeline, with an even split between resorts and urban properties, and 30 management agreements are signed and in pre-development. Jumeirah’s focus is on major gateway and resort areas, he said, and each project has to have a residential component.
Jumeirah’s new brand, VENU Hotels, already has five properties in the pipeline and will open first in Shanghai and Dubai. In Buenos Aires, the company has a deal for a polo-themed resort and has another deal to develop an urban property in Panama City as well as a destination resort. In Mexico, he said the company would consider Los Cabos and Riveria Maya.
“We are fully dedicated to the luxury segment,” Erlacher said. “We aspire to be a globally recognized luxury operator.”
Erlacher noted a lack of available luxury projects for residential in the Americas, and the lack of financing will hold supply in check. The environment is good for current operators, he said, but Jumeirah is looking for areas for growth.
In Latin America, Erlacher noted the desirable markets of Rio de Janeiro and Sao Paolo. The latter, he noted, has “no significant luxury supply” but a lot of wealth.
The challenge for luxury development in Brazil, as well as Colombia and other South American countries, is an underdeveloped airlift.
“Respect the time the guest has for the trip,” he said. “This is a challenge in Brazil. The resort market there is going to be a challenge. Be sensitive to what the travel and arrival sequence involves. … It’s easy to get there from Europe. It’s North America that’s the challenge.”
Charalambides said airlift is one of the most crucial factors when considering a new project. Other development factors important to Dolphin include the differentiation and uniqueness of the product; the service, environment, experience and social responsibility; and finally, real estate integration. Dolphin’s projects always combine hotel with residential. Dolphin prefers to buy into virgin areas, he said, but a hotel on its own is risky in a resort location unless the market is developed.
Charalambides and Erlacher discussed their projects with Christopher Froome, vice president of development planning and feasibility for Ritz-Carlton, at the South American Hotel & Tourism Investment Conference.
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