SINGAPORE: Apart from oft-heard concerns such as manpower woes and rising costs, restaurant owners in Singapore have had to deal with an additional challenge this year: Diners on a budget.
Chef-owner Willin Low said sales at his restaurant Wild Rocket have dropped around 15 per cent so far this year.
“At the end of last year, there were forecasts saying how 2017 was going to be worse. It hasn’t been doom and gloom as we expected but it’s not the brightest either,” he said, while adding that business for the year has seen huge fluctuations with second-quarter takings being the worst.
Mr Low pointed to lingering concerns about the health of Singapore’s economy which seem to be affecting how often consumers go to restaurants and how much they spend.
“Concerns for the economy have caused people to tighten their belts. People still eat out but they avoid opening the most expensive of bottle of wine or cut back on what they order.”
The lawyer-turned-chef, who also owns casual eatery Relish and bar Wild Oats, is not the only restaurateur feeling the bite.
Restaurant Association of Singapore’s (RSA) executive director Edwin Fong also observed less-than-ideal sales volume among its members this year, compared to 2016, amid “more prudent and conservative” spending among diners.
Recently announced third-quarter economic data showed restaurants as the sole laggard in the food services sector. Sales dropped 3.4 per cent year-on-year over the July to September period, after falling 10.1 and 9.3 per cent for the first and second quarter, respectively.
This despite Singapore’s economic growth picking up pace over the course of 2017 and storming past expectations to a near four-year high in the third quarter.
On the flipside, fast food operators, as well as owners of cafes, food courts and coffee shops, have had a better year. Fast food sales have been in positive territory so far this year, while takings at other eating places reversed declines for the first six months of 2017 to notch up 1.2 per cent year-on-year in the third quarter.
Patrons find that food courts are cleaner and brighter, and provide variety at affordable prices. (Photo: Jalelah Abu Baker)
“Restaurant sales were in general more badly affected by the weakness in consumer sentiments than sales in other F&B (food and beverage) establishments, likely because restaurant meals tended to be more expensive,” said a spokesperson from the Ministry of Trade and Industry (MTI).
Weakness in the labour market remains a key reason why local consumers continue to tighten their purse strings, said Standard Chartered economist Jonathan Koh.
“Although the picture seems slightly better in the third quarter, slack remains in the labour market and given the past few quarters of negative job creation, consumers would not have felt the slight improvements,” said Mr Koh.
Still, there are some restaurant operators that have seen less of an impact.
Mr Loh Lik Peng, founder of Unlisted Collection with 14 F&B brands under its belt, said sales for the year have improved, albeit inconsistently across the group.
“Broadly speaking, things have improved though it wasn’t quite consistent across the board. Some have done better than the rest and for those that underperformed, we are doing more in terms of promotions and marketing.”
The serial restaurateur even went on an expansion spree, with the addition of at least four new eateries like French bistro Audace and kushikatsu restaurant Panko earlier this year.
“People still want to go out and have fun so it’s about creating new concepts to fill in the gaps and appealing to consumers differently. We also adopt different strategies to make sure our menus always have affordable options,” said Mr Loh.
BETTER YEAR AHEAD?
Moving forward, MTI said it expects F&B sales volume, including restaurant takings, to “improve gradually” on the back of a pick-up in domestic consumer sentiments and a positive outlook for visitor arrivals in 2018.
But apart from budget-conscious consumers, restaurant owners are also watching out for a new challenge on the horizon –an increase in the goods and services tax (GST), which has been raised as a possibility by economists and tax specialists after Prime Minister Lee Hsien Loong said last month that raising taxes will be inevitable amid increasing Government spending.
Business owners like Mr Loh said a hike in the GST, if true, will be “much more painful” than the recent increase in water prices.
“Water costs can be mitigated to some extent whereas GST is something that gets passed on to the consumer. If it happens, it will be much more painful for consumers and the F&B industry.”
Agreeing, Mr Low admitted that even with expectations for Singapore’s economic growth to remain firm in 2018, he does not quite know what that means for his business.
“I like to think of restaurants as the place where you get a feel of what’s happening in the economy because you get to meet people from all walks of life.
“And it’s a general feeling across the industry that the rosy figures so far don’t seem to correspond with what’s happening on the ground.”
