County residents still enjoy dining out, but spending less

The economic downturn is pinching high-end restaurants, as diners seek out more casual -- and less expensive -- fare.

Business is off at Shadowbrook, a destination establishment in Capitola recognized by Wine Enthusiast magazine. There haven't been layoffs, but employees have seen their hours and days cut back.

People who used to order a moderately priced bottle of wine are now ordering a glass of wine instead. Or a party of three splits a bottle.

"They're not spending like they used to," said Shadowbrook co-owner Ted Burke.

The trend to "buy down," as it's called in the restaurant business, affects the overall tab, crimping restaurant profits and tips for wait staff as well.

In October, following the financial markets meltdown, a survey of consumers by consulting firm Technomic found more than half of the respondents planned to spend less when they eat out.

The 2009 Zagat Survey of more than 145,000 diners found similar patterns: 33 percent are eating out less and being more sensitive to prices; 28 percent are eating in less expensive places, and 20 percent are cutting back on alcohol, appetizers and desserts.

A handful of holiday parties scheduled for Shadowbrook canceled after the economy headed south.

"You can't lay off people and have a party at the same time," said Burke, who is grateful for pleasant weather that boosted business past October at his other restaurant, the Crow's Nest, and customers who opt for fine dining as a way to lift their spirits.

"Spending time with family and friends, what could be better?" Burke said.

The Scotts Valley Hilton catering operation also cut back on employee hours because of a decline in conference business.

"People aren't traveling as much," said Jessica Thompson, who oversees catering. "We were very budget-conscious."

The hotel hosted nine holiday parties and had only one cancellation.

"We actually did better than last year," Thompson said.

Chaminade, the upscale Santa Cruz resort, not only cut back on hours but laid off "quite a few" employees, general manager Norbert Relecker said. Because the restaurant had been closed for renovations during the holidays in 2006 and 2007, he budgeted low for holiday parties, and hit his number.

Relecker also gave employers a less expensive option by opening a Friday night buffet in December for $39 a person. Other companies treated employees to Chaminade's $15 per person breakfast buffet.

"I think a buffet adds value," said Relecker, who is expecting 400 people to dine today.

Vida, in downtown Santa Cruz, is a "white tablecloth restaurant" experiencing a slowdown while Betty Burger on Seabright Avenue is seeing an uptick. Both are owned by Juan Valledor.

Betty Burger manager Seth Landig said customers are willing to spend $5-$10 person rather than $20-plus per person.

"Sales are still up from last year when we opened," he said.

The most popular item on the menu, he said, is the Point Grinder, a half-pound patty, with bacon, blue cheese, and portobello mushroom for $6.95. Another favorite: Sweet potato fries for $3.25.

The concept is doing so well that the owner plans to open a second Betty Burger on 41st Avenue next summer.

Another good sign: The restaurant plans extended hours on New Year's Eve.

Kelly's French Bakery, which operates a wholesale business as well as a cafe, is seeing a seasonal rush for baked goods.

"For a bakery, this is the busiest day of the year," said office manager Richard Goeb on Tuesday.

The cafe serves up breakfast and lunch with most menu items under $9.

"We're doing well," said co-owner Mark Sanchez, adding that people "buying down" could be part of the reason why.

Casual eateries with modest prices are the fastest growing dining segment, according to the Zagat Survey. Zagat dubbed them a "better alternative to home" because they buy wholesale and produce meals cost-efficiently.

That's the case for Charlie Hong Kong, which specializes in noodle bowls for $5.95.

"We're not seeing the ravaging effects a lot of businesses are," said owner Darryl "Rudy" Rudolph, who has invested in inventory to offset the rising cost of ingredients.

He knows of restaurants for sale and expects some will close in 2009, either for business or personal reasons. His advice: Upscale restaurateurs must re-evaluate their concept.

"It might have worked when people were flush with home equity," he said. "You have to have a good product that people want."