Restaurant outlooks improves slightly in July

The National Restaurant Association’s outlook for the restaurant industry went up for the first time in three months.

The monthly composite index, which tracks the health of and outlook for the U.S. restaurant industry, was up 0.3 percent to 98.1 in July.

“Although restaurant operators continue to report soft same-store sales and customer traffic levels, they are more optimistic about improving conditions in the months ahead,” said Hudson Riehle, senior vice president of research and information services for the Association.

The index is based on a monthly survey of restaurant operators about their sales, traffic, labor and capital expenditures.

More operators (26 percent) reported a same-store sales gain between July 2008 and July 2009, compared to 22 percent in June. Same-store sales were still negative in July, however, with 58 percent reporting a same-store sales decline in July, down from 61 percent in June.

Negative customer traffic levels were reported for the 23rd consecutive month. While 23 percent had an increase in customer traffic between July 2008 and July 2009, up slightly from 19 percent in June, 59 percent reported a traffic decline in July, compared to 60 percent reporting lower traffic in June.

Restaurant operators have an improved outlook for sales growth, with 31 percent predicting higher sales in six months, up from 24 percent.

But 33 percent of restaurant operators expect their sales volume in six months to be lower than it was during the same period in the previous year, matching the proportion who reported similarly in the previous two months.

This summer, Morton’s the Steakhouse in downtown D.C. has had an uptick in business compared to six months ago.

“July and August were good months for us,” said Dan Festa, general manager of the upscale steak restaurant on Connecticut Avenue. “Hotel occupancy in D.C. was pretty high compared to the national average. People are spending less on rooms and that translates into what they spend on dinner.”

Locals also stayed in town in July and August, which resulted in an upward swing in business from regulars, he said.

“We are coming out of whatever you call it we were in. People are spending money and going back out for special occasions.”

Festa is preparing for what he predicts will be a strong fourth quarter.

“We have pre-sold rooms and people are booking now for the holiday season. A lot of companies will start spending money again on company dinners and things like that.”

On a national scale, 2008 and 2009 have been the most challenging years for the restaurant industry in several decades, according to Hudson Riehle, senior vice president of research at the D.C.-based National Restaurant Association.

Nationally, there are almost a million restaurants across the country that employ 13 million people. The monthly performance index is compiled by surveying 500 to 600 operators of fast food to full service eateries across the U.S.

Sales are up two percent in the first seven months of the year -- which is a slower-than-normal growth rate -- but sales are still expected to reach a record high of $556 billion this year, he said.

“The D.C. region is fortunate in that the household income levels here are relatively high compared to the nation as a whole. Restaurant industry sales growth is strongly correlated with levels in household income.”

Tourism is also an important factor of growth, said Riehle. The number of tourists coming to D.C. is expected to decline slightly this year and remain flat through 2012, according to projections from IHS Global Insight.

“At certain fine dining restaurants, tourists can account for 70 to 80 percent [of sales]. What happens in tourism is reflective in what happens with restaurant sales,” said Riehle. “They don’t have the dining at home option.”