The restaurant industry has historically performed well in Q4, generating an uptick in traffic as more people venture out to shop or socialize. The pandemic turned that trend on its head in 2020 and again last year amid the omicron surge.
This year’s holiday season arrives with some new challenges, including persistent inflation and labor shortages. Recent data from Alignable finds that holiday hiring is down nearly 40% versus last year, for instance, leaving operators to scramble to cover hours. Because of these challenges, nearly half of small restaurant owners are having a hard time covering rent costs.
Despite the gloomy environment, 60% of independent and small chain operators have a positive outlook for the 2022 holiday season, according to new data from SpotOn. This optimism is supported by a new American Express Travel report, which finds that 72% of consumers plan to dine out at their favorite local restaurant during the holidays, while 10% plan to tip more than usual. The pent-up demand for holiday dining has also already led to a 34% year-over-year increase in New York City restaurant bookings, according to Open Table.
To woo – and prepare for – less anxious diners this season, restaurants big and small are expanding their services, staffing and experiences. Las Vegas fine dining restaurant Jing has launched “party after nine” nightly events through the season, for example, complete with a DJ and special holiday menus, while Fogo de Chão has introduced curated dining experiences for the holiday season. BJ’s Restaurants is beefing up its staffing levels to prepare for the influx of seasonal diners.
“Because there remains a strong correlation between restaurant staffing levels and comparable restaurant sales, we intend to continue adding team members as necessary in the coming weeks to capture more sales in the near-term and have the right teams in place as we head into the busy holidays so we’re able to maximize our fourth quarter sales potential,” BJ’s CEO Greg Levin said during the company’s Q3 call last month.
This intensified focus on staffing and service can make or break the critical holiday season, which generates up to 20% of restaurants’ annual sales, or nearly 50% for fine dining concepts, according to SpotOn. BJ’s sales have historically increased from the third to the fourth quarter because of a bump in holiday traffic. In 2019, for instance, the chain’s weekly restaurant sales increased from $104,000 in Q3 to about $108,000 in Q4 and executives anticipate a similar trend this year.
“We intend to continue to build sales and what we believe will be a busy holiday season with demand for experiential dining remaining strong,” CFO Tom Houdek said.
Q4 business will also get a boost from gift card sales, catering
No doubt consumer demand is high for an in-person holiday dining experience, but restaurants will also get a boost from last-minute gift card sales. Last year, 62% of consumers included a restaurant gift card on their holiday wish list. This year’s gift card sales are expected to surpass that number, according to Blackhawk Network, as consumers look for solutions to manage inflation. This is good news for operators, as over 80% of consumers who redeem their gift cards at fine dining and fast casual restaurants spend more than the value of that card when using one, according to Fiserv research.
Texas Roadhouse is one concept anticipating a boost from this channel. On the company’s third quarter earnings call last week, CFO Tonya Robinson said she is anticipating a strong end to the year driven by high gift card sales.
“We feel really good about heading into the holiday season,” she said.
Catering also tends to provide a lift during the holidays for restaurants that offer the channel. In 2018 and 2019, catering revenue increased by nearly 20% in November and December versus the previous five months, for instance. This could be the year the channel gets back to its pre-pandemic momentum and several concepts are bullish on catering accordingly. During Bloomin’ Brands’ Q3 call last week, CEO David Deno noted catering’s rebound at Carrabba’s and said sister concepts Bonefish, Outback Steakhouse and Fleming’s Prime Steakhouse are following suit.
“Catering will be an important lever for growth over the upcoming holiday season,” Deno said. “We see a tailwind with people coming back to work and having office parties and holidays.”
The optimism – for Q4 dining traffic, for gift card sales, for catering – is backed by overall consumer sentiment, which is up slightly heading into the holiday season.
Contact Alicia Kelso [email protected]
Follow her on Twitter: @BGBunster
