London Restaurants are Going For Gold – by David Coffer

June 1, 2012

The eyes of the world will be focused on the UK this summer as we play host to the Olympic and Paralympic Games, the London 2012 Festival and the Queen’s Diamond Jubilee celebrations. With approximately 11 million visitors expected in London alone, the restaurant industry will be looking to capitalise. But just how big an impact will these events have and will they lead to an increase in profits?

It is certainly a bumper year ahead, packed full of iconic, once-in-a-lifetime events. These will provide restaurants with incredible opportunities, but those who wish to prosper most must plan early; talking to suppliers well in advance and testing alternative arrangements to help minimise any negative impact.

And restaurant groups are finding innovative ways to ensure they are ready for the starter’s gun. For example, Galvin Restaurants, which has four London eateries including the Michelin-starred La Chapelle, has produced an Olympics website page. Translated into four languages, it offers customers the opportunity to dine at different times to fit around the sporting action, watch televised events while they eat or hire the restaurant.

Top London chef Tom Aikens will also feel he is at peak fitness for the games with his restaurants among those to have signed the London Visitor Charter, promising fair pricing during 2012. And regular Gold medallist Noma, the famous Copenhagen restaurant voted “World’s 50 Best Restaurants” winner in 2011 and 2012- is ready to enter the race for Olympic trade, opening a pop-up restaurant at London’s famous Claridge’s hotel for 10 days during the summer. It will offer a five-course menu priced at over $300 per person. Another global champ- New York’s John DeLucie-has also opened a special pop-up, bringing the Crown in the Upper East Side and The Lion in the West Village to Kensington, known as Lion NYC at the Brompton Club.

The true heavyweight and the restaurant set to prosper most from the Games is McDonald’s. The fast food company is a long-standing sponsor of the Olympics, and as a result has a monopoly on all the catering outlets within the Olympic Park in Stratford, east London. McDonald’s is building four new restaurants at the Park, with the flagship outlet seating 1,500 customers, ten times the average size of a restaurant in Britain. It will be 30,000 square feet, trumping its current biggest global store in Orlando, Florida. Usain Bolt is famously a fan of chicken nuggets, complementing his penchant for nuggets of gold.

McDonald’s estimates that it will sell 1.75m meals at the four Olympic outlets during the month of the games. This will work out at about one in four people visiting the Olympic Park buying a meal there. It usually sells about 72.5m across its 1,200 outlets in the UK. During the 2008 Beijing games it sold 1.25m meals at the Olympic Park. However, It is understood the company will sublet some of the venues to other companies in a bid to assuage fears from British consumers that the only meals they can buy in the park is fast food.

Similarly, coffee giant Starbucks has gone big for the Olympics, investing over $12m in the renovation some 70 London outlets ahead of the Olympics, individually redesigning stores in the West End and the City of London to better reflect their local communities.

Yet historic data from the 10 Olympics held between 1964 and 2008, indicates that growth tends to rise in the run-up to the tournament, but fall away even before the games begin. Following the games, economic growth tends to be weaker. Indeed revenue and jobs generated through construction and planning happen long before the games start.

Only a few cities have experienced impressive levels of growth during the games and created a long- lasting legacy for future generations to enjoy: Los Angeles already had a big infrastructure, lots of space and plenty of money from TV and advertisers; Barcelona’s GDP growth was boosted by 2.9%; while Sydney was boosted by 2.1%. However for Athens and Montreal, the games were a disaster. Certainly the people of Greece are still paying for it- just one of the many contributors to its boom-and-bust travails. Yet it is hard to quantify the price of the game’s “feel good factor”, which helps to lift both the nation’s spirits and economy.

Certainly, all restaurants will be hoping to capitalise, but there are also various challenges ahead for the country’s 260,000 eating out establishments. Some worry about a ‘displacement effect’, if tourists and residents of the UK are put off by sports tourists and decide to stay away from the action. Some restaurant owners are expecting a dip in trade, worrying that regulars and cultural tourists will give London a wide berth during the Games. Concerns are also mounting that transport disruption, such as road closures, will cause problems for customers and suppliers? Transport for London’s primary concern will be ensuring athletes and officials turn up to their events without getting lost rather than the general public. The implementation of the Olympic Route Network, which will include Olympic-only traffic lanes for athletes, officials and the media, is sure to pose problems for delivery drivers and ordinary punters as a result.

Further, the Government has recommended that its civil servants work from home for up to eight weeks whilst the Games is on- a move which has already resulted in resentment and criticism from the “man on the street”.

At this time there is still much mystery surrounding the true impact on residents and local employers/employees. Confusion abounds as to how workers will get into London, how employers will cope and the subsequent effect upon turnover and profits. But in the current climate, a distraction and boost in activity is probably just what is needed: The economy remains challenging, consumer spend is restricted, the future of the Euro has yet to be resolved and many people in work remain fearful for their jobs – all factors that inhibit growth. We’re not out of the woods yet, but 2012 has more going for it than 2011 and we remain cautiously optimistic. In addition to continued ‘staycation’ effect that we hope will continue long after the event, what is crucial to remember is that the real legacy of the Games for the restaurant sector, the hospitality industry and Great Britain as a whole, will be the long-term benefit resulting from the surrounding publicity it has brought us.The exposure of the powerful spotlight shining on London could generate a profound interest and attraction to global consumers- particularly to rapidly-emerging markets such as Malaysia, Indonesia and Thailand, whose tourists are increasingly brand-savvy and have a lot of disposable income, as well as the Middle East, Russia and China.

Right across the country we must offer our international guests the highest levels of customer service to help create a lasting impression and hopefully bring them back time and time again. That is one gold medal that we have a duty to win.