A serving of steak is seen at the Peter Luger Steak House in Brooklyn, New York, United States on August 12, 2021. REUTERS / Andrew Kelly

NEW YORK / LOS ANGELES, Aug. 17 (Reuters) – As U.S. steakhouses recover from the first wave of COVID closures, the Delta variant threatens to dampen appetite for a sector seen as a barometer of the full economic recovery of United States.

While many large steak restaurants found new customers by reinventing themselves during the crisis, the return of the US $ 5 billion upscale steakhouse industry – known for its leather booths, white tablecloths and ribeyes at $ 60 – depends on resumption of business events and affluent tourists flock to Broadway theaters and other attractions.

But group travel and events are under threat again as Delta infections and deaths increase. Several companies have pushed back the target dates for returning employees to their offices. Some major in-person events, including the New York auto show, have been canceled.

High-end steakhouses are particularly vulnerable to the spread of the virus because their traditions – such as long, three-course indoor dinners – can scare away worried customers. At the same time, the price of beef is skyrocketing, with wholesale prices 40% higher on average in July than a year ago, according to the US Bureau of Labor Statistics. This threatens the profit margins of steakhouses.

Several chains say they are better prepared in the midst of the pandemic this year since the addition of outdoor dining and home delivery if the latest increase or new government restrictions frighten some diners again.

Some are also expanding their bars – higher margin liquor sales can help offset the pressure from more expensive beef. Ruth’s Chris Steak House’s parent company, Ruth’s Hospitality Group Inc (RUTH.O), said on an Aug. 6 earnings call it had “recently” blocked about 10% of its beef purchases to help face higher costs.

Data from booking provider OpenTable showed the number of diners sitting in steakhouses more than doubled by mid-year compared to January, as vaccination rates rose and before the Delta variant became a huge one. matter of concern.

But sales in “premium” steakhouses peaked in early July before dropping slightly in the first week of August, according to consultant Malcolm Knapp, who tracks steakhouse data.

“We won’t get the lift we expected before the scale of the Delta variant,” Knapp said.


At the Peter Luger Steak House in Brooklyn, New York, on Thursday, 26-year-old butler Tom Hobby, 66, checked guests’ lunch reservations on a clipboard as waiters clad in long white aprons walked past bread baskets, sole with lemon wedges and sizzling plates of steak to alfresco diners at sidewalk tables.

The iconic steakhouse only added outdoor seating and home delivery due to COVID, he said. When his bar finally reopened after the city allowed full capacity seating in mid-May, “the whole mood changed,” Hobby said. “It wasn’t just about the food. It was like an event.”

At Fleming’s, owned by Bloomin ‘Brands Inc (BLMN.O), takeout and delivery orders were scarce before the pandemic. But when many of its dining rooms were closed a year ago, take-out soared to 47% of sales. Today, it’s around 8% when customers return to restaurants, CEO David Deno said in an interview on July 30.

Ruth’s Chris has permanently shut down some of its restaurants that weren’t compatible with delivery and take-out – a business that has gone from around zero before the pandemic to as much as 7%. Ruth Chris’ general manager Cheryl Henry said the chain has attracted new customers. “We started to see younger, better-off guests trying Ruth’s for the first time through our take-out and delivery program,” she said on the earnings call.

Henry said “it’s a little early to tell” whether vacation bookings, which kicked into high gear in recent years in September, would be affected by Delta.

Chicago’s Gibsons Bar & Steakhouse – one of the nation’s most profitable independent restaurants – and other chains like Del Frisco’s Double Eagle Steakhouse have started delivering premium steaks and other meats to customers. during the first wave of coronavirus – and continue to do so.

Gibsons boxes, which sell for up to $ 268, boosted revenue at a time when sanitary restrictions limited diners to delivery and delivery.

But the industry is now watching closely for trends in private room reservations – where bills easily range from $ 150 to $ 250 per person, boosted by pricey wine and whiskey.

On a recent afternoon at the Fleming Steakhouse in Edgewater, New Jersey, with an unobstructed view of the New York skyline across the Hudson River, Cynthia and Bill Rosen were exploring the dining room as a venue. for their son’s planned wedding in October. The restaurant charges $ 55 to $ 125 per person depending on the menu chosen.

Fleming’s saw private restaurants drop to zero from 17% of sales before the pandemic, but it is now down to 7%, Deno said.

Keith Beitler, COO at Landry’s Inc (GNOG.O), whose premium steakhouse brands include Del Frisco’s Double Eagle and Morton’s, was cautiously optimistic as the Delta variant loomed.

“If things don’t get worse, we expect this December to be about normal,” Beitler said.

Reporting by Hilary Russ in New York and Lisa Baertlein in Los Angeles; Editing by Andrea Ricci

Our standards: Thomson Reuters Trust Principles.

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