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Industry Research

Upswing in On-premise Spending Habits

October 18, 2010 By: Donna Hood Crecca


The news last week that unemployment remained at 9.6 percent and 95,000 jobs had been lost in the month of September alone was not exactly what we all wanted to hear as we barrel into Q4. Consumer confidence levels, which drive on-premise spending habits, are fueled or suppressed by employment levels, so the unemployment scenario laid out by the Department of Labor did little to raise our industry’s spirits.

But don’t despair. The unemployment figures were released almost simultaneously with several top restaurant chains reporting consecutive weeks of same store sales gains, as well as a fourth-quarter forecast from NPD Group, Inc. calling for the first uptick in restaurant traffic in eight quarters.

Another positive indicator: Demand for hotel rooms is also growing. Smith Travel Research cited an 8.3 percent increase in booked rooms in August, well ahead of the 7.4 percent average for the year. Room rates are now rising as a result of increased demand.

Why is this good news in the midst of a dour employment picture? It appears that despite the rather slow economic rebound, Americans are eager to get back to their pre-recession dining habits, although their behavior will likely be tempered a bit by a more cost-conscious mentality. As reported recently in VIBE, the National Restaurant Association is bullish on the Q4 sales picture for restaurants, with Hudson Riehle, SVP of NRA's Research and Knowledge Group, citing “pent-up demand” as reason enough for consumers to eat, drink and be merry in the next few weeks.

At last week’s U.S. Drinks Conference in New York, Mike Ginley of Next-Level Marketing also touted pent-up demand as driving premium and super-premium spirits going forward. While the recession did cause trading down at the bar, many consumers held onto their favorite high-end brands as an affordable indulgence. Going forward, consumers will look for value at all price points, and those drink menus and brands that deliver value – especially at the very high end – stand to benefit in coming weeks and months, he predicted.

The message here is that consumers want to come out to your restaurants and bars. The trick is to entice them with a solid value proposition – and that doesn’t necessarily mean ultra-deep discounts, since we all know how that turns out. It means great products, creatively promoted, priced right and served with a smile could all add up to very happy holidays indeed.
 


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