Caixin Weekly | High-End Dining Goes Downmarket (AI Translation)

财新周刊｜高端餐饮下探

Food blogger Wayne, reflecting on the declining demand for high-end dining, noted that popular restaurants that once had long wait times now offer immediate seating, partly due to the resumption of overseas travel, providing better value for money, thereby impacting domestic markets [para. 1]. He added that the diminished customer base has led to reduced culinary creativity among chefs [para. 1].

The fine dining sector, typically defined by per capita costs exceeding one thousand yuan and composed of Western, Japanese, Cantonese cuisines, and private kitchens, has faced significant challenges since 2023. Waning business banquets and directory spending, along with high fixed lease costs, have resulted in numerous restaurant closures [para. 2].

A clear trend of such closures emerged in 2024. Notably, Beijing’s Refer shut down on New Year’s Day, and in April, the ten-year-old TIAGO closed all its brands and stores with pending consumer refunds and unpaid wages for employees. Similar closures included Opera Bombana, KOR Shanghai, and Osteria [para. 3-4]. Data from Red Dining indicated a decrease in high-spending restaurants in Shanghai, with those spending over RMB 500 per person dropping to 0.59% as of July 2024 [para. 5].

Nationally, high-end dining consumption has also fallen, as highlighted by Mintel’s survey showing a decline in customers "very eager" for these restaurants [para. 5-6]. Additionally, restrictions on hospitality expenses and economic downturns in various industries like real estate primarily contribute to the decline in clientele [para. 6]. For instance, rumors suggested the impending closure of Xin Rong Ji in Beijing due to reductions in financial sector salaries and its addition to the “non-reimbursable list” of state-owned securities firms [para. 7].

To address the weak consumer demand since the beginning of 2024, chain restaurant companies have offered price cuts and discount menus. However, such measures are difficult for high-end restaurants because of their fixed customer base and high ingredient and labor costs [para. 8-9].

Additionally, some high-end chains have explored indirect discounts by creating sub-brands targeting lower price points, such as Xin Rong Ji’s lunchtime set menu priced significantly lower than their regular offerings [para. 8-10]. However, issues like oversupply in various sectors have resulted in a downgrade in competitive pricing, leading to widespread homogenization in the market, according to Weng Yongjun from Yongfu Catering Group [para. 11].

Post-pandemic growth saw increased demand for dining out, predominantly in affordable dining, causing an oversupply [para. 13-15]. Data showed that the dining sector maintains high foot traffic, yet high-end dining has experienced declines in customer numbers and average spending [para. 15-18]. Newly opened low-spending dining options are now more prevalent, with higher-priced establishments experiencing dual pressures of declining traffic and prices [para. 16-17].

Yongfu’s Weng Yongjun noted a revenue decline of 18% across high, medium, and low-tier outlets, affecting both business banquets and mall-based locations [para. 20]. As a response to declining demand, the company plans to slow down expansion, focusing on internal training instead [para. 21].

While closures of high-end establishments continue, some, like Refer and TIAGO, have various reasons spanning from chefs' health to internal issues among partners [para. 23-25]. Western cuisine establishments face particularly tough challenges due to their limited audience [para. 25].

Shifting strategies include opening smaller, cost-effective venues, relocating within commercial areas to reduce rents, and launching lower-cost sub-brands aimed at younger consumers [para. 29-31]. The demand for affordable yet quality dining options has even prompted high-end Western restaurants to introduce low-priced set meals [para. 32-33].

Facing these challenges, some high-end operators are exploring overseas markets, with initiatives like Yongfu’s Hong Kong and Singapore locations or Xinrongji’s Tokyo venture [para. 34-38]. Adjusting supply chains and ingredient sourcing reflects broader industry trends, especially post-Japan's 2023 nuclear wastewater incident, which prompted many Japanese restaurants to seek alternative sources [para. 41-42].

Despite operational pressures, innovative moves within the high-end dining industry indicate an evolving landscape, focusing on adapting to changing consumer behaviors and market conditions [para. 50].