London restaurants warned against over-discounting

Restaurants in the capital are in danger of over-discounting to drive footfall in the recession, an industry analyst has warned.

Ashley De Safrin, tourism and hospitality specialist at Business Link, said that while London restaurants are still busy thanks to a wide range of special deals being offered, problems could start to arise.

"A lot of restaurants are offering specials, which is driving footfall and turnover but not necessarily profitability," he said.

"Operators will start to have problems if they continue to offer deals that aren't sustainable and we may well start to see an increased number of restaurant closures in the next quarter."

De Safrin added that operators need to be adaptable and focus on changing menus to maintain margins and removing those costs that don't add value.

"The hotel industry has learnt its lesson from the last recession and is generally avoiding blanket discounts but the restaurant sector still has a lot of lessons to learn," he said.

Business Link's latest London Restaurant Barometer revealed that 60% of restaurateurs in the capital experienced a drop in takings, footfall and customer spend in January.

The survey, which questioned more than 130 operators across London, found that two thirds of restaurateurs in the capital said that January was down compared with last year, with 20% down more than 25%.

One respondent said he was "very worried" about 2009. "I didn't think our area would be so affected as the interest rate cut would benefit those with large mortgages," he said. "This is counteracted by chain restaurants doing deals which we can't compete with."

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By Kerstin Kühn

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