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UAE’s F&B industry believes worst is behind it

UAE’s F&B industry believes worst is behind it

27 October 2019


Dubai has second highest number of restaurants as percentage of population, says KPMG. Dubai: Restaurant operators in the UAE are starting to breathe just that little easy these days — and no, it’s got nothing to do with their cooking. They are feeling a lot more optimistic about being in the restaurant business than was the case in early 2018, according to the latest F&B sector survey by KPMG.

But even then, there are subtle differences in the degree of optimism. The quick-service/fast food restaurants have managed to withstand the tough market conditions better than any other category in the F&B business. This they did by cutting costs where possible and making a clean break from loss-making locations, according to the KPMG report. Among upscale dining outlets, there was “relatively steady patronage” for popular brands and concepts, but hotel-based premium licensed offerings had increased competition from licensed non-hotel outlets. Among all restaurant types, 29 per cent of F&B owners believe they are likely to see like-for-like revenue growth of under 10 per cent this year, while 34 per cent said they did not expect any change. Another 29 per cent expect revenue dips of 10 per cent and less. Only 8 per cent of restaurant operators reckon drops of more than 10 per cent this year.

Among these sentiments, there remains one constant — Dubai is second only to Paris in having the most number of restaurants per million residents. According to KPMG numbers, there were 2,935 F&B outlets in Dubai alone per million residents. Only Paris has more — 3,656 outlets per a million population. Even as some restaurants and F&B brands shut down, there are other ventures stepping in to expand their presence. Last year, there were 1,109 new restaurants and cafés that opened their doors in Dubai. There were also deals being made for existing outlets. Restaurant Secrets Inc. (RSI) has acquired the lease and operating rights of five restaurants from Emaar Hospitality Group, and this includes a brand new entry — The Loft at Dubai Opera. This one and two others are scheduled to open this quarter itself.

And operators will be expanding their base to new and emerging locations in Dubai, most notably in the vicinity of the upcoming Expo 2020. More than half of operators surveyed by KPMG “believe Expo 2020 will have a favourable impact and the event has the potential to provide a much-needed fillip to the industry. More than one third of operators currently plan to directly participate by establishing a presence at the site.” The report also suggests that restaurant operators believe that the worst is behind them. “We step into 2019 with a cautiously optimistic medium-term outlook for the sector, bolstered by trends such as delivery-led revolution and expectations around Expo 2020,” said Anurag Bajpai, Partner and Head of Retail, KPMG Lower Gulf. And “four out of five operators we surveyed expect growth in the medium-term.”

The last two years have been exceptionally difficult from the point of profitability. Margins have been slashed, and there have been cashflow issues across much of the sector. According to Bajpai, “2018 was a challenging year for the F&B industry, in the face of increased competition, higher operating costs and comparatively tepid consumer sentiment. Despite this, the sector has demonstrated resilience as owners and operators have responded with measures to drive operational efficiencies, and take difficult but essential decisions.” But there are subtle changes in the way the F&B industry tackled 2017 and 2018. In the former, the emphasis was still on expansion possibilities “into new markets and geographies”, the report finds. As for last year, the many businesses focused on putting the “house in order”. “Many investments were aimed at operational improvements and local expansion of the winners in their existing portfolios,” it adds. They also effected changes in their pricing models, dictated in part by the introduction of value-added tax. “Within the F&B industry, changes were primarily addressed through repricing and other strategies, such as combo offers and menu refreshes,” the survey notes.

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