Executives are loosening the purse strings this year, as budgets for holiday parties are higher than in 2012 at restaurants including STK steakhouses.
The pace of booking activity is shaping up to be “slightly better” than the “mid-single digit” growth Larry Miller, founder of MillerPulse.com in Atlanta, forecast in September. Business leaders appear to feel more generous, which is encouraging because restaurant sales this year have been “a bit disappointing overall,” said Miller, who provides an industry performance-benchmarking service.
“It’s shaping up to be a decent year for the corporate-dining business,” Miller said. That’s “pretty good,” especially given that this compares with a couple of strong years when spending on holiday events grew between 8 percent and 12 percent, he said.
Eateries will be humming as corporate customers “do everything they can to have that one last hurrah of the year,” said Jonathan Segal, founder and chief executive officer of New York-based the One Group LLC, which owns STK steakhouses in five U.S. cities. Segal says he’s optimistic, particularly after some “hot dates” -- such as the two Thursdays before Christmas -- were booked as early as last year.
The amount spent per guest has been “creeping back up” at STK locations after employers cut back during the recession by ordering less-expensive food or drinks and planning shorter parties, Segal said. Some especially gregarious executives probably will extend the open bar at their parties -- as many have done in years past -- to keep spirits up among employees, he said. “It’s remarkable how often this happens.”
There’s also been a surge in bookings late in the season compared with 2012, which suggests companies have a “renewed interest” in holiday events, said Malcolm Knapp, a New York-based consultant who has monitored the industry since 1970.
These events offer investors a way to gauge confidence among business leaders, particularly because some people remain concerned even as the economy shows solid signs of improvement, according to John Manley, who helps oversee $233.6 billion as chief equity strategist for Wells Fargo Funds Management in New York. The rebound “has happened, but the true recovery is still ahead in terms of sentiment improvement.”
Gross domestic product expanded at a 3.6 percent annualized rate in the third quarter, up from an initial estimate of 2.8 percent and the strongest since the first quarter of 2012, based on figures from the Commerce Department.
Party plans are holding up even as business-leader sentiment has fallen to 5.63, the lowest since March, from as high as 6.09 in June, according to Chief Executive magazine’s confidence index, which is based on an e-mail survey.
The minimum amount budgeted for fetes at STK steakhouses is slightly higher than last year, though Segal won’t know how generous executives were until January, he said. Similarly, Nicki Keenan, senior vice president of sales at Landry’s Inc., is “conservatively optimistic, provided that nothing derails our economy” in the next few weeks, she said.
There was a pause in holiday reservations at Landry’s restaurants during the 16-day partial government shutdown in October, though most cancellations were for events in that month. “We are pacing ahead of the same time last year for definite revenue on the books and the number of bookings,” Keenan said.
The Houston-based operator of Morton’s, Vic & Anthony’s Steakhouse and McCormick & Schmick’s chains offered a free gift card for business customers who made reservations before Nov. 1 -- and many took advantage of this promotion, she said.
Reservations also are up at Ruth’s Hospitality Group Inc. (RUTH) restaurants compared with the same period in 2012, Chairman Michael O’Donnell said on a Nov. 1 conference call, even with a shorter holiday season: six fewer days between Thanksgiving and Christmas.
“Our early indications are that banquets are above last year, so we feel very good about that,” he said.
While the government shutdown scared some business leaders, holiday parties may be “a form of investment to thank customers and retain employees,” Manley said.
Even if there’s “differential behavior” across the U.S. -- with some regions stronger than others -- executives try to avoid canceling these types of celebrations, Knapp said.
“In the money centers the bookings will hold up, but around the rest of the country this spending could be scattered,” he said, adding that the total may get a boost from individuals in a department going out for lunch or dinner.
One possible impediment could be weakness in holiday spending, which might presage a less-festive party environment. While online sales surged about 20 percent to a record on Cyber Monday, that marked a bright spot in a shopping season that has lacked luster so far, with the National Retail Federation reporting the first spending decline for a Black Friday weekend since 2009.
Still, eating out among business customers has been “very strong” in recent months -- outpacing consumer expenditures -- suggesting this trend could continue through December, Miller said. If corporate dining were to grow between 4 percent and 6 percent this year, “that would be pretty great performance.”
Even companies that had a challenging sales year look forward to holiday events, Segal said, adding that this segment of his business has been “fairly resilient” since the recession ended.
“This is the one time of year when ownership has an opportunity to say thank you to their employees in a social environment.”
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