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WTF: Zagat's Restaurant Inflation?

Here's one of those things that make you scratch your head while mouthing the words WTF to yourself.

My friend and RM colleague Paul posted on the huge increase in restaurant prices nationwide (but not NYC), via a Zagat's press release:

"While overall restaurant prices in NYC remain the highest in the U.S. at $39.46 per dinner, that's only three cents higher than last year. ... However, inflationary trends look quite different at the city's 20 most expensive restaurants where an average meal now runs $143.06. Since 2001, dinner prices at the city's elite have soared at an average of 11.6% per year, from $84.45 to $143.06."

There's a small problem in this press release: While among all New York restaurants, the average cost of a meal has risen only three cents since last year's survey -- to $39.46 from $39.43,nearly 60% of survey participants say they spent more per meal this year than last year (and we assume its more than 3 cents).   

How can this be?

Let's look into the various aspects of that, to see if there is -- or isn't -- inflation in restaurants.

To begin with, the Zagat's are well known gourmands who are big promoters of the dining industry. That they found prices only moderate doesn't surprise. They are hardly neutral, skeptical observers. Perhaps the more critical eyes of our readers here can help us delve beneath the press release to discover if restaurant prices are actually flat. (Some people call this lawyering, I prefer to think of critically reviewing BLS or press releases as analysis; you can make your own decision).

There are a few possibilities we can explore -- perhaps prices are flat, maybe its something else (I don't honestly know). My own personal experience -- and I dine out quite frequently with clients, friends and family -- is that prices appear have increased substantially. We know food costs are up, rent is up, energy costs are up -- and yet, overall prices, according to the Zagat's, are flat.

To begin with, the Zagat guide is a self-reported set of reviews, where diners submit their views on food, decor, service as well as price. Since people are reporting what they spent, perhaps this is reflecting their own self-imposed budgets, rather than actual restaurant pricing. If a Zagat reviewer is limiting themselves to only spending $50 or a $100 on a meal out -- perhaps they are skipping dessert, not ordering the premium dishes/specials, or not ordering beverages -- then this may not be fully reflecting what restaurants charge. Instead, it reflects what the diner spent -- a subtle but imprtant difference. 

Then there is the question of what the restaurants themselves are doing. As these paragraphs from the press release suggest, the restaurateurs are trying to keep costs down in a variety of ways:

Small Is the New Big: Small-plate menus are cropping up all around town including those at L'Atelier de Joel Robuchon, Degustation and Perbacco, despite the fact that 75% of those surveyed think traditional standard-plate menus provide a better value. Additionally, smaller, more intimate neighborhood restaurants like Cafe Cluny, Insieme, Klee Brasserie, Morandi and Waverly Inn are outpacing last year's theatrical, mega-restaurants such as Buddakan, Craftsteak, Del Posto and Morimoto. [getting alot less for a little less money? sounds like inflation]

Dressed-Down Dining: The rise of these neighborhood restaurants has led to another trend - the dressing down of dining out. White tablecloths and dress codes continue to lose ground with the loss of fine dining establishments like Alain Ducasse, Lenox Room and March, with not a single formal restaurant among this year's crop of 234 newcomers. (emphasis added). [getting less for the same money? inflation]

Prix Fixe:  A number of top restaurants offer relatively affordable prix fixe lunch and dinner menus, and the popular biannual Restaurant Weeks, which we helped to create in 1992, allow diners to sample some of the city's finest at greatly reduced prices. [I can't speak to elsewhere in the US, but in NYC, Prix Fixe meals are typically the less expensive dishes; the "better" dishes come with a surcharge] 

Smaller portions, "lesser" prix fixe entrees, eliminating expensive accessories -- perhaps diners are paying the same amount, but getting less. That sounds like inflation to me.

courtesy of Jim Picerno

For a more generalized overview on inflation, Jim Picerno says "Don't Write Inflation's Obituary, Just Yet"

>

Sources:
Where the Dollar's Still King
By NINA ZAGAT AND TIM ZAGAT
October 10, 2007; Page A20
http://online.wsj.com/article/SB119198373154954370.html

Average Meal Cost Holds Steady, Prices at High End Soar
Zagat 29th Annual New York City Restaurants Guide
PRNewswire via COMTEX, 12:01 AM ET Oct 10, 2007
http://tinyurl.com/yt86vm

Wednesday, October 10, 2007 | 01:09 PM | Permalink | Comments (23) | TrackBack (0)
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Comments

My impression is that Pizza costs about the same, but drinks and wine cost substantially more as well as dinner in upscale restaurants. Drinks can cost 12 - 18 dollars now. I guess if you average it, there are probably 10 times the pizza places as upscale restaurants and you can do the math. I never get out of a restaurant these days at less than $100 per couple and I consider that a good price now.

Posted by: sailorman | Oct 10, 2007 1:41:32 PM