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Waikīkī Restaurants Still Face Challenges Despite Crowds of Visitors and Locals

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The hotel and restaurant industries were the most impacted during the COVID-19 pandemic.

Although hotels are recovering due to the return of tourism, eateries are still having a difficult time.

"I've heard quotes in the neighborhood of 50% of the restaurants are still shut," said Sean Dee, chief commercial officer for Outrigger Hospitality Group.

The Outrigger hotels in Waikīkī have restaurants on their property, helping to feed their guests and other visitors. Dee says the challenges restaurants face impact the hospitality industry, which concerns him.

"Then with social distancing, you're really looking at 50% to 75% capacity at max," Dee said.

Even in good times, successful restaurants in Hawaiʻi operate on very lean profit margins. This is due to the usual challenges that eateries face — rent, food costs, utilities, and labor.

But for months, the COVID-19 pandemic shut down dining rooms across the state.

Businesses either kept their doors closed in anticipation of the virus subsiding, or shifted to strictly takeout. But even when restaurants shifted to takeout, it only made up a fraction of what they would normally make.

Those months of little to no income hit eateries in Waikīkī especially hard — primarily due to higher rents in the area.

"Tourism was reduced to under a thousand daily visitor arrivals for seven months of last year. So there are months and months of piled-up back rent that still remains to be addressed. And less than a third of restaurants received the Restaurant Revitalization Fund Grant," said Ryan Tanaka, co-owner of Giovanni Pastrami at the Waikīkī Beach Walk.

Tanaka says businesses have limited options when it comes to addressing rent. Ultimately, it comes down to making arrangements with their landlord.

"If they received financial assistance, if they were able to work out things with their landlord, that's great," he said. "If there are lingering issues, that becomes one major challenge. If you have the right landlord, it does make it a lot easier."

Tanaka says he was able to make an arrangement with his landlord. But acknowledged other restaurants aren't as lucky.

"When you have landlords who understand that in the end, we all want the same thing, we want everybody to come out of this pandemic whole — if we're all looking at that perspective, then there are solutions."

Tanaka also notes restaurants outside of a resort have a more difficult time attracting guests. He says eateries in resorts have a consistent source of visitors, regardless of occupancy rates.

"For example, I have a friend who has a restaurant at the Hilton Hawaiian Village, and even when they were at 20% occupancy he was still doing comparable to pre-COVID," he said.

"As these resort properties are increasing their occupancy during the summer, he is doing extremely well. So these various restaurants on resort properties have captive audiences."

Tanaka says for restaurants outside of resort areas, it is difficult to attract customers passing by and manage surges in demand.

Restaurants face added challenges in latest trends

Outside of higher rent, restaurants in Waikīkī face the same challenges other restaurants in the state are going through.

The Mina Group's STRIPSTEAK Waikīkī reopened its doors on July 1 at The International Marketplace. Nishaan Chavda, the group's senior operations manager, says a troubling trend he's seeing is people not showing up for their reservations.

"People are making multiple reservations at various restaurants, but not necessarily making the courtesy call, or even the courtesy text, in the event that they have to cancel," said Chavda.

"So we're trying to hold tables for customers that don't show up, and then actually turning away a lot of potential business."

Chavda says they try to be as accommodating as possible, but "no shows" have a big impact on restaurants.

"We're relying on people to show up, and we plan for people to show up," he said. "It allows us to properly staff the restaurant accordingly, and also prepare enough food. So it definitely hinders us as an operation."

Chavda says despite this trend, he tries to see it as an opportunity for his restaurant because it is in a location surrounded by big hotels.

"You have more places than others that are turning away people, because they're either doing only strict reservations or they're already full to capacity," Chavda said. "We're tying our best to be as accommodating as possible. And knowing that if six restaurants are turning away guests, and we have the ability to not — let's make it happen."

Another challenge is the recent increase in food costs, driven primarily by national inflation. In July, food costs in the U.S. jumped 2.4% year-over-year — adding to an overall 5.4% increase from a year earlier.

"Restaurants can't react fast enough to change their menu and increase prices," Tanaka said. "So with the price of the consumer remaining the same, and food costs going up substantially, it results in the vast majority of that cost being borne by the [restaurant]."

Another trend in the restaurant industry is staffing.

Nationally, there is a worker shortage, and restaurants are providing incentives to hire job seekers. However, health and safety concerns, as well as generous unemployment benefits, are cited as reasons for the shortage.

Locally, Tanaka and Chavda say a majority of their staff have returned to work, but there are openings at their restaurants. Tanaka says competition for job seekers is fierce.

"Restaurants are doing more to try to attract new talent, try to differentiate themselves among job seekers," said Tanaka.

He says his restaurant is offering perks such as slightly higher wages, hiring bonuses and incentives for showing up to an interview.

But Chavda says STRIPSTEAK isn't offering incentives, but are looking for individuals that believe in their company's philosophy and culture. He says before the pandemic, the restaurant's hiring process was rigorous.

"Staffing, in general, has always been challenging. And finding the right individuals with the commitment to excellence and wanting to be a part of something special doesn't happen overnight," he said.

Chavda says the company offers competitive wages to other restaurants, but there are opportunities for employees to make more in certain parts of the company.

Going forward

Despite these challenges, Tanaka and Chavda say they are both fortunate and thankful their restaurants are able to reopen and operate.

But going forward, Tanaka says he would like to see restrictions be eased even more.

"The increase in food costs and wages, along with the remaining social distancing requirements, it's still a challenge for these Waikīkī restaurants to come out of this very deep hole that was created by COVID-19," he said.

As daily new cases continue to stay in the triple digits, Tanaka says restaurants have had more than a year to train staff and implement safety protocols to protect customers and staff.

For Chavda, he says STRIPSTEAK is going to make the most out of the current situation.

"It's not in our hands, it's definitely in [lawmakers] hands. But we're going to hope for the best, but hope is not a strategy. So we're going to work every day as if we need to keep these doors open. We're going to work within our parameters, make sure we're creating a safe environment for our staff and our guests."

This summer, Hawaiʻi Public Radio brings you a closer look at all things Waikīkī, but not just the tourism numbers.

Outrigger Hospitality Group is an underwriter of Hawaiʻi Public Radio.

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