Almost two months into the Gulf Coast oil leak, the impact on people, businesses and the environment is deepening. Although it is difficult to precisely quantify what this means for the restaurant industry in the affected states and nationwide, the consequences will continue to evolve.
The oil spill negatively affects the restaurant industry primarily in two ways: the availability and price of seafood, and declines in tourism.
The closing of some seafood production beds in the area affected by the oil spill results in declining supplies, which in turn drives up prices. However, other seafood production areas in the United States - and abroad - are stepping up to fulfill demand, so the impact will be most severely felt in local areas. It is also important to remember that most of the Louisiana production areas remain open at this time.
Prices of select seafood items are elevated, making some restaurants review their sourcing options and make decisions according to what's best for their business and their guests. Chefs are also experimenting with substitutions to crab, shrimp and oysters to manage costs and deal with the challenging supply situation, which is a testament to the adaptability and flexibility that characterize the restaurant industry.
Average wholesale food prices were up 6 percent in the 12 months ending April 2010, according to Bureau of Labor Statistics data. Some individual commodities are showing substantially higher increases, though, including unprocessed shellfish (+23%), fresh vegetables (+50%), fresh fruits (+17%), pork (+22%), and beef and veal (+16%).
Despite rising food costs squeezing their already tight profit margins, most restaurant operators have managed to keep menu price increases to a minimum. According to National Restaurant Association research, menu prices increased 1.1 percent in the 12 months ending April 2010, which is low compared with historical standards.
While negative effects on tourism due to the oil spill are limited and localized at this time, the areas around the Gulf of Mexico that have been affected are seeing a serious impact. Tourists and business travelers generally account for 15-40 percent of sales at restaurants, making travelers a key foodservice customer demographic. While Florida is a year-round destination, the summer season is typically an important time for vacationers to visit Gulf Coast beaches, making the timing of the spill significant.
The National Restaurant Association is supporting restaurant associations in the Gulf states - the Florida Restaurant & Lodging Association, Alabama Restaurant Association, Mississippi Hospitality & Restaurant Association, and Louisiana Restaurant Association - and will keep a close eye on the situation as it develops.
