This Week on The Street
August 6, 2018
Atlanta Restaurant Real Estate
This Week on The Street “A more or less regular compilation of news, factoids, and observations”
By Harold V. Shumacher
It’s interesting, to me, how a phrase or word can become shorthand for a whole variety of descriptions. I can’t tell you the number of times landlords and developers have said “When Jimmy Carter was president” as a euphemism for the increase in inflation and the need for generous annual increases in rent. (Failing to note that was more than 45 years ago.)
The same thing may be happening today with the word tariff, which has come to mean uncertainty and increases in material costs when bidding on construction projects. In fact, according to several contractors we spoke to at Bis Now’s annual Hospitality Seminar, they are all hedging their bids, anticipating continued increases in labor and material costs, often as much as one percent per month for the project construction period. According to one insider more and more companies are bidding on public sector construction projects with a dwindling number of privately financed projects on the horizon.
In the past month alone, fifteen companies bid on the soon to start Georgia State Convocation Center (at the old Braves stadium site.) A year ago there would have been five bidders and two or three of whom would have been invited to participate.
The expert panel, comprising a half-dozen operators of multiple hotel brands, primarily in the Southeast, made some interesting observations including that there are likely more good days behind us then ahead of us, that the development curve for hotel projects is now approaching two years in many areas, making predictions even more elusive and that hotels have to provide more than a place to sleep if they want to compete with alternatives like airbnb. Said one, “if all we’re providing is a bed we’re in trouble, there has to be a unique experience to warrant our business” though quickly adding that in major business markets hotels remain the venue of choice whereas, in resort, vacation and smaller markets air bnb, bed and breakfasts and independent hotels may carry more sway.
An example of an experience is the recently opened Hotel at Avalon, a Marriott brand. The appeal here, according to Mark Toro, North American Properties’ CEO, who negotiated the deal, is that guests want an urban experience and like stepping out their door and being somewhere. Said Toro, “guests like to step outside the door and be where they’re going rather than getting into a car, or cab, to go somewhere else.”
A big part of the draw is lively bars and restaurants on the properties. As fine dining restaurants become an endangered species we wouldn’t be surprised to see a return of upscale restaurants in hotels where shared occupancy costs, a built-in clientele and a desire to separate from your competitors may be an impetus to partner with local operators.
One group that has gone that route is the Fifth Group, with their operation at Avalon and a soon to open Ecco adjacent to the Marriott AC at Phipps Plaza.
Robbie Kukler, Fifth Group Founder was among a restaurant panel that also included Fred Castellucci, Ryan Pernice and Garron Gore, Food and Beverage Director for the HVMG hotel group. All four agreed that restaurants are an increasingly important component for hotels but also admitted that predicting what the public wants is a big challenge. Noting the increased sophistication diners bring to the table, greater expectations based on travel and the general foodie culture that exists if you’re wrong it can be an expensive mistake with build outs easily reaching into the seven-figure stratosphere.
When pressed to describe the restaurant world the answers tended to be more specific and local than global, noting that in every market there are pockets that do well while other areas suffer. The continued increase in competition-over 120 new openings in metro Atlanta in the first quarter of 2018 alone- was another hot topic, the panel all agreed that a shakeout is likely inevitable. While the easy math is to say the lowest quartile will bear the brunt of the closings it was noted that established restaurateurs like Billy Allin, owner/operator of Cakes and Ale and Jay Swift, at Fourth & Swift, both highly regarded operators have recently closed as well.
Recent Transactions for The Shumacher Group, Inc. include
Rina, Israeli Restaurant, Ford Factory Square
Egg Harbor Café North Point Parkway
Sales of the following Businesses
Flip Burger, West Midtown
La Hacienda Vieja, Marietta
Tiki Cafe, Buford
Hook Line & Schooner, Smyrna
Sale of Property
Cru Wine Bar, 620 Glen Iris Lofts
For a more comprehensive list please visit our website www.shumacher.com