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9 Mar 2020

Services

Restaurant Business, 2020: Turnover to Decline by THB26.5-36.5 billion due to COVID-19 Fears (Current Issue No.3090)

              The coronavirus (COVID-19) epidemic has had a broad impact on many industries. One of the major casualties is the restaurant business because the slowdown in the number of international tourist arrivals to Thailand has adversely affected food and beverage spending, which accounts for roughly 15 percent of the total spending by all foreign tourists visiting Thailand (THB1.93 trillion in 2019).

                   Growing concerns about the COVID-19 outbreak and sluggish economy have undermined purchasing power and confidence of consumers, causing them to avoid dining in crowded places such as shopping malls and tourist attractions, as well as tightening their spending on eating out.

                    The impact of the COVID-19 epidemic and slowing economy on the restaurant business varies depending on the type of restaurant: 1) Those that will likely be the hardest hit are full service restaurants, which offer fine dining and table service largely at shopping malls and tourist attractions. This is not only due to a substantial drop in the number of foreign tourists, but also the fact that local consumers have avoided dining out; 2) Those that will be moderately affected are limited service restaurants[1] and eateries that also offer food delivery service. Although their turnover may be adversely affected as much as that of full service restaurants during 1H20, their food delivery service may help them diversify risk and ease such impact on the turnover somewhat; and, 3) Those that will likely be the least affected are restaurants with turnover derived mainly from food delivery or food vendors offering takeaway service because they have a diverse range of sale channels. In addition, concerns over bleak economic prospects may have forced Thai consumers to purchase the best value for-money dishes from such restaurants.

               To create new market opportunities and ease the above impact, restaurant operators may have to make the following adjustments: 1) Introduce a new sales channel i.e., takeaway or food delivery. If restaurants are located near business or residential areas, they may offer food delivery service for group orders. In so doing, they may have to adjust certain operational systems of their staff and offer reasonably-priced menus in line with weakening purchasing power; 2) Step up in-store sanitation efforts to boost consumer perception of restaurant cleanliness; and, 3) Reducing certain inventories to maintain liquidity.

            ​         We at KResearch expect that restaurant operators will likely experience more challenges during 2020, including the COVID-19 outbreak that will not only hurt receipts from foreign tourists, but also purchasing power of local consumers. However, it is expected that the restaurant business overall may improve somewhat during 2H20 as the impact of the COVID-19 and anemic economy will likely ease. Given this, we have revised our 2020 turnover forecast downward for the restaurant business to THB402-412 billion from the THB439 billion projected at the beginning of 2020 or by THB26.5-36.5 billion.



[1] Limited-service restaurants have an ordering facility where customers can place their orders and obtain food to go in a few minutes. Limited-service restaurants can be classified as fast food restaurants or certain types of Asian restaurants.


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