MARCH is usually the cruellest month for Paphos restaurateurs, a time when cash flow is at its lowest. This year it’s even worse with regular patrons from the British expat community staying home, conserving their euros after losing 23 per cent plus in the value of their sterling pensions due to poor exchange rates.
The town’s once reasonably comfortable restaurant sector is predicted to go into freefall, with numerous establishments going under, leaving in their wake a mess of bankruptcies, debts and depression.
It’s not just its permanent and semi-permanent expat community that makes Paphos so vulnerable to the knock on effect from the UK recession. Its status as a favoured vacation destination for British families is also under threat. If predicted arrival figures starting to come through from UK tour operators prove correct, then the cruel winds of March will continue relentlessly blowing throughout the entire six months of our 2009 tourist season.
Other elements currently in place are also conspiring to push independent business into closing down.
One is that local restaurants are now in direct competition with hotels. In the past, tavernas that cleverly nestled close to hotels on the tourist strips relied heavily on regular evening traffic from these hotels. They have now all but lost this essential customer base. The introduction of ‘fully inclusive’ hotels, along with the move by most hoteliers to introduce attractive half board deals to guests, has dealt these family businesses a crippling body blow. Tourists tempted with a good breakfast, plus an evening meal offering a choice between eight starters, five main courses and three puddings will naturally be loathe to give up ‘what they have already paid for’, to then tramp out into the night in order to search out the delights of an authentic Cypriot tavern.
On the face of it, Paphos’ culinary future looks grim indeed. Yet when I talked about the year ahead to two ‘old hands’ in the local restaurant business, with over 50 years experience between them, I discovered both that the reasons behind many restaurants’ plight went beyond the current recession and also that the canny restaurant owner should be able to survive.
Phivous Roussis owns and runs three restaurants in Kato Paphos. He is recognised as a savvy, pragmatic businessman and, as an active member of the Restaurateurs’ Association, he is well placed to have a sound overview of the restaurant business as a whole. He believes that some restaurants are simply paying the price for their past greed.
“To be honest, over the years some owners have been taking customers for a ride, offering inflated prices and poor quality food, but in the end these venues usually closed down naturally, as the public cannot be fooled for ever,” he said
“Now though, good, well run places will soon go to the wall unless they can put in place some changes that will still get people coming through the door.”
Restaurants, he said, used to count themselves very fortunate if they had a regular clear profit of 18 per cent. “Now we will be lucky indeed if we can manage five per cent, and it’s going to need clear heads, hard work and innovation to even generate that level of profit.”
The lack of customers is obviously the main factor affecting profits, but owners are also being hit by rising costs across the entire spectrum.
“Rents are going up as landlords still seem oblivious to the fact that we are in a recession so this will see a few places close down. Then there are suppliers’ costs. These have also increased,” said Roussis.
He cited the example of the cost of rice for his Bombay Brasserie. What used to cost him one euro a kilo now costs over three euros a kilo. The good quality chicken he buys now costs eight euros a kilo and this is expected to rise further. The cost of bottled water, meanwhile, has risen by 20 per cent.
Restaurants have also been affected by the large numbers of companies offering wholesale products at uncompetitive rates. “On this small island there are over 1,500 companies offering wholesale products to restaurants. They each charge 15 per cent for delivery costs, yet most sell us the exact same thing as their nearest competitor. This we find ridiculous and feel they should now all join together and start offering a mutually beneficial service to restaurants etc,” said Roussis.
Ironically, the recession may make this more likely as food distributors are increasingly saddled with unpaid debts. “This recession might weed out a huge number of these 1,500. One distributor I know has at least seven million euros in outstanding debt owed by mainly hotels and supermarkets. Another has in his hands from January this year about 125,000 euros worth of cancelled cheques, and another has half a million outstanding.”
Roussis has instituted a wide range of cost-cutting initiatives in his restaurants to ensure he can weather the storm. “I have seen it coming and prepared myself as best I can, but have done so without damaging the intrinsic quality and value for money of the food served. And that’s the key. Start messing with cheap ingredients and you will lose the customers who can still afford to come to you. It’s the route to a swift form of culinary suicide in my book,” he said.
Roussis has cut overheads in several different ways. It used to cost him three euros for each tablecloth to be laundered. He now has his own laundry, a saving, he says. of 30,000 euros a year. Buying bread from outside used to cost him 15,000 euros. He now makes his own bringing his bread bill down to 2,000 euros. All the water used in the toilets is now recycled factory water, which saved 4,000 euros – 60 per cent down – on his previous year’s water bill.
“I’m also looking seriously at bringing in induction cooking rather than gas as it’s 75 per cent more efficient with less of a carbon footprint,” he said.
He buys his house wine from Greece where they offer better value and has cut the price to the customer of all his alcoholic drinks.
“That’s the whole point really, to try and do your utmost to get your own house tidied up and running properly, so you can then pass on all the benefits to diners, not the other way round.”
“What’s the best way to make a small fortune in the restaurant business?”
Answer: “Start with a large fortune.”
It’s a joke that Tex, the owner and chef of the popular Tex Restaurant in Kato Paphos, believes could ring truer than ever this year.
“No restaurateur is expecting to make profits this year so they will have to dip into their savings in order to keep the welcoming doors open,” he said. “We are taking a big hit, but, if you have worked hard all your life to create a professional well-run establishment, you will fight hard to keep it open and to the same standard. Drop the standard and you are dead, that’s the only rule that you cannot break.”
Restaurants like his have had to adapt their menus for customers watching their euros. “They don’t order three courses any more, so instead of the classic three courses we can now offer almost a starter menu for an exceptionally reasonable price,” he said. “The standard is the same but it’s just a less formalised manner of dining, and I think that’s a good thing. I have always believed that people come out to restaurants like ours to enjoy the company of friends and family and have fun. Although the food is important, it’s no longer seen as three courses with coffee and brandy, because customers just can’t afford that anymore. Giving customers the opportunity to spend less and not feel as if they will be frowned upon for doing so is vital.”
Two key overheads for most restaurants are rent and wages. Tex expects to pay a waiter 1000 euros a month plus tips and food, while a basic chef wants 1,800 euros minimum plus holiday pay
. At Tex’s restaurant a washer up is paid about four euros an hour working from 6-30pm until 11pm, while a cleaner, employed six days a week for five hours a day, is paid six euros an hour. Social security payments are are on top.
With overheads like these, Tex has had no choice but to let staff go. “Since Christmas, we have cut down drastically on our waiting staff. To be honest I would be far happier serving a small number of customers every night and just breaking even in order to stay open,” he said. “If we had 80 people every night we just couldn’t cope as the level of service would be below what we aspire to.
“No doubt about it 2009 will offer a classic Catch 22 situation for a lot of us in the business, but I still believe the ones that will survive this unprecedented economic storm will be those restaurants who learn to adapt to their customers needs and budget.”
Speaking to those in the trade there is full agreement that a lot of dead wood in the restaurant trade deserves to be cut back. The problem is that in the process a whole clutch of innocent suppliers who have provided their products on credit will also go to the wall.
No one I spoke to believed the situation would improve by the end of 2009 unless the value of the sterling pension for expats is restored to pre-euro levels, or the tour companies magically announce increased tourist arrivals.
Until then, the tourists we do manage to attract to Paphos will no doubt opt to stay put in their all inclusive buffet hotels, while expats will opt to stay home and nibble on pepperoni pizza, containing enough salt to cure a kipper.
