Hong Kong's Omicron restrictions could be the end of the road for many restaurants, say industry insiders

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Hong Kong’s Omicron restrictions could be the end of the road for many restaurants, say industry insiders

Hong Kong’s battered catering industry, which braved through the initial storm after the city imposed stringent restrictions to contain the coronavirus pandemic, expects the latest measures to battle the Omicron variant could lead to a spate of closures.

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While restaurant operators were trying to offset the loss from curbs imposed on their dine-in business by concentrating on food deliveries, this may not be enough as this has its own challenges, industry insiders said.

The new dining restrictions that came into effect on January 7 were an unwelcome surprise for Lan Kwai Fong Group, which had just experienced revenue growth in the final three months of 2021.

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“We all thought that we were through the worst of it and were making up for the losses of the previous two years,” said Jonathan Zeman, CEO of LKF Group, the biggest bar and restaurants landlord in Hong Kong’s Central district. “Now, I really think, for a lot in the sector, this means the end.”

Hong Kong’s Omicron restrictions could be the end of the road for many restaurants, say industry insiders

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Jonathan Zeman, CEO of LKF Group, pictured in June 2021. Photo: K. Y. Cheng

Following a local outbreak of the more transmissive Omicron coronavirus variant, Hong Kong reimposed tough anti-pandemic measures, including banning dine-in services after 6pm in restaurants and shutting bars altogether. The measures will be in place until at least January 20. The struggling catering sector expects losses of up to HK$8 billion (US$1.03 billion) as a result of the abrupt return of tough anti-pandemic restrictions.

LKF, once a prime tourist destination, had been enticing locals to spend more on night outs at their clubs and restaurants.

“People were generally out and willing to spend more, as they weren’t going on any vacations and had more savings,” Zeman said.

One of the most notable trends was the performance of LKF’s three Japanese restaurants.

“A lot of Hongkongers enjoy travelling to Japan regularly, so when they can’t do that, they’re more willing to go out for Japanese food,” added Zeman.

The sector capitalised on the buzz, with small and upscale Japanese restaurants sprouting up across the city, offering authentic Japanese menu options like omakase, in which a chef selects the customers’ dishes.

Now, under new restrictions, these niche dining restaurants have to find a way to transition to breakfast, lunch or online delivery menus. But delivery of high-end food and drinks presents challenges.

Black Sheep Restaurants, which operates more than two dozen restaurants in the city mostly in SoHo, Central and Wan Chai, has its own GO delivery service for its outlets.

However, the revenue from even their busiest delivery nights across all restaurants does not stack up to the revenue one restaurant can pull with indoor dining, said Akbar Butt, chief operating officer at Black Sheep Restaurants.

“You cannot deliver the atmosphere, the hospitality of the servers, the knowledge of the sommeliers, you just cannot recreate the magic of a buzzing dining room inside a paper bag,” he said.

However, some companies are finding ways to bring Hong Kong’s fine dining to the delivery space.

Fung Hing-wa, a professional footballer for Hong Kong’s Eastern Long Lions football team, started Homemakase during the Covid-19 lockdowns in 2020 when he was unable to practise.

The 10-person company delivers omakase boxes and sends chefs to customers’ homes to cater. Since the current lockdown restrictions were imposed, the company said it has experienced a near 500 per cent increase in inquiries about its services.

Smaller, digitised establishments that are more acquainted with delivery are expected to perform better during the current dining restrictions, according to Simon Wong Ka-wo, the president of the Hong Kong Federation of Restaurants, which represents more than 8,000 eateries.

Delivery currently accounts for about 30 per cent of the sector’s total turnover, he said.

“Larger restaurants were only allowed to seat six people per table, which was already far too little, and a lot of restaurants were closing down,” Wong said, adding that some 2,500 restaurants had closed over the past two years.

While new restaurants have opened, they have generally been smaller with less seating capacity, meaning they also employ less workers, he added.

On Friday, Chief Executive Carrie Lam Cheng Yuet-ngor unveiled a HK$3.57 billion relief fund to help businesses affected by the tightened social-distancing rules, of which HK$1.76 billion is earmarked for the catering sector. Restaurants can start applying for aid from Monday.

“It [aid] will probably just be enough to pay a month’s rent, but not enough to pay salary and other expenses,” said Wong.

“Businesses will try their best to stay afloat, but with quiet months in March and April, the peak of closures for restaurants will be during these months.”

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