Bernardo M. Villegas
Recent Articles
Agriculturally Awesome
published: Aug 07, 2017




Chinese Appetite for High-Value Crops
published: Aug 18, 2017


Articles  >> more topics
Restaurant Business as Sunrise Sector

          The consumption-led GDP growth of 6 to 7 percent can be sustained by the Duterte Administration on the bases of OFW remittances, IT-BPO earnings, significant increases in infrastructure spending on the part of the Duterte Government and a more aggressive implementation of the Public Private Partnership (PPP) projects that languished during the last Administration.  These primary engines of growth have their multiplier effects on domestic tourism which now counts on some 40 million Filipinos discovering the many tourism destinations in their own country; the thousands of condominium and residential units being sold; and the increasing demand for office space by the BPO enterprises.  All the incomes generated by these sunrise sectors are benefiting first and foremost the Four F’s of a consumer economy:  Food, Fashion, Furnishings and Fun. 

         One of the fastest growing businesses that are associated with two of the Four F’s (Food and Fun) is the restaurant industry.  Using data from the Family Income and Expenditures Survey (FIES) of the National Statistics Office, it is estimated that Food Consumed Outside Home now exceeds 500 billion pesos annually.  Out of the budget for food of the typical middle-income household, some 20 percent goes to food consumed outside the home. Consumption of food either at home or outside the home will be the first to be benefited by the contemplated tax reform of the Duterte Government to reduce the income tax rate for those in the 200,000 to 1 million pesos range, the expanding middle class.  They are expected to spend the increase in their disposable income on eating out.  This refers not only to restaurants, cafes, canteens and the like. It also includes street stalls/kiosks that are in high demand in business districts with heavy foot traffic.  When one considers the nature of the fourth F (Fun), it refers to both entertainment and tourism which are highly correlated to food eaten outside the home.  Just consider the 40 million domestic tourists who usually stay in bed-and-breakfast facilities and have to take most of their meals in restaurants.  Also consider the indispensable role played by eating out in myriad of family celebrations or events from weddings to baptisms, birthdays to even wakes.  There are also the numerous office-related events that necessitate eating out.

           It is no surprise then that restaurants are mushrooming all over urban centers.  First, think of the more than one million workers in the BPO/KPO industry who usually take one or more meals daily outside their homes.  Then there are the households in which both husband and wife are working and have little time to do their own cooking, especially in the condominium units in which more of them are residing.  Marketing surveys in supermarkets reveal that less grocery items are being purchased because families eat out more often or at least resort to take-outs which are now an essential part of the business of restaurants, whether fast food or traditional.  The Philippines is becoming more and more an urban society with 60 percent of the population living in urban or “rurban” districts.  In fact, the real estate developers are consciously developing town houses or office towers surrounded by commercial centers that are logical venues for restaurants of all shapes and forms.  Many middle-class households are also developing a taste for foreign cuisine, whether Thai, Vietnamese, Korean, Indian, or other non-traditional Asian dishes in addition to the traditional Chinese, Japanese, Italian, and   Spanish culinary delights.

         A related sector is the accommodation/hotel industry.  Extrapolating from 2012 figures of the FIES, the total expenditure for accommodation services can exceed P9 billion pesos in 2016.  Until 2018, the hospitality industry is expected to grow by an additional 20,000 rooms to cater to increasing foreign tourists, mostly coming from the U.S., Japan and South Korea.  If we handle our relations with China more diplomatically, we may increasingly capture some of the 120 million Chinese who are taking trips abroad annually.  The middle class in China comprises some 225 households (about 675 individuals).  By 2020, the number will exceed 300 million households (900 million individuals) further reinforcing the fact that Chinese tourists comprise the Number One foreign tourists in the world (The Economist, July 9 to 15, 2016).  In handling the very delicate territorial dispute we have with China, we should keep these figures in mind.

         It should be pointed out, however, that a sunrise sector can have a good number of midnight or nightmare cases, i.e. that the restaurant business has a very high rate of failure.  It is the typical example of what the Harvard economist Joseph Schumpeter called “creative destruction.”  There may be many start ups but also many close down.  There is no substitute for a thorough study of location, market niche, management practices, labor requirements and most important of all the quality of the food served.  A favorable trend that I see is the increasing number of young people taking up culinary arts in some of the leading schools for chefs like Enderun, College of St. Benilde, the Culinary Arts Foundation of the Philippines that is sponsoring the Philippine Gourmet Tourism Movement, and other culinary schools.  There are also the initiatives of the technical training institutes like Punlaan in San Juan, Anihan School in Calamba, and Banilad in Cebu in training highly skilled and virtuous workers for the hospitality industry.  The graduates of these schools will be in great demand as the restaurant and hotel business becomes the next boom industry under the Duterte Administration.  For comments, my email address is bernardo.villegas@uap.asia.