The oversupply ‘bubble’ in the Dubai food and beverage sector is now bursting, leading many outlets to close down, according to the chief executive of Crystal Group, which owns a number of restaurants, lounges and bars including 40 Kong, El Chiringuito and Em Sherif.
Speaking to Arabian Business, Mazel El Zein said he is living what he ‘feared would happen,’ referring to oversaturation, stagnant demand and low consumer spending in the market.
“In every bubble, first, it bursts, there is blood on the streets, businesses close down, it takes time to clean, and then demand picks up. [But] you have a few players left,” El Zein said.
‘Amateur’ restaurant owners looking to make a quick buck have largely contributed to the oversupply, leading to inflation at almost every level, from rents to payrolls and staff accommodations, he added.
“Today, we are paying the consequences of good and bad competition that come to the market and take away from your share for a few months. It’s short term, but it hurts. It’s the typical bubble, where everyone wants to invest in the same thing. And then, at a certain point, there are no more buyers,” he noted.
Despite many already closing down, the oversaturation will continue past 2018, he said, as supply is expected to increase by 17 percent by 2020, according to reports by property consultancy JLL. The reports predict a fifth of mall space will be taken up by F&B outlets in the next 10 years.
El Zein argues that the market will get worse before it gets better after 2020, when only the best players will remain.
“Don’t misunderstand me. It’s a very profitable market. It’s the number one in the region and will continue to be, but it is a [maturing market] and it will naturally select the best. It’s not easy like it used to be. To succeed in the F&B sector today, you need to be the best. You can’t afford not to be,” he said.
Part of being the best includes refraining from transferring VAT costs, such as implementation, onto customers.
“You can’t increase your prices because today’s customer is very picky, or at least, I wouldn’t recommend it,” he noted.
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