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Sun 29 Jul 2018 02:40 PM

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High minimum spends 'consequence' of saturated Dubai market, says F&B boss

Rates are 'legitimate' practice to secure restaurant revenue, said Mazen El Zein, CEO of Crystal Group

High minimum spends 'consequence' of saturated Dubai market, says F&B boss
Mazen El Zein, CEO of Crystal Group.

Market oversupply has led F&B venues in Dubai to implement minimum spending requirements ranging from AED250 to as high as AED880, as well as 50-100% booking fees, in order to avoid empty tables, according to the CEO of a Dubai-based hospitality firm.

Speaking to Arabian Business, Mazen El Zein, CEO of Crystal Group, which is responsible for concepts including rooftop restaurant and bar 40 Kong and beach lounge El Chiringuito, among others, said a wider variety of dining options have seen customers double-booking venues, causing last minute cancellations and financial losses for restaurants.

“If you want to understand why venues are doing this, you need to analyse what pushes them to [introduce] such policies. The question is, ‘Are customers, because of oversupply in the market, basically trying to secure themselves by several bookings and choosing last minute?’ Because this was absolutely not possible a few years back. I think that’s one of the consequences of oversupply in our market,” he said.

El Zein said minimum sends and booking fees might not be the “right way” to deal with client bookings, though he agrees it is a “legitimate” practice to secure revenue.

“It’s not about the right way. It is legitimate for a place that has a very big waiting list to secure that the client is serious about his booking, because you have this trend where many people book in 5 or 6 places on a Thursday night and they end up going to one place. At the end, it’s the venue losing,” he said.

“While I’m not necessarily a fan of minimum spends, I can definitely understand that on certain days, especially the weekend, and for big groups, the venue needs to guarantee that in case of no show it doesn’t lose a lot of income. If it’s a table of two, four or six, maybe you can fill it up last minute. But if it’s a table of 20 on a Thursday night, what can you do?” he added.

The Crystal Group applies minimum spends and booking fees on a case-by-case basis, depending on the venue, date and DJ performing. The rates range between AED250 to AED300.

“I’m a partisan of, in case of no shows, to charge a booking fee, which is communicated to the client,” El Zein said.

While several F&B concepts in Dubai are requested customers to pay 50-100% deposits for their meals upon reservation, dubbing it a ‘booking fee’, El Zein said he opposes the practice, debiting certain amounts only in cases of no shows.

“Of course [we do] not take a 50% [deposit], unless it’s event-based or we have a very big star performing. You should charge the booking fee and not a minimum spend in case of a no show, but that’s only in the case of a no show. You don’t take anything as a deposit. You take the card details and authorisation to debit in case of a no show,” he said.

The CEO added that only market leaders and top tier venues could get away with the practice of minimum spends and booking fees.

“Today, only the leaders can do such a thing in such a market. It’s a thin line… if you’re not a leader, you can’t do this. This will turn off the customer. If you’re a leader today, you need to do this, because many people are just basically fishing around for a deal,” he said.

Too high

Similarly, Tony Habre, founder and chief executive of Dubai F&B management and concept creation firm Addmind, said high booking fees do not represent the initial concept of hospitality.

Addmind boasts several venues across the UAE and Lebanon, including casual Italian restaurant Matto Dubai, rooftop lounge Iris and social restaurant and bar Indie.

“A 100% upfront deposit for a dinner reservation is too high, and we don’t implement this practice at Addmind. I agree with implementing a booking fee on busy days/nights, but I don’t think this fee should exceed 30-40% of an average, expected check as this doesn’t fall under the hospitality concept,” he said.

Habre told Arabian Business in 2017 that customers should not “need to eat with AED1,000 to have good food”.

“All over the world, the best places are not that expensive anymore. We’re going to hit the market where any person can spend AED300 but have the service and the quality of an outlet where you usually pay AED700,” he said at the time.

He added that expensive dining is an issue Dubai needs to solve, explaining that in major cities such as New York or London, few people spend over $200 per person on eating out.

Moreover, top Dubai lawyer Essam Al Tamimi said it is ultimately the consumer’s choice to partake in minimum spends or booking fees.

“The civil code offers consumers the freedom to contract. Subject to certain provisions, as long as Party A makes an offer and Party B validly accepts the offer, a contract is formed. Therefore, a minimum charge is part of the contract that the parties either agree to enter into or not. The same applies to bookings where customers are informed in advance of the policy and the applicable fee,” he said.

According to the annual 'Mapping the world's prices' report by Deutsche Bank, Dubai ranked the world’s 7th highest for dinner costs for two at $53.90, with the most expensive being Zurich at $72.30 and the cheapest being Manila at $14.90. The report highlights the cost of living in around 50 major cities.

Smart restaurants

Jumeirah Group’s CEO Jose Silva also predicted restaurants in Dubai will adapt ‘smart’ and more affordable pricing due to changing consumer behaviour, adding that customers will ultimately decide on restaurant prices.

“I do think restaurants will become more and more affordable. Great restaurants will succeed if they [retain] smart pricing or more affordable pricing. In my past, I have systematically lowered [rates] of overpriced restaurants. Eventually, the consumer will decide if that price is comfortable or not,” he said.

Silva added that guests with high spending power will also avoid paying for highly-priced restaurants if they lack value for money.

“If [consumers] are not comfortable [with prices], even if they could actually pay, they will choose to be frequent where they feels there is a shared value for money through regular consumption,” he said.

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