Foie gras should be sold in restaurants for HUF 10,000 in order to be profitable, but it is impossible in the current economic client as no one will pay the price. Therefore, it has been removed from many restaurant menus. This is just one of the many worries owners have to face all across Hungary. Numerous units are closed and may close in the future, permanently or temporarily. The sector is facing brutal increases in energy and raw material prices. Now, it is compounded by falling demand, since people cannot afford the soaring costs.
László Kovács, president of the Hungarian Hospitality Industry Association (MVI), illustrated to Index the skyrocketing expenses and explained the difficulties owners are facing while Balázs Csapody, a gastronomic expert and owner of the Kistücsök Restaurant in Balatonszemes, urged restaurateurs to hold on.
Some dishes have been removed from the restaurants’ offerings because they just proved to be too pricey for guests. For example, HUF 10,000 (EUR 25,03) would be the price range at which it would be worthy to have foie gras on the menu. But who could afford that nowadays? The purchase price of this Hungaricum has jumped to HUF 20-25,000 (EUR 50.07-62.59) per kilogram. At that price, even a hardcore foie gras lover would rather give up the dish. Balázs Csapody, gastronomic expert, restaurant owner and president of the Pannon Academy of Gastronomy, opened up to Index. They would rather take foie gras off the menu than serve it at such a high price.
The biggest difficulties for restaurants are not just the rising cost of raw materials and energy, but also the rising labour costs. In terms of raw materials – whether we look at the food or the beverage side – there has been an average price increase of 40-50 percent, Csapody said. It’s easy to calculate that a restaurant’s electricity bill, which used to be around HUF 1.5 million, can now rise to HUF 3.5-4.5 million. While for gas, the monthly cost of HUF 235,000 rises to HUF 2.35 million.
“Even in the autumn, there were many, otherwise busy, restaurants that were glad to come out at zero with a full house.”
Rising energy prices have left a painful and lasting scar on the sector, which is now compounded by the battle with suppliers. The utility company’s response was to either pay the bill or they would stop providing electricity. Therefore, those who benefited from this situation are the ones who thought ahead and invested in alternative energy sources before the energy price boom.
A great deal of effort should be made to optimise staffing levels as hiring redundant staff is not sustainable. However, skilled staff should be valued and rewarded, depending on their employees’ abilities and inflation.
Political and economic entities have indicated that 2023 will continue to be a difficult year, and the situation is not expected to improve anytime soon. Closures are to be expected in the majority of restaurants that the owner sees primarily as an investment and is not driven by the love for the profession.
The cost increase due to the price of energy and raw materials cannot be fully passed on to the guests. Otherwise, they would rather eat at home. Excessive price increases can lead to a drastic reduction or loss of customers, just as in the case of spas and baths. As we wrote earlier, the problem is that the current 10-12 percent rise in ticket prices does not solve the deficit caused by rising costs.
According to the MVI survey, in the three-year period from June 2019 and June 2022, the number of restaurants and canteens closed was 1,540.
The question is whether someone who ceases their activity for a long period of time can ever revive their business afterwards. Losing the workforce is another pressing issue. Restaurants have two options: either to close permanently or to stay open and absorb the higher overhead and retain the workforce, while relying on attracting customers from the closing units.
Tourism and catering employers had hopes that most of the workers who lost their jobs during the pandemic would return when reopening. But according to László Kovács, this happened only in a modest number of cases.
Hungarian gastronomic tourism has an important role on the hospitality map since it is one of the fastest-growing sectors. This is why top gastronomy Michelin-starred restaurants are feeling the effects of the crisis less, according to László Kovács. The publication of the Michelin Guide Hungary has played a huge role, added Balázs Csapody.
On one hand, it is a big relief the government has merged the pockets of the Széchenyi Recreation Card. The amounts charged in the former accommodation, catering and leisure sub-accounts are now added together, said László Kovács. On the other hand, people try to cut their expenses and rather spend this amount on groceries and basic needs.