Get Real, Rocco

Hawaii restaurateurs say local customers are key to survival

June, 2004

Reality shows, such as NBC’s “The Restaurant” featuring New York Chef Rocco DiSpirito and Fine Living’s “Opening Soon,” have created high drama out of restaurant ownership. However, this heightened reality doesn’t shed much light on what it really takes to survive in the restaurant industry. Says Conrad Nonaka, director of the Culinary Institute of the Pacific and a 30-year restaurant industry veteran, “People see all the cars in the parking lot, they say, ‘Look at that guy, he must be making plenty money!’ But they don’t realize the commitment it takes. You have to do your homework.”

National studies show that 60 percent of restaurants fail within three years. Despite these odds, the industry is flourishing. The National Restaurant Association anticipates an average 4.4 percent growth in sales this year, its 13th year of growth. However, Hawaii’s restaurant sales are estimated to grow just 3.5 percent in 2004, a virtual tie with the slowest growing state, the District of Columbia (3.4 percent). Hawaii’s rate is only half of Nevada’s, which is expected to lead the nation with 6.8 percent sales growth. The association says, Hawaii’s dim prospects reflect its dependence on the recovering, but still relatively weak, tourism industry.

Restaurant owners are increasingly aware that, while tourists bring sweet returns, local residents provide sustenance. Like many Waikiki businesses, the new owners of Matteo’s restaurant want to increase their local market share. According to Jim Boersma, managing partner of Matteo’s and Zanzabar nightclub, “Matteo’s lost some of the local market when the theaters closed down. In contrast, about 70 percent of Zanzabar’s customers are local, so we’re going to introduce them to that restaurant.” Besides distributing free dessert or appetizer coupons to nightclub patrons, the new owners will cater food from the restaurant to the nightclub, and double the restaurant’s advertising budget.

Some restaurateurs are looking outside of Waikiki for growth. Mattson Davis, managing partner of Kona Brewing Co., chose to open its second restaurant in suburban Hawaii Kai. “It’s not about having one-tenth of 1 percent share of 6 million visitors and providing mediocre service. It’s about exceeding expectations and having people come time and time again. In Kona, our mix has always been 70 percent local and 30 percent visitor. Tourists will find us in Hawaii Kai, but we expect the percentage of locals will be higher than that.”

Les Hong, president of Hong Enterprise, Inc., which owns Charley’s Tavern, The Original Chuck’s Steak House and Lewers Street Loft & Lanai, will be courting suburbia on the other end of the island. “My family has been in Waikiki since 1950. But Kapolei is what Waikiki was in the 1940s and 1950s; it’s the fastest growing area on Oahu.” He believes that the area is ready for his restaurant concept. “My average check is $20, and I’ve got early-bird specials for families, a salad bar, cocktails and entertainment later in the evening. I think I’ll be filling a void there. We’ll be bringing Waikiki to Kapolei.”

However, as Davis found, what applies to one local market might not be applicable to another. On paper, Hawaii Kai looked more favorable than Kona – market research showed a denser population, higher family incomes and a neighborhood of community leaders. The glitch was that he underestimated what it took to reach customers in the new location. “I failed in getting the message out to the person here who cares about local, organic food,” he said, and in positioning the restaurant as a community gathering place. Like Matteo’s new owners, he is ramping up his advertising, and also sponsoring more community events. Says Davis, “When we were in Kona, we were a big fish in a little pond; now on Oahu, we’re a little fish in a big pond.”

In the end, he believes what made the restaurant successful on the Big Island will work on Oahu: “It’s all about making connections with the community.” At the end of the day, survival could depend on making those connections last.

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Maria Torres-Kitamura