Houston's Pro-business Climate Cooks Up Texas-sized Recovery
December 7, 2009
Houston's Pro-business Climate Cooks Up Texas-sized Recovery
By Ron Ruggless
HOUSTON - Just a little more than a year after being buffeted by Hurricane Ike and the nation's credit collapse, this Texas port city is nonetheless in the midst of a restaurant boom.
As other cities struggle with the slow economic recovery, Houston is benefiting from strength in the oil-andgas and biomedical industries, a pro-business environment, and a dining culture that has led to dozens of highprofile openings by independents and chains this fall.
“The international culture of Houston, its vibrant port, energy base and medical center all provide stable cogs in a sometimes wobbly wheel,” says Bradley R. Freels, chairman and chief executive of the Midway Cos., which this year debuted the CityCentre One multiuse development in west Houston. The complex is home to such recently opened restaurants as Alex Brennan-Martin’s Bistro Alex and Café Rose, Straits, RA Sushi, Eddie V’s, the Yard House, and an upcoming Ruggles Green.
“We are not immune to the meltdown of the markets, but I do believe Houston has fared relatively well — relative being the appropriate word — because of the pro-business environment that is prevalent here,” Freels says, noting that Texas has no income tax and local and state budgets that are required to be balanced.
Unemployment also has stayed relatively low compared with the rest of the country. The Houston economy added jobs in both September and October, bringing its unemployment rate to 8.5 percent in October, well below the 10.2 percent national rate.
The local housing market also is bucking national trends. Prices of residential homes have
risen modestly in the Houston area this year. Meanwhile, the Foreclosure Information & Listing
Service of The Woodlands, Texas, said that year-to-date foreclosures in Harris County,
which is dominated by Houston, had declined 9 percent
as of November.
But while a large number of restaurants have opened or plan to in the next few months, Rene Zamore, director of the Greater Houston Restaurant Association, says some of her members still are feeling the impact of the downturn, including stalled sales.
“Houston is still feeling a little bit of the pinch,” Zamore says. “On one side you hear all these independent operators with big names in the city that are opening, but on the other side of it you have the small collection of guys who are struggling. They are really feeling the homeowners pulling back and not eating out as much.”
Still, many operators say the time is right to grab opportunities. Patrick Chiu, who owns the family-oriented Waza, opened in November a new 293-seat Sushi Raku in the once blighted Midtown neighborhood, just west of downtown Houston.
“There’s a lot of development in this area and an increasing amount of foot traffic,” Chiu says. “Everything is risk-taking, but this seemed like a good time to bring a restaurant to this area.”
Brennan-Martin, whose Brennan’s of Houston was destroyed by fire during Hurricane Ike in September 2008, plans to reopen that institution in January. In the meantime, he has opened Bistro Alex and Café Rose, a coffee shop, in the CityCentre development.
“This past year has been very, very hard,” he says, “but many of these developments were planned before both the economic collapse and the hurricane. But we’re seeing many positive factors in the economy right now.”
Other established operators are still working to recover from the storm. Chef Bruce Molzan
will be reopening his Ruggles Grill, which has been closed since Hurricane
Ike in 2008, as well as expanding his more casual, greencertified Ruggles Green concept.
Robert Del Grande earlier this year closed his venerated Café Annie and moved into a new
space nearby, renaming the restaurant RDG and expanding the more casual part of the restaurant
as Bar Annie.
“We’re seeing much of the business shifting to the more casual part of the restaurant,” he says. “But the economy hasn’t severely changed how many times a week people are dining out.”
Chef Bryan Caswell and partner Bill Floyd of PF&B Management have expanded their popular Reef restaurant with a gourmet burger-and-wine concept called Little Bigs and just opened an Italian restaurant called Stella Sola, Italian for “Lone Star.”
“Business has really been very good despite the recession,” Floyd says. “We plan to open another of the Little Bigs burger concept, which really seems to appeal to consumers because of the economy.”
Meanwhile, national restaurant operators are venturing into the Houston market.
Yard House of Irvine, Calif., on Nov. 21 opened a 9,500-square-foot store at the CityCentre. Jennifer Weerheim, vice president of marketing for Yard House, said the company has had Texas expansion in its plans for some time.
“Houston was on our map long before the economy took a turn,” Weerheim says. “We know that for the long term it’s a good place for us to be.”
Yard House also just opened in San Antonio, and is looking at sites in Dallas and Arlington and Austin, Texas.
“Houston was a good fit for us,”Weerheim says, “because it’s a growing population, and the demographics of the center fit our demographics, which rely on lunch, happy hour — which is over 20 percent of our daypart — dinner and even late-night.”
Houston was the seventhlargest metropolitan area in the United States in 2005, and it is expected to move into fifth place by 2025, adding almost 2.6 million people to reach a population of nearly 7.9 million, according to projections based on U.S. Census data by Bizjournals.
Chris Fannin, vice president of operations for the Strip House restaurant in downtown Houston, credits Houston’s economic stability to continued growth in the energy and gas sector.
“A lower cost of living for residents allows for a greater amount of disposable income to spend on dining and entertainment,” he adds. “The vast pool of talented hospitality professionals in the market and the city’s entrepreneurial spirit has enabled us to maintain a dining segment that is diverse and rich with quality offerings.”
The downtown Strip House has “already seen an increase in the frequency of our regular guests and special-occasion dining since the summer, but I see the current economic situation impacting sales until the second quarter of 2010,” Fannin says.
He adds, “I feel we will start to experience an increase in business travel and convention business in the second half of the year, and we’re optimistic about comp positive sales overall for 2010.”
Other steakhouses, such as a new III Forks that opened nearby, are increasing competition as are new restaurant entertainment venues downtown, such as the recently opened Lucky Strike Lanes in a downtown shopping mall. Independent operators also are investing in new operations. Among them, Jerrell “Rusty” Powers is opening Byrd’s Market & Café in downtown Houston.
“The economy, at least in downtown Houston, seems to be showing strength,” says Powers, whose new store features prepared meals to go as well as limited grocery items and serve-in meals. “If you have a concept that fits the market,” Powers says, “it can work well in this economy.”
Berge Simonian, owner and founder of Salata Create Your Own of Houston, says, “Comparing ourselves to what we see in the rest of the country, we believe the market in Houston was spared the worst effects of the recession.
“In fact, Salata stores have been performing well, even showing a moderate increase in our sales compared to the same period last year,” he says.
Houston customers, however, are becoming astute shoppers, Simonian says.
“What we have become very aware of in the latter part of this year is how restaurants such as Subway, Applebee’s and T.G.I. Friday’s are introducing and being driven by huge discounting,” he says. “The result is a noticeable increase in bargain hunting, meaning more diners are making decisions based on what discounts and deals restaurants are offering.
“This was very apparent during grand-opening week for three of our stores in early November,” he says. “As a one-day promotion, we discounted our salads by 50 percent and more than doubled our customer count.”
Simonian adds: “There is a general reluctance among consumers to spend the kind of money for entertaining and dining that they did a year ago. This is true even among people who have not had their incomes or jobs directly affected by the economy, and that has created a negative situation for the high-end and even moderate restaurants. People have pulled back on their spending and don’t want to be seen as insensitive to what is going on.
“On the other hand, Houston is still a city where dining out is as much a way of everyday life as it is some kind of treat. Places like Salata, where an average ticket is $10 to $12, are not only retaining most of their old customers, but also are seeing an increase in customers who were used to spending a lot more.”
The number of gourmet cocktail lounges has increased as well. Bobby Heugel, who consults on a number of cocktail menus at restaurants throughout the city, in March opened with partners the Anvil Bar & Refuge, which features cocktails in the oldfashioned tradition, with housemade bitters and fresh juices.
“Houston has seen what I call the ‘Food Network’ effect,” Heugel says. “There’s an increased emphasis on food and cocktails.”
In October, the Houston Landmark Hospitality Group opened the “gastro-lounge” Hearsay in the city’s second oldest standing commercial building in the downtown historic district. The limited menu by executive chef Pedro Silva accompanies cocktails from local mixologist Britton Douglass.
Michael Kramer, executive chef at VOICE restaurant in the Hotel Icon in downtown Houston, says operators are also becoming more savvy at producing special dinners either to promote cocktails or to tie in with local events or products.
As the decade comes to a close, Houston anticipates more restaurants to open. Chef Randy Evans plans to debut his Haven Restaurant in mid-December.
“Haven has been three years in the making,” he says. “We are building a restaurant from the ground up and purchased the property before the downturn in the economy. The bank was happy with our profit model, so they gave us the green light to move forward. With our aggressive wine pricing, we’re offering a valueadded experience that people are looking for. Houstonians still want to dine out, try new places and have a good dining experience, but at a lower price point.”
The economy does pose challenges, however, Evans notes. “Financing terms are much more difficult than they have been in the past,” he says. “Today there are more constraints with building. Now external companies are inspecting each step of the build-out. ... Banks want to know they have equity if they have to deal with foreclosure later.”
Still, Evans thinks Houston is poised for the rebound.
“We have a bright future ahead,” he says.
