Frugality campaign sparks change in high-end catering

Li Hongjin, manager of an upscale restaurant in north China's Shanxi Province, has grown frustrated over business in the last year.

"We used to have VIP tables, now we have to give them up," said Li, manager of Juguangju Hotel. "We must turn to the ordinary when the business can barely survive."

The change in business coincided with the intensified anti-corruption campaign by the Communist Party of China (CPC).

Li's hotel is located in Pingyao County in central Shanxi, renowned for its well-preserved ancient city. The hotel has been designated for official receptions by the government since 2008.

His business was greatly impacted last year, spooked by a 60 percent decrease nationally in official receptions compared with the previous year.

Luxury catering services throughout Shanxi are facing a chill. Overall turnover in the industry fell 20 percent compared with 2012, according to the provincial statistics bureau.

According to a survey from China Cuisine Association (CCA), revenue of catering services in China only achieved 9 percent year-on-year growth in 2013, a 21-year low. The situation for high-end restaurants is especially bleak.

The catering industry in China has developed steadily since 1978, when China embraced economic reform, and has become a crucial component of the country's service industry.

However, the CCA survey reveals deep changes are on the horizon in the Chinese catering industry, both in market structure and business model.

"The business will face some huge reshuffling in 2014," predicted Tu Jianqiu, executive president of the catering business association in Hengyang City in central China's Hunan Province.

Some high-end restaurants have even gone out of business.

"Last year, over 40 percent of luxury hotels and clubs in China's first-tier cities were closed," said Tu.

"As China clamps down on government-funded receptions, heavy losses have been inflicted on lavish catering services," said Feng Enyuan, CCA's vice chairman.

STRATEGIC SHIFTS

As a result, other high-end restaurants in the country have struggled to shift their business patterns. Some have turned to the general public for profits. Home-style cooking, for which profits are slimmer, is now taking the place of haute cuisine. The Youth Restaurant in downtown Taiyuan, capital city of Shanxi, for instance, is selling dishes at big discounts to meet diner demand.

High-end restaurants have slowed down their expansion, while others have shut down branches. Companies have started alliances and associations to cooperate in investment, promotion and business operation.

"The campaign hurt high-end restaurants, but the reshuffle is necessary," said Yan Kaixian, chairman of Cuisine Association in Taiyuan. Luxury catering services are not the way to go, she said, as they have led to a huge waste of public resources.

Depending on luxury receptions from the government is not sustainable, the expert noted, and the industry's growth should count on obeying the rules of the market.