Steakhouse Glut Could Mean Lean Times

By DEBORAH BELGUM
Staff Reporter

No one visiting downtown L.A. needs to ask, "Where's the beef?" It's everywhere.

In the last few years, steakhouses catering to a resurgence in beef-eating diners have been popping up all over downtown, causing some restaurateurs to worry that the glut may lead to cannibalizing of each other's business.

Last month, Morton's of Chicago was the latest steak joint to enter the culinary fray by opening a 128-seat restaurant at Seventh and Figueroa streets, across from the Wilshire Grand Hotel, the second-largest downtown hotel.

Next spring, The Palm plans to open a 400-seat steakhouse a few blocks from Staples Center, to capture the concert and sports arena crowd.

That's in addition to the existing crop: the 80-year-old Pacific Dining Car at Sixth Street, Nick and Stef's Steakhouse at the Wells Fargo Center, Windows Steaks & Martinis atop the Transamerica Center, and L.A. Prime on the 35th floor of the Westin Bonaventure Hotel.

"When I came up with the idea of Nick and Stef's, the Staples Center was under construction and our only main competition was the Pacific Dining Car," said Joachim Splichal, who opened Nick & Stef's three years ago. "We are concerned there are too many steakhouses."

Steakhouses nationwide are having a hard time reaching the same profit levels they had achieved just a year or two ago. Typically, high-end steakhouses in metropolitan areas cater to corporate travelers with big-ticket expense accounts, as well as international and domestic tourists willing to splurge a bit while on vacation.

But travel by these two categories is down. Splichal said that since Sept. 11, his business at Nick and Stef's is off 6 percent from the like period last year.

While Morton's officials said it is too early to tell how its steakhouse will do in downtown Los Angeles, the chain has not been performing well nationwide. Morton's Restaurant Group Inc., the parent company of Morton's of Chicago, recently announced that it could post a loss for its fourth quarter ending Dec. 20. Through Dec. 9, the company's fourth-quarter restaurant revenues were down 16.1 percent from the like year-ago period. Prior to this year, Morton's of Chicago had not seen a decline in quarterly comparable-restaurant revenues since the first quarter of 1991.

Restaurant industry analyst Janet Lowder noted that while consumers are eating more beef, the steakhouse sector is under pressure.

"In the current economy, people are downsizing to lower-priced menu items when they eat out. And high-end steakhouses will not fare well for six to eight months," said Lowder, president of Restaurant Management Services.

So the downtown steakhouses are looking for ways to stand out.

Splichal points to his offerings of 12 appetizers, 12 sides and 12 toppings for potatoes in his distinctive environment. He also is adding a prime-rib cart in January, so customers in a hurry to attend the symphony, opera, theater or a sporting event can be served quickly.

Until two years ago, Windows Steaks & Martinis on the 32nd floor of the Transamerica Center was called the Tower Restaurant and served continental cuisine. But its location a few blocks from Staples Center prompted the name and menu change, said Windows' General Manager Scott Goldberg.

Goldberg is not blind to the arrival of other steakhouses. But he said business since October has been even with the like period last year. Holiday parties and corporate events are still being held atop the office building. "A lot of steakhouses don't have our view," he said.

The granddaddy of downtown-area steakhouses, the Pacific Dining Car, is counting on years of customer loyalty and its 24-hour schedule to keep things cooking. It also offers free shuttle rides to Staples Center and the Music Center, as well as car washing on the premises.

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