What Troubled Economy?

No Problems Yet for Hill Eateries

Posted October 20, 2008 at 3:49pm

Are happy days here to stay?

On Capitol Hill, it sure seems that way.

Take, for instance, Zack’s Taverna on Pennsylvania Avenue Southeast. Like many restaurants on the Hill, this Greek eatery seems to have kept at bay the economic crisis afflicting the rest of the country.

“We’re lucky. Our business is good,” said James Nash, the restaurant’s co-owner. “When there’s a crisis in the nation, people come here.”

Business is even better at Charlie Palmer Steak on Constitution Avenue Northwest, where sales are on track to be “slightly higher” than last year, according to general manager Philip Gates.

“Our booking rate is at an all-time high. … We’ve been growing steadily since we opened,” Gates said. “Especially through the busy campaign season, we’ll be finishing strong through 2008.”

Although restaurant sales nationwide were down 0.5 percent in September from August, the Capitol Hill restaurant community continues to fare well, said Bruce Grindy, the chief economist at the National Restaurant Association.

Capitol Hill stands out from the rest of the city in that it has two distinct customer bases: Congressional staffers and Capitol Hill neighborhood residents. Staffers (and those connected in other ways to Congress, such as lobbyists) tend to fill the seats at lunchtime, while residents come during evenings and weekends. And this year, Capitol Hill had a lucky break, with Congress sticking around to pass the Wall Street bailout bill.

While the economic crisis has clearly been tough for the rest of the country, businesses here have stayed steady for a longer period.

Former Speaker “Tip O’Neill [D-Mass.] said that all politics is local,” Grindy said. “Well, the same thing can be said about restaurant economics.”

He added: “There may be seasonal down periods when Congress is not in session, but in general, Capitol Hill restaurants have the ability to draw from a relatively stable pool of customers.”

Still, that doesn’t mean that there haven’t been difficulties — and the uncertain road ahead is creating concern for many local establishments.

“I don’t think anyone’s in a dire situation, but I do think it’s a tough time,” said Julia Christian, the executive director of the Capitol Hill Association of Merchants and Professionals. “I can’t say for a fact that anybody is going under, but I can say there’s been cutbacks.”

Many restaurants and other local businesses are seeing the same foot traffic but a drop in sales as customers continue to go out but cut back on the extras.

“I’m spending less because we literally can’t afford it, which kills me, because I’m the leader for Capitol Hill,” Christian said. “When we’re going out, I’m not ordering a salad before my dinner. I’m just ordering dinner.”

Even before the current crisis, Capitol Hill businesses faced a set of unique problems, Christian said. For one, continued parking difficulties (read: Good luck trying to find a nearby spot) have kept some out-of-area visitors away from Capitol Hill.

But perhaps a more difficult challenge arises from the soaring property taxes facing local businesses, Christian said. The average small Capitol Hill business pays $25,000 a year in property taxes alone, she said.

“You’re talking about $12,000 you have to pay every six months, in one lump sum,” Christian said. “With so much going on right now, it’s sort of one punch after another.”

Those punches have begun to hit some speciality restaurants pretty hard. The Wellness Cafe on Pennsylvania Avenue Southeast, for instance, has seen sales nose-dive over the past several weeks, owner Uzay Turker said.

The store offers a wide-range of organic foods, herbs and supplements, and also serves up sandwiches and smoothies in its take-out cafeteria. Just a few months ago, Turker had at least three employees working in the cafe’s kitchen.

Now a drop in sales has forced him to lay off one employee and use just one or two in the kitchen, Turker said.

“If we’re really feeling it here on Capitol Hill … I just don’t want to know what the rest of the country is feeling,” Turker said. “People just don’t come in, and they don’t even want to eat out.”

Restaurants are going to have to think more like politicians and focus on their base, Grindy said.

“Repeat customers represent a sizable proportion of sales for most restaurants, so an establishment’s survival is typically dependent on those customers,” Grindy said.

Nash admitted that the economic downturn has put a pinch on some restaurant operations, including higher cost for deliveries and supplies. As a precaution, Zack’s Taverna closed on Columbus Day as Congressional traffic would be down and many locals had left the city for the three-day holiday.

At the nearby Hunan Dynasty, business is “up and down,” according to manager Robert Biam. Lunchtime was slower than usual two weeks ago but had picked up by the time folks returned from the Columbus Day holiday, Biam said. Take-out and delivery orders remained steady.

Biam added that he can’t attribute that lunchtime drop to the economic crisis alone — things always tend to slow down during the recess, he said.

Turker is hopeful that business will pick up once Congress returns, he said. He has to be, he added, since the new Congressional session will open at the same time Turker launches a new store in Northwest, he said.

Grindy pointed out that things continue to look up for the Capitol Hill restaurant community. The recently opened Good Stuff Eatery and Lola’s are doing very well, and the upcoming addition of Matchbox also is expected to be a big hit, Grindy added.

After all, people do have to eat. “While the restaurant industry isn’t recession-proof, it generally fares better than most other industries during economic downturns,” Grindy said. “This is because restaurants have become an essential component in the lives of busy Americans.”

“The Hill has always been a very resilient place,” Christian said. “When several other areas of the city haven’t been able to thrive, the Hill has always been able to come out the other side.”