Gulf restaurants urged to keep it local

December 31, 2024, 7:52 AM

Chefs prepare food in a Dubai restaurant, where the sector is said to be close to saturation point

Restaurant relevance is vital
Saudi market is tough to crack
Aim is to develop then export

Restaurant operators and investors in the Gulf should open local, authentic outlets rather than imported high-end brands, experts say.

Saudi Arabia, where government-backed initiatives seek to double the number of restaurants, “is definitely a growth market”, according to Duncan Fraser-Smith, CEO of Craft Hospitality Group. But the establishment needs to suit the location.

Craft turned down the opportunity to take over high-profile restaurants in Riyadh “because the venues themselves were based on their, let’s say, Vegas equivalents”, Fraser-Smith says.

“They were big, 400 or 500-seat venues that were never, ever fit for purpose or relevant to the market that is in Riyadh at the moment and were never really going to be financially viable.”

Growth in Riyadh and the rest of the Gulf is in homegrown brands that feature local chefs keen to establish themselves, he says. The ultimate sign of success is being able to export the concept overseas.

“Some of the most successful homegrown products we have in Dubai are now in Mayfair in London,” Fraser-Smith says. “Maine opened three venues in Dubai and a fourth in London and next was Ibiza.

“I see that happening in Saudi Arabia, especially in those sorts of developments like the Red Sea and Neom.”

Riyadh has hosted many brands from Europe and the US, says Kareem Ibrahim, founder of Operate Solution, a food and beverage tech company. Yet the market is changing, he says.

“In the early 2000s, someone could open a restaurant or café in one location, live off it and grow it organically. Now you need deep pockets to compete in the market, especially in Riyadh,” Ibrahim says.

He says that many restaurants are being opened first in locations like Tabuk, a city 1,200km from Riyadh in northwestern Saudi Arabia. Once brand awareness has been built they move into the capital.

Staffing issues

The ease of doing business and being able to recruit the right staff is another major issue in Saudi Arabia, says Aaron Allen, a restaurant strategy consultant.

“It’s easier to get talent and people to live and work in Dubai than it is going to be in Saudi Arabia, particularly outside of Riyadh and Jeddah,” he says.

“The ecosystem across the industry, in terms of the supply chain distribution, is not as well built out.”

Allen says there is insufficient training for the higher levels of service required for fine dining and clients who are accustomed to international or global standards.

But Allen still sees the Saudi market as the “biggest opportunity in Mena”. “The spend there is so high, and the density of restaurants is still relatively low,” he says.

In Dubai, where there is a high failure rate, the opportunities are more targeted and prospective owners have to be cautious about what and where they open.

The local scene is at risk of hitting saturation point experts told AGBI in April, and Allen says there are too many restaurants opening right now.

“When we look at the number of new restaurants opening each quarter, and we look at the new number of residents, and then tourism traffic as well, it’s moving at a faster pace than the population is,” he says.

Fraser-Smith says many dive into ownership thinking it is easy and are not prepared to finance the first six to 12 months.

One of the issues in the city is that there are clusters of too many high-end venues in one location, he says. Better planning would have a mix of mid-range, fast casual and some slow dining outlets in those locations.

Craft Hospitality have the sole rights to an AI tool called Spotquest which does the market intelligence on what is the right fit for each venue.

“We use this tool to go out to the market and basically sweep all of the necessary data around the sentiment of the customers that are going in, what the price points are, what people are willing to pay, what type of cuisine are they going to have,” he says.

That removes 85 percent of the guesswork that usually goes into choosing what to open and where, Fraser-Smith says. The top 15 percent is “kind of the icing on the cake”, where you put feelings into it to create something built around the two keywords – authentic and relevant for the market.