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B.C. restaurant sector relishes reflationary rate cuts

Central bank’s successive rate cuts expected to put more money in consumers’ pockets.
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Romer’s principal Kelly Gordon closed his original location on Vancouver's West Fourth Avenue on Oct. 27.

With surveys saying most Metro Vancouver restaurant owners are losing money or barely breaking even, hopes are high that recent Bank of Canada interest rate cuts will stimulate consumer spending.

This is key given the range of challenges the industry faces. 

For example, new federal changes to its Temporary Foreign Workers Program impact the sector.

That program's low-wage stream involves hospitality employers paying workers approximately $20 an hour. The federal government is cutting that stream for the hospitality sector, forcing restaurant owners who want to hire foreign workers to do so under a pricier high-wage stream, which could force them to pay up to $36 per hour. For most, that would not be viable.

Ottawa's intent in making the changes is to have fewer temporary foreign workers and more jobs for Canadians. 

Restaurant owners hope the interest-rate cuts will make consumers feel wealthier and more willing to spend money so they have increased sales that help them pay workers.

Canada’s central bank slashed its key interest rate to 3.75 per cent on October 23. Back in May, that rate was five per cent.

Four consecutive rate cuts have prompted the country’s biggest banks to lower prime mortgage rates in tandem—to 5.95 per cent.

“The cuts are going to take a while to flow through the economy, but let’s face it: Any cut in interest rates will put some extra dollars in the consumer’s pocket for that extra coffee or glass of wine,” said Romer’s owner Kelly Gordon.

Business has been hit-and-miss at Gordon’s pub-style burger chain.

He closed his 14-year-old, original Romer’s restaurant at 1873 West Fourth Avenue on October 27 because guest counts were declining and renewing his lease would result in an unsustainable rent hike, he said.

To compensate, he opened a new restaurant in Lynn Valley in the spring and he plans to open a fourth Romer’s restaurant in the U.S. departures terminal at Vancouver International Airport (YVR) in the first quarter of 2025, he told BIV.

Picking his spots carefully is key given what has been a tough time for many restaurateurs.

He chose to open in Lynn Valley because he thought that the market was “underserved,” whereas opening at YVR makes sense because travellers are a “captive audience.”

His other Romer’s restaurants are in Port Moody and in the River District, in Vancouver’s southeast corner.

He separately owns the Steamship Grill in Victoria.

“We tend to be more suburban focused, where real estate is a little bit more affordable,” he said.

Business has been tough in part because diners are trained to expect happy-hour promotions, and they are drinking less, he said.

“Late-night drinking, and, I think, drinking in general, is definitely waning,” he said.

British Columbia Liquor Distribution Branch (BCLDB) data for restaurant and retail wholesales backs up that estimation.

In the quarter that ended in June, wholesale buyers spent nearly $891.4 million on alcohol from the province’s monopoly distributor, or 7.31 per cent less than the $961.7 million that was spent in the same quarter in 2023. 

That decline in alcohol wholesale purchases was more than twice as big as the 3.56-per-cent, year-over-year decline in Q1, according to the BCLDB.

Others in the hospitality sector are consolidating their restaurant businesses.

Andrew Jameson told BIV he closed his Say Mercy! restaurant at 4298 Fraser Street on November 2 because he “got an offer.”

He sold that space’s lease and its kitchen equipment to a new owner who will launch a new concept, he said.

Jameson plans to focus on his two other eateries: Mackenzie Room at 415 Powell Street and Collective Goods at 3532 Commercial Street.

The Bank of Canada’s interest rate cuts are “a step in a direction that will hopefully lead to consumers having a little bit more free cash flow to enjoy things like meals out and have some extra cash for things that are considered luxury experiences,” he said.

“It will be another five or six months before people really feel the effects.”

Restaurants Canada’s Western Canada vice-president Mark von Schellwitz agreed that it will take a while for many affected homeowners to feel effects of lower interest rates.

For von Schellwitz, the central bank’s monetary-policy steps are just one part of the equation. His organization also wants governments to help the sector.

Foremost among those moves would be having the provincial and federal governments reduce payroll taxes.

He would also like the B.C. government to urge the arms-length WorkSafe BC agency to return all or part of its $2.1 billion in excess funds from surpluses. The B.C. government appoints WorkSafe BC’s board and therefore can exert pressure, von Schellwitz said.

He also wants the province to create a new tourism and hospitality stream in its Provincial Nominee Program (PNP).

The B.C. government in 2022 changed policy to explicitly say that non-hospitality workers, such as those in health care and child care, would be prioritized.

“We want a separate, new stream that guarantees the tourism and hospitality industry a certain number of those PNP spots,” von Schellwitz said.

The BC NDP, which just won a narrow majority government with judicial recounts confirmed today, was lambasted in the election campaign for allowing B.C.’s health-care system to devolve to the point where there are regular emergency-room closures at hospitals across the province.

That may make it less likely that the government will reverse its policy and heighten the priority for hospitality workers in the PNP over workers in health care.

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@GlenKorstrom