Omicron puts restaurants back in 'dire' straits as cancellations mount, traffic drops

Just as the hospitality sector was starting to recover from the Delta wave of COVID-19, a growing number of local restaurants and bars are bracing themselves for the Omicron variant, which is swamping highly-vaccinated population centers and threatening public gatherings.

With Christmas and New Year's approaching, closed doors, canceled reservations and sparser dining rooms are once again the order of the day for eateries battered by COVID-19 restrictions over the last two years.

“We're seeing it trending roughly towards around 30 to 45% per night in cancellations, either the day before or day of which is incredibly detrimental to restaurants,” David Nayfeld, a San Francisco chef and restaurateur told Yahoo Finance Live this week.

But with the new — albeit less fatal, according to early data — COVID-19 mutation sweeping the country, business owners are trying to navigate as they weigh the safety concerns against the financial costs of shutting down for a few days.

“A number of restaurants [are] having to shut down very quickly because they're getting breakthrough cases, with their all vaccinated staff,” said Nayfield, who co-owns 2 Bay Area restaurants, Che Fico and Che Fico Alimentari.

“You essentially have to account for the entirety of the loss of revenue for that night, and potentially other nights, as well as loss of products. So we're in a really dire situation right now,” Nayfeld said.

And along with that, parts of California are also experiencing colder weather and rain, causing restaurants to lose out on foot traffic that would also be served by outdoor dining.

Already, a number of restaurants and entertainment venues have closed in New York City, where cases are spiking to record levels. The government hasn't imposed new lockdowns, and hospitalizations remain stable as Omicron causes vaccine efficacy to plunge; still, some eateries have voluntarily shuttered their dining rooms and reverted to takeout only.

"It’s become evident that we can’t predict the state of the world," Enrique Ortegon, Senior Vice President, of SMB at Salesforce, told Yahoo Finance in a statement.

"In the year to come, it will continue to be crucial for restaurants and other businesses in the hospitality industry to be capable of operating seamlessly between the in-person and digital worlds, giving customers flexibility," he added.

It’s also an anxious time for small business owners, who continue to struggle in finding qualified (or willing) workers. In a recent survey of 3,000 U.S. restaurant operators, 77% said they didn’t have enough workers to meet demand, according to the National Restaurant Association, an industry trade group.

“Our industry is a challenging one to work in for anyone. The labor force issue is just one of maybe a dozen of issues that are just really crippling our industry right now,” Nayfeld said.

Employment in restaurants in November was sluggish as the industry added an average of 44,000 jobs each month — down from an average monthly increase of nearly 200,000 jobs during the first 7 months of the year, according to preliminary Labor Department data.

Meanwhile, operational costs for restaurants have gone up. Owners have had to deal with inflationary pressures resulting in raising menu prices to stay a float.

“There is no elegant solution to the fact that we just have to raise our prices across the board and I'm not talking by a little,” Nayfeld said. “I'm talking about menu prices going up sometimes between 30 to 50%, if you want to survive this.”

The need for federal funding

To that point, one Oakland born-Chef, Kwasi Moses, went viral with an Instagram post showing increases in his cost of goods: fryer oil went from $21 a year ago, to $35 six months ago, to $45 today.

However, pricing is only one piece of a larger, more intricate puzzle. The push to refill the Restaurant Revitalization Fund (RRF) continues as more than 170,000 eateries wait for funding. But the fund ran out of money, which prompted a bi-partisan push to replenish the RRF with another $60 billion.

The fund was created as part of the $1.9 trillion COVID-19 relief package passed in March 2020, designed to help struggling restaurants and bars. As part of the program, Small Business Association (SBA) distributed $28.6 billion to more than 100,000 bars and restaurants.

“None of this is gonna be solved unless we get federal funding in the form of the Restaurant Revitalization Fund refilled, which is something that's been promised to us time and time again,” Nayfeld said.

“If we get funds that will help a lot of restaurants sustain current pricing models and take care of their staff, as well as make their landlords whole, pay their creditors, pay everyone involved in the ecosphere of the restaurants,” Nayfeld said.

Still, there’s been no movement on RRF legislation since the summer, which prompted Nayfield to add his voice to growing calls for action. Lawmakers continue to ask Congressional leaders to act quickly to pass an additional round of COVID-19 relief for small businesses.

“Right now, what we're seeing is the fallout of a lot of restaurants that are struggling with the Omicron virus, kind of gaining a lot of traction, you're gonna see a lot of restaurants that are suddenly going to close, losing a ton of revenue,” Nayfeld said. “Probably a lot of them may not reopen at all."

Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter: @daniromerotv

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