Higher Labor, Food Costs Eat Into Profits; Restaurants’ Prices to Rise

The outlook for San Diego’s hospitality sector is lopsided in 2008. While the local lodging industry is expected to be able to increase its room rates and see greater RevPAR , increased revenue from rooms that they let , predictions are that restaurants will also increase their prices to cover overhead, but they won’t reap greater profits.

The reasons: Higher labor and food costs, coupled with a decline in customer counts as people dine out less frequently in a belt-tightening approach to the possibility of an oncoming recession.

In January, a 50 cents-an-hour increase in the federally mandated minimum wage will take it up to $8 an hour. But labor intensive restaurants are getting a double whammy, since workers’ compensation insurance costs, which were in decline mode in the last couple of years , California paid the highest rates in the country , are now increasing with higher payrolls, said Steve Zolezzi, executive vice president of the San Diego Food