Consumers in China are paying to dine at nicer restaurants

BEIJING — A new restaurant scene is growing more popular across China: fine dining.

Despite the Covid-19 pandemic, a brand called Lu Style opened four new restaurants in the last three years in Beijing and Shanghai.

At that store, Lu Style said, business brings in 4 million yuan ($579,710) a month. Meals cost about 735 yuan per person, according to reviews on China’s Yelp-like Dianping app. Judging from more than 1,500 comments, users were most enthusiastic about the service, taste of the food and “elegant” design.

That’s how restaurants are competing in a country whose culture emphasizes good food — and where the global trend of spending on experiences is taking hold.

Since Lu Style launched in 2016, more people no longer focus on just being able to eat, said Tian Junfeng, director of operations. Instead, he expects demand for social spaces will be greater.

The brand has seven restaurants — including a soft open this year in collaboration with a Shanghai art gallery. Lu Style’s cuisine comes from the province of Shandong, including many of the ingredients themselves. The restaurants offer seasonal menus and meticulous design — one outlet in Beijing claims the peony bush they transplanted to an outdoor seating area is 880 years old.

Tian said Lu Style will be focused on improving customer service in the coming months. To do so, it contracted an etiquette instructor to spend two days at each store every month, he added.

A similar focus on customer service set hotpot chain Haidilao apart when it opened its first Beijing outlet nearly 20 years ago.

But while its growth in China has slowed, other restaurants are coming in with a similar experience-centered strategy.

By 2018, Dianping owner Meituan started to track and rank the best performers with its Black Pearl “restaurant guide” awards. Anonymous judges annually screen restaurants for food quality, dining experience and creativity in catering to traditional and modern tastes.

The 2023 rankings selected 304 restaurants — most of which were in China, including Lu Style. Several of the venues were in smaller cities. Restaurants in Jinan, Changsha and Wuxi made the list for the first time.

The overall number of new fine dining restaurants in China declined from 2021 to 2022, but the number of new venues doubled in 2021 from 2020, said Tang Yan, a Black Pearl representative.

“The pandemic also affected consumers, and now they’re more likely to want to treat themselves,” Tang said in Mandarin translated by CNBC.

She said spending for business gatherings at the restaurants has declined slightly, but spending by individuals or families has risen by a greater scale.

A meal out at a Black Pearl restaurant can cost as little as 164 yuan per person at Yangzhou city’s Quyuan — which plans to open three new outlets in China this year. On the other end of the spectrum is Ultraviolet by Paul Pairet in Shanghai, a French restaurant where dinner can cost over 6,000 yuan per person.

Higher-end dining options in Beijing, such as the King’s Joy vegetarian restaurant, impressed Cici Lu, a consultant in the digital assets industry who recently moved back to Beijing from Singapore.

“It was a full house,” she said, despite the $500 per person price. Lu noted the ingredients came from different parts of China, while the courses had “some very intriguing textures and flavors.”

King’s Joy has three Michelin stars, and is also on Black Pearl’s list for Beijing. Two Lu Style locations have one Michelin star each, and the France-based guide includes more than 400 restaurants in mainland China. Michelin declined a CNBC interview request for this story.

“One of the worries about moving back to China after spending 27 years overseas in Canada, the UK, and Singapore (and married to an Australian), was I would be missing out on the restaurant and bar scene like in other metropolis[es],” Lu said.

But “I found the dining scene has become more contemporary,” she said. “Younger consumers prefer dining experiences with high-quality produce, interesting concepts, and stylish venues.”