Higher prices, lower profits: many restaurants ‘closing down after a year’

Restaurant owners across Malta claim that while menu prices have gone up, profits have dwindled, as a result of surging costs, tighter consumer spending and an oversaturated market.

A survey commissioned by the Association of Catering Establishments (ACE) last week found that Maltese residents tend to find restaurants to be too expensive, while tourists are more likely to view them as good value.

At the conference where the survey was presented, ACE president Michelle Muscat highlighted the market’s oversaturation, noting there are around 4,000 restaurants in Malta, with 500 more applications pending.

All restaurateurs who spoke to Times of Malta acknowledged that prices have increased. But they argued that these increases are often necessary for businesses to remain viable.

‘We don’t like increasing prices, but quality has a price’

Michael Diacono, owner and chef of Giuseppi’s at Salina admitted they have had to raise prices due to inflation over the past few years, but he felt quality has improved.

“I do not enjoy it when customers note that prices have gone up, but we must also acknowledge that standards in many restaurants have also improved exponentially. Quality has a price,” he said.

Restaurants’ biggest expense is wages, which he said have doubled since the pandemic, followed by food and beverage, and rent.

“We have obviously absorbed some of these costs, which have eaten into our profit margins,” he said.

Places closing down one year after opening

Anthony Scicluna, managing director of Café Jubilee, echoed similar points but believed that many restaurants remain affordable.

“Since COVID, there has been a global surge in prices, to the detriment of customers. The main expenses are rent and food costs, which have shot up. We try to keep it at €30 to €40 per person, which we think is affordable,” he said.

Despite raising prices, Scicluna said many restaurants are still struggling to turn a profit. In Jubilee’s case, he said they have not been able to make more than a 10% profit margin.

“Rising costs are the main reason why a lot of places are opening and closing down after a year,” said Scicluna, who also runs AYU restaurant.

Cheaper to import food from Italy

Fausto Soldini, owner of Sotto Pinsa Romana and Zero Sei Trattoria Romana, said his profits have taken a significant hit over the past two years. While Zero Sei still maintains a profit margin of around 15%, he noted that this figure used to be considerably higher.

Soldini said the biggest challenge remains rent, which he claims has doubled in recent years. Wages also take up a significant portion of expenses.

“My staff are important to me. If I want them to be happy and stay, I have to pay them a fair wage so they can live comfortably in Malta,” he said.

To further manage costs, Soldini sources his ingredients directly from Italy. Despite shipping fees, he says it’s still more affordable than buying locally.

“I spend about €2,500 a month just on shipping, but it’s worth it. I can get Pecorino Romano for €16 per kilo from Italy, while in Malta it would cost me around €23.”

Sometimes people come in and they choose to share a plate of pasta between two. They don’t order water because they have their own. This is not right

To illustrate the impact of rising costs, Soldini pointed to one of the restaurant’s most popular dishes, carbonara, which is priced at €16. Once the cost of importing high-quality ingredients from Italy and paying fair wages is factored in, he said, there is little room for profit.

“We simply can’t charge less than that,” he said.

Still, he found it ridiculous that restaurants charge over €20 for a carbonara.

Besides rising costs, he has noticed that in the past few years people have been spending less at his restaurant. The average spend per person at Zero Sei has dropped drastically from around €50 to under €30.

“Sometimes people come in and they choose to share a plate of pasta between two. They don’t order water because they have their own. This is not right,” Soldini said.

‘Many restaurants don’t pay VAT’

Briju in Gżira closed down last year after two years of barely breaking even.

Chef Rafael Sammut agreed that the Maltese customers were right to feel this way, but this is because people are living in more expensive times. He added that, compared to other European countries, Malta’s prices are fairly average.

“Since the pandemic, overhead costs have shot up. Rent is through the roof. Wages cost a lot if you want to keep your staff happy,” he said.

“I can confidently say that around 60% of restaurants are losing money. If they’re not, then there’s a good chance that they are messing about with VAT,” he said, adding that if cash were to be removed from restaurants, this could force 40% of restaurants to close within a year.

Sammut also echoed Soldini’s complaints about no-shows or customers who choose to order very little at his restaurant.

“Obviously it’s a free market where you can order what you want, but when you stay for hours, preventing us from seating other customers, you’re eating into our profits,” he said.

‘We have the worst tourists in Europe’

When speaking about tourists, Sammut said that from his experience, “Malta has the worst quality of tourists in Europe”.

Tourists visiting Malta are now less likely to dine out than previous years.

Sammut said that the country is attracting tourists who are more inclined to either book self-catering accommodation or an all-inclusive option.

Therefore, fewer tourists are opting to eat at restaurants.

Today, Sammut runs a catering company, which he finds offers a more predictable income thanks to advance bookings.