Impacts next the Michelin Guide’s Shanghai Launch next week

As the upcoming release of Michelin's Shanghai Guide is only one week away, we heard some good news from different restaurants that were being invited to the press conference on September 21st. One couldn't help but wonder how the arrival of the Michelin Guide is to change Shanghai's culinary industry.

The introduction of Michelin Guide will not only boost the business of local restaurants but forging culture of Michelin-starred chefs; it will surely witness more tourists flowing into the city. Local governments all are glad to see the arrival of the Red Guide as it boosts business of restaurants while injecting energy to local tourism.

Some are curious about how the inspectors give rating to the local Chinese restaurants. According an interview with Mr. Bruno de Feraudy, President of Michelin China, conducted by Qdaily China(好奇心日報) on June ,16th. “Most of inspectors in Shanghai are Chinese, the team was built 4 to 5 years ago,” said Bruno de Feraudy.

Take Hong Kong as an example, there are 61 starred restaurants on le guide with 40 Chinese restaurants accounts for 65% of starred restaurants. So how would Shanghai’s distribution look like?

What impact will Michelin Guide bring to Shanghai when everyone is looking at the bright side of its arrival?

Perhaps “the curse of the Michelin Star" can be considered as one of the impacts Michelin Guide could bring to restaurants. One sound example of impact resulted from Michelin’s star recognition is Kai Kai Dessert, a Hong Kong- based restaurant that was listed in Michelin Street Food Section in November 2015. The restaurant witnessed 30% growth in the first month upon recognition. However, the landlord raised 120% of the rent, which forced the restaurant to move away from the original spot.

With Kai Kai’s Michelin-recommended dish, selling for just HKD 20 (RMB 17), it will need to sell 11,000 servings of the dish a month to cover the increased rent. Fortunately, one regular customer offered to lease a corner shop to the restaurant at a reasonable rate. After all, not every restaurant is that lucky.

Michelin Guide also replied on the “curse of Michelin star,” pointing out that Michelin has no connection with the development of local real estate market.

The original landlord of Kai Kai was overoptimistic on the revenue growth. In fact, the landlord mistakenly viewed the situation. According to one research, one Michelin star brings the restaurant with average 20%-25% extra income.

According to industry insiders, Shanghai's rent increase could occasionally record 50% increase and even double the original rent. Therefore, Michelin is not to be blamed for the skyrocketing rent.

In some of the cities, Michelin does boost the local economy. An impressive example is when Aarhus, the second large Danish city, found three restaurants with one Michelin star in 2015. The New York Times included it in  one of the Places to Go in 2016.

According Aarhus ’official record, tourists booking of local hotels grew 17%, which marked the largest growth among 50 cities. They are convinced that Michelin contributes to the growth the most in this case. In 2015, the revenue income of Aarhus’ overall tourism rose to SEK 3.3 billion (RMB $2.59 million). Michelin Guide covers wider categories and style of cuisine than that of the World’s 50 Best Restaurants rankings. It attracts tourists from varied population structure.

For instance, following the one star that was awarded to Hong Kong- based TimHoWan( 添好運 ), the Dim Sum giant built a central kitchen to sustain the operation of several newly-added franchises. Some criticized that the quality of the restaurant is going down but the founder of TimHoWan said that they no longer rely on the influence of the Guide while still witnessing growth all the same.

Perhaps investors with “hot money” can spot some targets that worth investing in Shanghai.

Impact of Michelin Guide on France-based restaurant – A Case Study

In an analysis of French Michelin reviewed restaurants from 1970 to 1994 Snyder and Cotter (1998), Michelin star’s impact on a restaurant generally reflects on the income of the restaurant. A two-star restaurant generally witness 20%-30% growth while a three-starred one recording in between 30%- 60%. Restaurants that are awarded with one star see approximately 10%-20% growth.

If a three-starred restaurant lost one star, it’s not only losing local customers but also international ones. Hong Kong-based Caprice and Tokyo’s Ginza Kojyu (銀座小十) are two vivid examples.

Michelin- starred restaurants that got downgraded from two stars to one star , however, are generally less impacted. Based on TastyTrip’s previous experience in oversea gourmet tours for the past two years, diners care most about the number of three- star restaurants they visit.

However, one star- restaurants that lost their sole star will witness severe impact on the profitability.

 Advantages and drawbacks of Michelin Guide's recognition:

The advantages of Michelin Guide include the establishment of reliability, elevated social status and profession recognition of chefs, preservation of fine cuisine and a reliable reference for diners on selecting restaurants.

Negative influences and issues arose from the arrival of Michelin Guide include the opaque, black-boxed operation, forcing chefs to blindly chase after the star standard. Meanwhile, Michelin Guide is also being criticized for its slow reaction to the ever-changing cuisine industry.

We are convinced that traditional grand haute cuisine that are recognized by Michelin Guide will play the part of attracting high-end diners while boosting tourism. Local restaurant owners believe that Michelin will inject new energy to Shanghai’s high-end dinning.

Meanwhile, Michelin Guide's Street Food List in Asia has successfully tapped into the international tourism trend. What’s fascinating with Street Food Section is that it offers opportunities to foreign travelers in taking a peep of what local people's diet and life are like.

Michelin Guide's main source of income is book sales or sponsorship from local governments. A good example is the government of Singapore, which is one of Michelin's sponsors. The first published Michelin Guide for a city tends to attracted criticism. Take Japan's Michelin Guide for instance, the first edition received mixed welcome while some renown figures of Japan's food world criticized the selection of restaurants. However, the following editions are gradually accepted and being widely used by the public after revision.

Shanghai's culinary industry will surely attract more international diners following its “recognition" by the Red Guide. More international Michelin-starred chefs will be interested in expanding the landscape in China, which will naturally stimulate the versatility of standard food materials and increase of importation.

A fine dining lover like me is more than happy to see restaurants regaining their footing after a long lull period. The arrival of Shanghai Michelin Guide will play decisive role to the career of local chefs.

Restaurants that are awarded with stars will easily recruit renown oversea or local chefs, which is also good news for Shanghai’s long-lasting chef shortage situation.

And Yes, this autumn, our city would be under the “stars”.

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