A new economic report from advocacy group Texas Restaurant Association (TRA) warns that Texas’ hospitality industry is on shaky ground heading into the crucial holiday season.
“Texas restaurants have spent months bracing for an economic slowdown, and last quarter’s data confirms what many operators are feeling on the ground,” said Emily Williams Knight, president and CEO of the Texas Restaurant Association, via a release. “We’re sounding the alarm as rising food and labor costs continue to squeeze margins while consumer spending softens, especially among younger and middle-income diners.”
The organization’s latest quarterly report found that 88 percent of Texas restaurants reported higher food costs, while 66 percent are experiencing a rising wage burden. The added operational expenses are coming as 52 percent of the state’s restaurants are seeing decreasing traffic.
Texas eateries are also being hammered by federal policy. Tariffs have had a profound effect on restaurant operators. Only 10 percent of owners say that tariffs have not increased costs on key ingredients and supplies.
The report also says the state’s restaurateurs have growing concerns about heightened immigration enforcement activity: 19 percent of operators indicated they lost employees due to Immigration and Customs Enforcement (ICE) raids and other operations; 23 percent reported fewer job applications and acceptances, and 19 percent showed a traffic loss due to immigrant concerns.
TRA says the disruptions compound the already unfavorable economic headwinds, driving up prices for both restaurants and consumers.
“Restaurants are battling an economic storm because the same cost pressures that are driving up their menu prices are also making it difficult for consumers to afford dining out,” Kelsey Erickson Streufert, TRA chief public affairs officer, added in a statement. “Public policy decisions around not only immigration and tariffs but also taxes and regulations all create new costs or relief for local businesses and the communities they serve.”
However, TRA members pinpointed a few bright spots in the current dining scene, reporting strength in private dining experiences, catering, and traffic among high-income guests.
Thankfully, Austin hasn’t been rocked with many jarring closures in the past year or so. Those that have happened have largely been the result of a new project on the horizon, a well-earned retirement, or the infamous I-35 construction displacing businesses in its path — or at least, that’s how they were framed. It feels like 2024 was worse for big closures.
However, some restaurants and food projects since October 2024 like Black Star Co-op, Genuine Joe (now open again), Madhu Chocolate, and Icenhauer’s, all mentioned that slow sales and general affordability led to their final days. LGBTQ bar and venue Cheer Up Charlies is in a high-profile fight to stay open right now after experiencing slow sales, being behind on rent, making a deal to sell to a national holdings group, and seeing the deal fall through.
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Brianna Caleri contributed to this report.