It's not tough to find a good steak on 19th Street NW.
For years, the Palm and Sam & Harry's have served prime and potatoes to expense-account eaters from their locations across the street from each other near 19th and M streets. This summer, New York steak powerhouse Smith & Wollensky opened a branch less than two blocks south. If that's not enough choice, stroll a few blocks north or south on nearby Connecticut Avenue and there are outposts of the two biggest expensive national steak chains, Morton's of Chicago and Ruth's Chris.
At any one of them, diners can get a huge piece of meat, plus the required side dishes. The service will be attentive, the decor will be reminiscent of a classic men's club, and the bill for dinner will be upward of $50 per person.
Yet even with the lush expense accounts fueled by the hot economy, how many high-end steakhouses can one neighborhood--or even one city--handle, anyway?
"We don't know. It's been kind of an inside joke in the business for a while. But locally and nationally, there's no end in sight," said D.C. restaurant consultant Bob McKay.
Managers of the three 19th Street restaurants all say that so far they are doing quite well, thank you, and confidently predict that business will remain beefy.
They're not competing just with each other. There's already a branch of Capital Grille a one-zone cab ride away on Pennsylvania Avenue NW, and Bobby Van's Steakhouse, another Manhattan fixture, is opening soon near 15th and I streets NW.
The clustering is no longer limited to downtown, either. Tysons Corner already has a Morton's and a Sam & Harry's. Tomorrow, the Palm will open a branch there, too.
It's part of a national trend. Both Ruth's Chris and Morton's keep opening new locations, Morton's in part because, as a publicly traded company, it faces stockholder pressure to grow. Smith & Wollensky's parent, New York Restaurant Group Inc., earlier this year announced plans to go public so that it could step up its expansion. Last month, after a less-than-enthusiastic response from investors, it tabled the IPO.
But with all the new competition, why does it tend to be so concentrated? "When you have a lot of high-quality restaurants clustered in one place, that attracts other high-quality restaurants," said local restaurant consultant Steve Graul. "Restaurant people have more of a safety-in-numbers philosophy than they do the opposite."
As for steakhouses, "let's face it, Washington is one of the most conservative, strait-laced, boring cities in the country," he said. "If there's a place these groups can coexist in quantity, this is it."
"That fact that there are three of them or four or five" in the same neighborhood isn't a problem, said Dennis Lombardi, executive vice president of Technomic Inc., a Chicago restaurant consulting firm. "These are typically destination restaurants. People have made up their minds where they are going three, four, five days in advance. It's probably just a clustering effect, as you see in other retail. The question is, how deep is the steak market?"
Lately, very deep. Nationally, the steak segment has been the fastest growing in the restaurant industry over the past five years, according to Technomic's research, with sales up 19.1 percent from 1993 to 1998.
"This is not a good time to be a cow," Lombardi said.
Forget everything you've heard about health-conscious eaters avoiding beef. "What we're seeing is people may possibly be eating less beef at home, but when they go out, they may want to try things they don't get at home," said Steven C. Anderson, president and chief executive officer of the National Restaurant Association.
The healthy economy is behind the increase in sales--this is not recession food. That means that going forward, "the only issue in my mind is the economy," McKay said.
Said Lombardi, "The real question is, given the increase in supply of high-end steakhouses, if there's another recession will any of them be able to keep positive same-store sales?"
At the Palm, the oldest of the 19th Street steakhouses, "one of our strategic concerns coming into this year was increased competition," Vice President Jeff Phillips said. The District-based chain knew that Smith & Wollensky would open in several of its markets, and that both Morton's and Capital Grille had expansion plans, too.
But so far this year, "all our comparable-store sales are stronger than ever," he said.
In downtown Washington, "we've had four positive months since Smith & Wollensky opened."
At Sam & Harry's, the situation has been the same, founder Michael Sternberg said. The past four months have been record setters, he said.
"Business just begets business, number one. And number two, I think at dinner time it doesn't much matter where you're located. You're deciding to go to a particular restaurant. It doesn't really matter if they're across town or across the street."
Lunch is more location-oriented. Research shows that people tend to stay within two blocks of their offices. But even though the downtown steakhouses do a strong business lunch trade, that's not where the profit is, Sternberg said: "Nobody's making their money at lunch anyway. The average check at lunch is $20, the average check at dinner is $60." Those figures are before tax and tip.
The new guy on the block, manager Darren McDonald of Smith & Wollensky, said his company picked its spot because "it gave us the free-standing space we like to have." The two more-established restaurants were neither a pro nor a con, he said. "We don't see our competition being Sam & Harry's and the Palm any more than I Ricchi," an expensive Italian neighbor.
"It's just nice if the dining public knows this area has more and more restaurants," he said.
"What we create here is a Smith & Wollensky; it's a known commodity with a lot of clientele who either live in Washington or frequent Washington."
From the time the restaurant opened, he said, it had a very strong lunch business. He said: "This is a very popular block; it's unbelievable. From 12 till 2, there are hundreds of people walking around."
Despite those three optimistic assessments, competition among the steakhouses is a real concern, McKay said. "Even the most regular customer at the Palm or Sam & Harry's will most likely try the new place," he said. "There is no doubt that the pie is getting cut into smaller pieces."
Sales growth at steak places has outpaced growth at other types of restaurants* for the five years ended in 1998:
Percent change in sales, 1993-98
Varied menu 18.5%
Total (all restaurants*) 14.9%
Other specialty 14.4%