Is there Michelin relevance now or not?

Is there still Michelin relevance? Or is the cost just too high?

A while back, I toyed with the idea of setting up a completely new system of restaurant ratings, based on the chefs. Michelin relevance had hit rough waters with accusations of corruption, irregularities, and a growing irrelevance in the post modern digital age.

The work I did is still sitting there, waiting its time. It’s a huge undertaking, and needs a big sponsor or three. If it never sees the light of day? Doesn’t matter really. But the massive research I did into the company, its issues and trajectory was illuminating to say the least. There’ve been family tragedies (or murders) and a very colourful history marks the past and present of this enormous company.

And that’s not even delving into the supposed suicides of chefs who’ve got lost in the pursuit of perfection. Recently, this article by Brenna Houck from Eater Detroit magazine was published, and it carefully unwraps the current state of Michelin. It’s a great, interesting read so I’ve repeated it here if you’re interested. And take note: Tourism Australia paid $600K to host the San Pellegrino 50 Best Restaurants in 2017. Was that a good spend?

Do you really care? Here’s the post in its entirety:

The High Price of a Michelin Guide

South Korea, Singapore, and Thailand have spent millions to get their own Red guides

by Brenna [email protected] Jul 18, 2018, 9:42am EDT

In March 2016, the Michelin guide — that world-famous restaurant rating system devised by a European tire company — announced it was heading to Seoul, South Korea, for the first time. The guide’s international director Michael Ellis heralded the move as a recognition of Korea’s “wonderfully eclectic dining scene” that had “evolved into a world-class culinary destination,” and ominously warned restaurants that Michelin’s secret inspectors would soon arrive to examine their establishments under a microscope.

The new guide was lauded by both national and international outlets as an exciting new opportunity to highlight local cuisine, but the South Korean city got far more than it bargained for when it dropped that November. Seoul bloggers and Michelin followers were quick to criticize the guide’s list, with some accusing it of being corrupt.

But food obsessives weren’t the only ones who were fired up. In October 2017, Song Ki-seok, a local official from the National Assembly of Education, Culture, Sports, and Tourism Committee, publicly criticized the state-run Korean Tourism Organization for agreeing to pay Michelin approximately 2 billion won (roughly $1.8 million USD) to bring the Seoul guide to the country. The KTO’s initial payment of 100 million won went out in 2015. Over the next four years starting in 2016, according to the contract, roughly 400 million won a year would exchange hands to support the continued publishing of the guide. What the tourism board received for that hefty sum of public money was a Seoul guide riddled with errors.

The financial relationship between high-profile restaurant honors such as Michelin and local tourism boards is perhaps more common than people realize. Tourism Australia paid $600,000 to host the 2017 ceremony for the World’s 50 Best Restaurants in Melbourne, Australia. Tourism boards in Louisiana and Chicago have used big money to lure Top Chef and the James Beard Awards to their cities. Michelin isn’t willing to address the financial relationships that are fueling its guides: representatives were unresponsive to Eater’s multiple requests for comment.

But the company has been candid about its monetary relationships with tourism boards and government entities in the past. “Some countries and some governments that want to . . . attract tourism, they are very interested in having a guide, and so they sponsor a guide to have the ability to communicate around their gastronomic landscape,” Claire Dorland Clauzel, former executive vice president for Michelin guides, told the Washington Post in 2017. Since 2016, the company has launched guides in Washington D.C., Singapore, Shanghai, Seoul, Taipei, and Bangkok. Phuket and Phang Nga, Thailand, are also expected to get the Michelin treatment in 2018.

Unlike the handful of new guides rolling out in Asia, no U.S. cities have ever paid a “commission” to Michelin, according to the report. And Dorland Clauzel notes that not all cities are considered Michelin material. “You have to have first the right gastronomic landscape,” with lots of restaurants to choose from, she said.

Historically, Michelin’s brand recognition has been predicated on the unwavering independence of its inspectors, whose standards translate from guide to guide. But in an era marked by competition from World’s 50 Best Restaurants, Instagram influencers, and crowdsourced review platforms like Yelp and TripAdvisor, Michelin’s relevance may be waning — particularly as the restaurant industry seeks to course-correct from decades of Eurocentric takes on haute cuisine. Amid this all this change, Michelin doesn’t seem to see much use in becoming more transparent about its financial relationships, even in a world where news travels faster to a far wider global audience than it did back when the guide started publishing in 1920. That hasn’t stopped persistent reporters from poking holes in the guide’s carefully cultivated image of editorial independence. Can the guide continue to maintain its brand reputation when it’s accepting private money and sponsorships?

The High Price of Michelin Stars

The cost of commissioning a Michelin guide varies depending on the location and scope of the deal. Numbers are generally difficult to come by since tourism boards, corporate sponsors, and Michelin itself are generally unwilling or unable to talk about their agreements. The best estimate comes from Thailand, where the Tourism Authority of Thailand (TAT) reportedly pledged 144 million Thai baht (approximately $4.4 million USD) in financial support to Michelin for five years, beginning with the first Bangkok guide in 2017. That’s about $880,000 per year with the hope that the guide will help boost food tourism in the country.

When it’s confirmed that money has exchanged hands, the details of the partnership seem complex — even to parties involved in the deals. Dorland Clauzel had asserted in the Washington Post that Michelin’s Hong Kong guide, launched in 2008, was funded by the Hong Kong Tourism Board (HKTB), something the government-funded organizations denied two months later when pressed by a reporter from the South China Morning Post. Dorland Clauzel then pivoted, stating that the guide was funded by corporate sponsors including Melco Resorts & Entertainment (a Macau hotel and casino operator), Mercedes-AMG, online restaurant reservation system Chope, water brands Badoit and Evian, coffee giant Nespresso, and Robert Parker Wine advocate, a marketing and wine ratings company in which Michelin owns a 40 percent stake. She also said the Hong Kong Tourism Board licensed Michelin’s name for a festival; HKTB denied having paid any money to do so. The group did, however, confirm it had a marketing contract with Robert Parker Wine Advocate for an undisclosed some and length of time. Under the contract, HKTB promised to create a booklet called Michelin Guide – Hong Kong Flavours.

Reps for the Singapore Tourism Board (STB) — a listed supporter in Michelin’s press materials and one of several tourism boards that Dorland Clauzel told the Washington Post had commissioned guides — alluded to a similar funding arrangement to the Hong Kong and Macau guide. “STB facilitated various business development discussions between Michelin HQ and potential sponsors and partners in Singapore,” Kershing Goh, STB’s regional director for the Americas, said in a statement to Eater. The tourism board also “supported” the guide’s marketing and publicity overseas, including “collaborations with in-market travel agents to curate and promote packages which include Michelin-recommended establishments.”

STB also has a contract with Robert Parker Wine Advocate. That financial arrangement provided indirect support to the guide and helped promote the 2017 Michelin Guide Singapore Street Food Festival and the Local Chef Showcases dinner series, with chefs from Michelin-starred restaurants. However, Goh tells Eater that STB is “unable to share funding details for business confidentiality reasons.”

When asked whether the Singapore Tourism Board had any say in the guide, Goh said that the Michelin guide is “independent” and the tourism board has “no influence over the selection of Michelin representatives, nor the dining establishments they review or select for the guide.”

But it remains unclear what kind of influence certain corporate sponsors with stakes in restaurants in Singapore have on the guide. Resorts World Sentosa, a “title sponsor” of the guide, hosted the invitation-only gala for the launch of the Singapore stars in 2016. Four of the resort’s restaurants — Forest, Osia, L’Atelier de Joël Robuchon and Joël Robuchon Restaurant — also happened to snag a combined seven of those coveted stars. The Resorts World Sentosa declined requests for comment regarding its sponsorship of the guide.

offthehotplate-michelin-relevance-stars-night

Why Accept Money for Guides?

It’s not clear how many anonymous inspectors help Michelin compile its guides. But in order to meet the standard of “reliability,” Michelin requires that restaurants be assessed and rated “by a collective of inspectors who visit the establishment multiple times.” (Michelin does not state how many constitute “a collective.”) And in order to maintain their guise of independence, inspectors must work solely for Michelin Group and always pay fully for their meals.

In 2011, a report in the Financial Times claimed Michelin was losing more than $24 million a year on the guides, and was projected to lose $30 million a year by 2015. Considering the tire company itself netted sales of $8 billion a quarter that year, the losses were relatively minor. But in 2011, Michelin relocated its headquarters and eventually sold the former office for $147 million. At the same time, CEO Jean-Dominique Senard made moves to grow profits at Michelin’s publishing arm by cutting back on staff and bringing in “tyre man” Michael Ellis as the red book’s international director, signaling to some a more austere direction.

The new strategy appears to have paid off. Michelin doesn’t report the guide’s profits or sales, but a 2016 annual results report from the company said net sales at Michelin Travel Partner (a division related to the guides) “rose sharply over the year.” The report attributed the improved financial situation to a “leveling off of share in the more challenging Print markets” and “very fast revenue growth following the launch of print and electronic Michelin Guides.” The company also reported increased digital revenue.

Under Ellis’s supervision, laid out in a pyramid diagram from a 2017 Q3 sales report, Michelin plans to “capitalize on the Michelin guide’s worldwide reputation in the field of fine dining” and “become the global ‘selection’ benchmark in the world of gourmet dining and travel services.” Under this model Michelin branched out into other aspects of the restaurant industry by acquiring online reservation platforms such as BookaTable and launching branded food and beverage events that turn their own profits, with a foundation based on the authority and faithfulness of its guides.

Under this more profit-generating model, it would make sense to accepting corporate sponsors and tourism board-backed commissions. Branching out to new cities around the world also has the side benefit of boosting the global image of Michelin in key tire markets, such as Asia, where people are beginning to buy cars for the first time, as Michelin’s CFO Marc Henry told Skift Table last year. In that sense, Michelin is using its red books as a marketing tool for the larger tire business just as it’s always done. The fact that it’s also profiting off the guides is just gravy.

Is the Guide Worth the Price?

By attracting the Michelin guide, tourism boards are betting that Michelin stars will be a net benefit to their cities and countries. In Thailand, for instance, tourism comprises around 18 percent of the country’s GDP — roughly twice the global average. Of those tourism dollars, gastronomy-related business accounted for 20 percent of tourism income in 2017. Raising the profile of its food industry to “quality” world travelers (read: luxury travelers) has been a key marketing effort for the Tourism Authority of Thailand. People from the United States and Britain, where the Michelin guide is more of a household name, also happen to be among the top spenders on food in Thailand, according to Thailand’s Tourism and Sports Ministry.

“The aim is to allow food lovers to explore Thailand’s culinary scene, raise the profile of Thai restaurants and boost the economy,” the TAT wrote in a joint press release with Michelin announcing the Bangkok guide. TAT farther projected that the guide would “boost overall food spending per head of tourists in Thailand by 10 percent.”

In Singapore, the STB says food and beverage accounted for roughly 10 percent or $2 million in spending in the first quarter of 2018, with customers from the United States spending about 13 percent of their travel dollars on dining. Receiving a Michelin guide, representative Kershing Goh says, has “cemented” Singapore as a regional food hub and the tourism board hopes it will also “encourage continuous culinary innovation and excellence amongst Singapore stakeholders, raising the overall quality of Singapore’s dining scene and encouraging the growth of gastro-tourism.”

Some businesses recognized by the guide have benefited in other ways. Hong Kong Soya Sauce Chicken Rice and Noodle, a renowned hawker stall that’s known as one of the world’s cheapest Michelin-starred restaurants, has expanded internationally to locations in Melbourne and Bangkok since receiving its one-star rating in 2016.

Erik Wolf, executive director of the World Food Travel Association, is skeptical that guides such as Michelin have a significant impact on where tourists choose to travel. For nearly 20 years, the Oregon-based non-profit has conducted research about the culinary travel industry, including government-run tourism offices and travel associations. “I’ve never seen any kind of data like that. I don’t know that that has ever been studied,” he says.

Wolf instead points to the WFTA’s 2016 Food Travel Monitor study, which looked at what motivated culinary and non-culinary travelers to choose a particular destination. According to the study, roughly 71 percent of culinary travelers and 69 percent of non-culinary travelers were most influenced by their friends, with online review sites such as Yelp and TripAdvisor being the second most influential sources. The Food Travel Monitor did not gather any data specifically on lists such as Michelin and World’s 50 Best.

When it comes to the tourism industry at large, Wolf says that most marketers are more interested in connecting with celebrities and online influencers to drive interest in their communities. “I think that the sentiment among destination marketers is if they’re included on the list, great, but I don’t think it’s something that they would go after,” he says.

“As a food lover and as a traveler, I would not choose a destination by a list of top 50, whatever,” Wolf continues. “I would look at that list if I’m already going to that destination, but it’s not going to be an influencer of destination choice for me.”

But perhaps, ultimately, that’s not the point. Michelin’s tire business will gladly continue to profit off the brand’s restaurant rating history — so long as it can find companies and tourism boards willing to pay for an opportunity to bathe in the glow of its stars.

Brenna Houck is the editor of Eater Detroit and an Eater.com reporter.

What’s your take on the Michelin now? Has Michelin relevance had its day? Or will it survive? That’s the question. 

Chrissie 🙂