April 14, 2010 -- Following two tough years, Downtown Santa Monica restaurants are hoping that 2010 will be more to their taste.

Some restaurant operators expect improvement in 2010, but unusually wet weather early this year put a damper on business, leaving eateries with a challenge to post increased sales for the year.

Business has been pretty flat, said Stuart Montalvo, director of operations at Yankee Doodles on Third Street Promenade, in early March. Rainy weather hurts business on the popular strip, he said.

Still, Montalvo thinks 2010 will be better than last year. He expects business to increase about 2 to 3 percent, and perhaps as much as 5 percent, if the economy improves as expected.

His optimism is shared by the National Restaurant Association, which expects gradual improvement as the economic downturn eases.

The association forecasts industry sales will increase 2.5 percent this year, but still remain essentially flat after taking inflation into account. That will be better than the last two years, however, when inflation-adjusted sales fell 1.2 percent in 2008 and 2.9 percent in 2009.

The situation was worse than these figures indicate for established restaurants, because they include new restaurants, which boost overall sales figures.

“The past two years have been a very challenging time for our industry,” said Dawn Sweeney, president and CEO of the National Restaurant Association. “While there are still substantial challenges ahead, we are encouraged that the outlook is improving.”

Consumers forced to cut back on spending during the recession say they aren't dining out as much as they would like, and this pent-up demand should turn into increased restaurant traffic as the economic recovery continues, according to the association.

Count Jeff King, co-founder and chairman of King's Seafood Co., among those expecting things to get better.

Restaurant sales are down this year, but the declines are not nearly as bad as those suffered by the industry in California last year, said King, whose company has 17 restaurants, including i.Cugini and Ocean Avenue Seafood on Ocean Avenue in Downtown Santa Monica.

“We see an absolute turnaround,” he said in early March. “There's less fear and a little more confidence in the economy.”

At Border Grill on Fourth Street, “we are still relatively busy” but “we're not getting that many out-of-town visitors,” said Amy Quinn, assistant general manager.

Like many restaurants, Border Grill has stepped up marketing efforts.

It created the Border Grill Locals Club, a loyalty program that gives members discounts and offers special deals through e-mail blasts.

“It's an incentive to have people come in more often,” said Leah Ross, public relations and marketing manager.

In addition, in June the Border Grill introduced the gourmet taco truck, which has been “a great awareness tool for us,” Ross said.

Border Grill -- which has picked up substantial banquet business through referrals from hotels -- also has gained business from the Bayside District Corporation's Downtown Employee Discount Program, said Quinn, noting that “I get at least one a day.”

At Yankee Doodles, party sales and special events are still down because companies don't have a lot of money to spend. Montalvo said. He doesn't expect much improvement in that area until businesses are healthy enough to begin hiring again.

The remainder of the business is holding up pretty well, aided by frequent specials and coupons.

King said his company has adjusted menus at some restaurants to offer lower-priced items and hasn't raised prices for three years at its 12 King's Fish House restaurants.

King remains sold on Santa Monica. “Santa Monica, I think, is still a great area for restaurants,” said the former chairman of the California Restaurant Association.

Despite some restaurant closures in Downtown during the past year, “we've been less volatile than a number of places,” said Robert O. York, a consultant to the Bayside District Corporation. “We've kept most of our restaurants.” Still, he said, it's been a tough time for eateries.

Meanwhile, there are signs that Santa Monica's visitor industry, which is an important source of business for Downtown restaurants, is beginning to recover a bit.

After year-to-year declines in Santa Monica hotel occupancy rates for each of the first nine months of 2009, occupancy improved in each of the last three months of the year. No doubt the return of Cirque du Soleil for a two-month run beginning in mid-October helped.

But the increased occupancy doesn't mean the market is strong, because the final quarter's results were measured against weak results a year earlier and the increased occupancy came at the expense of substantially lower room rates.

Still, the occupancy figures are a positive sign there will be more visitors in town.