Chefs often view Michelin stars as the ultimate accolade, and this fall, the French tire company will again bestow its stars on New York's restaurants. It will be the eighth consecutive year for the guide's New York edition, and for your sake, I hope your favorite new restaurant isn't in it.
In a wonderful piece of applied microeconomics, three academics Olivier Gergaud of Bordeaux Management School, Karl Storchmann of NYU, and Vincenzo Verardi of the Université Libre de Bruxelles looked at what happened to restaurants Zagat ratings after they appeared in New Yorks first Michelin Guide. The conclusion: Expert opinion on the New York City restaurant market exerts a negative externality on gourmets. In regular English, that means the arrival of the Michelin Guide ended up forcing us all to pay more money for the same food, even though the quality of that food didn't necessarily improve.
It would make sense that renowned restaurants try to take advantage of increased demand from the public. But as I discovered last year, reviews in the aggregate aren't the main determining factor in how or when a restaurant raises its prices, and good reviews don't automatically translate into a price hike. Michelin is different: The study compared restaurant prices before the Michelin Guide was announced and then after it had been out for a year. The restaurants that didnt appear in the guide raised prices by 0.46 percent. The restaurants that did appear in the Guide, on the other hand, increased prices by 8.52 percent: more than eighteen times as much.
The study concludes that the more stars a restaurant gets, the more prices soar: [O]ne Michelin star yields an approximate price premium of 44%, says the paper, while three stars will cause price increases of about 88%." An even more recent example: In 2010, the price of a meal at Chef's Table at Brooklyn Fare was $135 per person. Now, after receiving three Michelin stars, the highest possible rating, the restaurant charges $225. (Adam Platt gave the restaurant three stars out of five; the Times gave it three out of four.)
There are two things going on here. The first is well known in Europe: the phenomenon whereby once a chef has a Michelin star, the chef is under enormous pressure to retain it. Per the report, Massive efforts and investments are due in order to retain the recently gained Michelin star. Prices have to rise, if only to allow the owner to recoup those investments.
Furthermore, inclusion in the Michelin Guide also changes that delicate dynamic between a chef and his or her owners and investors. Raves from the Guide, which claims to judge restaurants solely on the quality of their food, make a chef more valuable on the open market, and its a powerful validation that can reassure owners that theyve got the most important part of the operation the cooking right. Owners who think they've got that part down are understandably more comfortable spending money on other parts of the operation, the parts that the Zagat Guide calls Service and Décor. In other words, it seems that a Michelin star or even just a mention in the Michelin Guide is enough to persuade restaurateurs to make the kind of investments in the front-of-house that they might have been reluctant to make before. And once those investments are made, of course, they have to be paid for in the form of higher prices.
Everyone in New York has that once-hidden restaurant gem that they discovered before a critical rave brought in the crowds and ruined everything. The takeaway from the Michelin study is that there's a real financial benefit to be had by staying ahead of the curve or at least ahead of the Michelin inspectors.