The Bottom Line
Is the Reservations Market a Real Thing?
For an illustrious restaurant that typically books out months in advance, there’s a large crowd willing to pay hard cash for a last-minute reservation. While the act of paying for a reservation has long been considered faux paus, there’s another group making a serious push to create this kind of marketplace. App-makers and some business-savvy industry professionals recognize the balance of supply and demand. Demand clearly exceeds supply at the hottest tickets in town, so why not charge for those sacred 7-9 p.m. slots, shrinking demand and increasing profitability at the same time?
Apps such as Resy, which allows users to buy last-minute reservations from partnering restaurants, are gaining traction. In the same way that restaurants allocate a few spots to OpenTable, they do the same for Resy, only Resy charges the customer while OpenTable does not. There are talks of people bidding for reservations [think eBay for restaurants] and even brokers who buy and sell reservations in the same way as one would trade stocks.
As this movement begins to take form, owners should keep tabs on how apps like Resy evolve, which major restaurants join in, and how both parties perform financially moving forward. How far will the movement go… will people be paying for all prime-time reservations in the same way that airline passengers pay for exit seats, or will there be a limit to the percentage of tables available for a charge? Consider the following thoughts in regard to whether your restaurant fits this bill:
Balancing short-term profit and long-term loyalty
There are two types of high-demand restaurants: those in-demand due to prestige [think Gordon Ramsay Steak] and those in-demand due to volume and value [think Mon Ami Gabi for its low price point and PF Chang’s for its national presence]. If your restaurant is in the prestige category, you should think twice before charging for reservations.
Think about it from a loyalty perspective. Prestigious restaurants likely rely on repeat customers for more than half of their revenue [food tourism phenomena, such as Per Se and Noma, where people travel specifically to eat there, are exceptions]. If your 7 p.m. Tuesday regular gets booted out by a first-timer willing to pay $ 25 up front, they’re going to be pretty upset and may take their business elsewhere. Same goes if your loyalists find themselves having to pay for something that was once free. Chances are that the money doesn’t matter to this crowd, but it’s the principle behind the charge that is most damaging.
If you’re a high-volume, low-price establishment that has a line out the door every night, maybe you could stand to make some easy bucks by charging for a few guaranteed reservations. For those places with no-reservations policies, where many potential patrons don’t even show up because they don’t want to risk waiting in a long line, this system could open up a whole new customer base. For spots who see too many last-minute cancellations, this could provide some great security.
Monitoring bidding and brokering
If you ever find yourself in a bidding market, be sure that your bid prices align with your brand image. A famous $10 burger spot isn’t going to get as much volume over time when people find out it costs $100 just to get a table. At the same time, a fine French establishment won’t look too fancy if Saturday night bids topped out at 35 cents. Set minimums and maximums [i.e. have a ‘buy now’ option for your max price] and monitor how they affect your volume and overall sales.
Brokering, while potentially helpful to get your restaurant’s name out there, can be quite dangerous. Allowing someone to buy multiple reservations to sell off individually can put your restaurant in a shady light, and can certainly upset someone looking to make/buy a reservation only to find out that they’re all taken as soon as they open up. You may not even intend to sell to brokers, but one person could create dozens of fake accounts to buy in bulk anyway.
Serious legal issues may unfold here. If you do decide to charge for reservations, be sure to seek regular online feedback to detect potential underground brokering as soon as possible.
Know yourself and your customer. Can you handle upsetting some people to reap profit from others? Do you have the demand to support charging for reservations? Are you willing to take the risks associated with this new, fragile marketplace?