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High-demand restaurants poised to profit from reservation revolution

High-demand restaurants poised to profit from reservation revolution

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Restaurants can thank the airline and hotel industries for demonstrating what yield management—dynamic pricing that reflects the relationship between fixed capacity and customer demand—can do for the bottom line. The latest wrinkle: OpenTable has begun testing OpenTable Premium Reservations, which enables diners to pay extra to secure a table at a restaurant’s most desirable time. Participating restaurants keep the proceeds, creating an incremental revenue stream that could become lucrative.

How lucrative? Customers who want to snag a 7 p.m or 8 p.m reservation on a weekend night at New York City contemporary Mexican standout and OpenTable test site Cosme are asked to pay in the neighborhood of $100-$200 to get it. That’s over and above the cost of food and drink.

Given the operating margins that prevail in the full-service restaurant segment, this represent a significant sum that’s going right into the pocket of Cosme’s owners. But OpenTable didn’t just pull this surcharge amount out of the air; it’s determined using a data-driven approach. Here’s what the company is telling operators about its test.

“When research revealed that many OpenTable diners are willing to pay for last-minute, prime-time reservations at popular restaurants, we launched into exploration. We’re excited to see whether OpenTable’s Premium Reservations can help you grow revenue and delight valuable guests seamlessly.

“As the leader in restaurant reservations, our diner demand and data is unmatched, so we believe we can capture more value for prime-time tables. Giving guests without the ability to plan ahead (last-minute business travelers, unexpected celebrations, etc.), the opportunity to be seated will delight those in need of your hospitality.”

OpenTable, which seats 16 million diners per month, might be the largest company to enter the pay-to-play restaurant reservations space. But it’s not the first. Reservation site also sells reservations and splits the proceeds with the restaurant. Its price for hard-to-get reservations varies.

"We work with the restaurants to set pricing," cofounder Ben Leventhal tells the Village Voice. "We really strive for it to be an accurate representation of demand. Demand is driven by a variety of factors: seasonality, day of the week—we're looking at all those things, and attaching what we feel is a fair price to the reservation. On Monday or Tuesday, 70 percent of the reservations are free. On Saturday, 70 percent are paid." has caught on in a hurry. It began operations in June, 2014. The site now handles reservations for more than 200 restaurants in NYC, L.A., Miami and Washington DC.

For their part, many restaurant owners might be happy just to gain greater control over their reservations. In some cases, outsiders book prime time tables under phony names, then turn around and sell them on an informal black market that exists in a few cities.

Disney World has had enough with outsiders profiting off its restaurant reservations. In September, the company told website Disney Dining Buddy to cease and desist, which it promptly did

DDB didn’t sell reservations per se. For $8, it monitored table availability at multiple Disney World restaurants and alerted customers to potential openings. Customers then had to book the table themselves.

“Disney has requested that we discontinue our services as currently provided, and we have honored that request,” says DDB.

Another service, DIS Dining Agent, booked tables under phony names and then sold the reservations for $15. They’ve stopped, too. “We have received word from Disney and are altering our service to meet their requests,” the service says on its website.

OpenTable’s gambit is just a test. Many restaurant operators are hoping the idea receives a passing grade. But if it doesn’t, keep an eye on restaurant ticket-selling website Tock. It’s the brainchild of Alinea co-owner Nick Kokonas. Tock’s pay-in-advance ticketing system uses yield-managment techniques, too, and gives an operation plenty of control over its dining room while getting maximum dollars for its most desirable times and tables.

Kokonas and chef Grant Achatz test-drove Tock at their Chicago operations Next, Alinea and The Aviary. Now its blue chip client roster includes restaurants in NYC (Aldea), L.A. (Trois Mec), Austin (Qui), Phoenix (Tuck Shop) and San Francisco (Coi). Thomas Keller restaurants The French Laundry (Napa Valley) and Per Se (New York City) both sell tickets on Tock.

Were not sure relative newcomers like Tock and Resy are going to disrupt traditional reservation schemes used by most restaurants. But given the scale at which OpenTable operates, if it gets into the game, look out. The appeal of pay-to-play systems to restaurant operators is summed up in this one liner from another founder, Gary Vaynerchuk. “We see reservations changing from a cost center to a revenue stream.” Just about every restaurant operator could buy into that.

Contact Bob Krummert at [email protected]

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