Restaurant reservations are back in the news. The Wall Street Journal had a story discussing two aspects of reservations — restaurants that offer tickets and sites that sell other people’s reservations (Ticket to Dine: The Restaurant Reservation Revolution, May 30). The first of these is an interesting trend if only because it so drastically changes the nature of running a fine dining establishment. Even with reservations, the number of people a restaurant serves in a night is random since they cannot guarantee that everyone will show up. Turns out, making people pay upfront does wonders for attendance.
“I’d been thinking about tickets for years,” said Nick Kokonas, a former derivatives trader who pioneered the approach, in 2011, at his Chicago restaurant Next—one of three ticketed spots he runs in the city with chef-partner Grant Achatz. At his tasting menu restaurants the ticket price covers the full cost of a meal—tax and tip included—with beverage pairing available as an optional add-on. But Mr. Kokonas has also begun experimenting with tickets in an à la carte setting, pre-charging $20 per seat at his cocktail bar the Aviary—a down-payment on the food and drink you’ll be consuming that night. “Our no-shows at the bar dropped from 14% to near zero,” he said. “If people buy tickets to a show, they go see the show.”
Others are following the lead of Kokonas and Achatz, often licensing their technology to sell tickets. The move into à la carte is interesting. Selling a tasting menu is much easier since, except for wine, everyone is buying the same thing. Per-person spending at an à la carte restaurant is going to be much more variable. Hence, the upfront payment is going to be significantly lower. That’s not inconsequential. Kokonas and Achatz’s restaurants sell out weeks (if not months) in advance and they get to sit on that cash until they actually need to prep food. If you are only getting $20 a head (as opposed to more than $100), the financial pay off of pre-selling isn’t quite as high.
It should be noted that one of the reasons why Kokonas and Achatz are seeing a near zero no-show rate is that they allow buyers to sell tickets. Here is what the FAQ at Next says.
Can I give my ticket away or sell it?
Yes. The ticket is completely transferable. However, selling tickets for greater than face value may be illegal in your area. Anyone who purchases a ticket from another patron should take care to be sure that the beverage pairing options are as claimed by requesting both an email confirmation from us as well as a printed ticket from the seller. Any tickets purchased on the secondary market are at the purchaser’s risk. We will not be held responsible for forgeries or misrepresentations. Please see the Resales link at the top of the page for more information.
Turns out, other restaurants don’t take so kindly to people reselling their reservations. This is particularly true when reselling reservations is the entire basis of a firm’s business model.
Seats at the country’s best restaurants will always be a hot commodity, with demand outstripping supply. “If you search on OpenTable for an 8 o’clock reservation at the top 100 restaurants in New York, you won’t find it, they’re never there,” said Pascal Riffaud, whose company PrimeTimeTables, launched in 2005, was the first formal service selling hard-to-get reservations online. Unlike the tickets sold by the restaurants themselves, the fees charged by these services merely secure a seat and are not applied to the bill for the meal. Shortly after its launch, Mr. Riffaud’s venture—run anonymously at first—was the subject of a punishing exposé on the food blog Eater that portrayed the business as “no more legitimate than the ticket scalpers who cruise outside Yankee stadium.” Mr. Riffaud, a former hotel concierge, eventually rebranded, changing the name to Today’s Epicure. He also switched to a membership model, charging $1,000 a year for unlimited access to the site’s reservations.
The field’s become crowded since Mr. Riffaud’s debut, with a host of new ventures offering last-minute access, at a price, to restaurants you usually need to book at least a month in advance. A war is brewing between these services—which sometimes use automated bots to score tables under fake names—and restaurants determined to ferret them out. “For someone to write a code that allows them to snatch up reservations from people who are doing their due diligence, we don’t think that’s right,” said Ryan Anderson, general manager of popular restaurant State Bird Provisions in San Francisco. “If we catch them, we cancel them.” (Hence the fake names on the reservations.)
Hoping to remove the acrimony from the equation, a few new players have begun cutting in restaurants as partners. Resy, the latest, debuting next month in New York, is the brainchild of social-media branding mogul Gary Vaynerchuk and Eater cofounder Ben Leventhal, who led the crusade years ago against Mr. Riffaud. Mr. Leventhal remains an outspoken critic of unsanctioned scalping. “It’s almost like stealing,” he said. “The restaurants aren’t seeing any of the proceeds.” For anywhere from $10 to $50, his service will deliver access to last-minute reservations, with restaurants receiving more than 50% of the fee. “It takes some planning to get into a great restaurant,” said Mr. Leventhal. “It’s a lot of time when you consider that you can get a car or hotel room on your phone in two minutes. That’s where we start.”
Scalping reservations in one form or another has been a recurring theme. PrimeTimeTables wasn’t the only player back in 2005. There was also withoutreservations.biz (see Procrastinators Get Help Landing a Table On Valentine’s Day, WSJ, Feb 9, 2005). For awhile there was also TableXchange, which functioned more like StubHub. It never made specious reservations on its own. Instead it let others sell reservations that they suddenly didn’t need. TableXchange folded when the market crashed and it all of a sudden wasn’t that hard to get a Manhattan restaurant reservation (see here). This, of course, leads to the theory that firms based on selling restaurant reservations are inherently a signal of an overheated stock market.
So what can we expect the market for restaurant reservations to look like going forward? The ticket model is certainly attractive for a number of reasons. But it is hard to imagine that will spread outside the extreme high end. I also can appreciate that restaurants do not like having their tickets scalped — if only because it exacerbates the problem of no shows. If a third-party scalping service were to really take off, it would make reservations under a false name a huge problem for many restaurants.
However, scalping reservations acquired in good faith but later unneeded is efficient. If a party’s plans change because of a work emergency or a baby sitting failure, then an effective scalping site a good way to make sure that capacity is used. That’s why Resy sounds promising. The goal would be to create an “obvious” place to go look for last-minute reservations — something that has some scale and regular traffic. From a restaurant’s point of view, the fees it collects would be secondary to making sure that a reservation that is cancelled on Wednesday finds a taker before Friday night.