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For the restaurant it means lost revenue. For the denied customer it means no table.

Photo by Alena Plotnikova on Unsplash
Photo by Alena Plotnikova on Unsplash

by Andrew Chalk

The Wall Street Journal had an article entitled Why Is It So Hard to Get a Restaurant Reservation Right Now? Unsurprisingly, the reason is a surge in demand for restaurant reservations. The WSJ noted “As people continue to re-enter “normal” life, restaurants are full again—and many diners have found that getting the reservations they want feels harder than ever. Restaurateurs and chefs are noticing the flurry, too.“

Restaurants lost out during the pandemic, now they are losing out to demand they cannot accommodate post-pandemic. However, they lose out all the time to people who make reservations and then don’t show up, without canceling the reservation. If there is someone waiting in the bar for a seat they may be able to fill the vacant table with little more than the downtime of waiting for the party with the reservation to show up (typically around 15 minutes). Judging from the WSJ article, that is the situation now.

However, when demand ‘normalizes’ we will return to the situation where no-shows at peak time essentially block tables that willing diners would occupy. At any time it means lost revenue for the restaurant. For the denied customer it means no table, or a less convenient reservation time. Back in the accounting office the Gods of double-digit bookkeeping are finding the costs of no-shows must ultimately be borne by the do-shows. In other words, a setup that superficially seems to be based on leniency actually subsidizes the rule breakers and punishes those who follow the rules. As well as being economically inefficient, the traditional system is unfair.

How widespread is the no-show problem? One mixologist-centric bar in Dallas that existed before the pandemic reported a no-show rate of 25%.

Restaurants with particularly high demand have been able to break free of this system by themselves. In the simplest form, the restaurant takes a credit card at the time the reservation is made and credits that amount to your bill on the night of your meal. No-shows lose the deposit. If you cancel prior to some published advance deadline you get a full refund. Now, the no-shows pay the cost of their non appearance, not the do-shows. This system is commonplace among Michelin-starred restaurants in Europe.

Another form is the ‘ticket’ system used by establishments like Alinea. When you make a reservation it is like buying a concert ticket. You can use it (show up), or sell it. In principle, last minute buyers could offer amounts over the ticket price for “table for 4 at 7:30pm on Saturday 17th June”, or whatever table ticket you have bought. The ticket system gets the restaurant out of the secondary market (a cost saving). The obvious operators of the ticket exchange would be Resy or OpenTable.

Virtually all restaurants would like to move to one of these systems to penalize no-shows. Diners who follow the rules want this as well. In the past, the vast majority of restaurants that take reservations dared not go out on a limb for fear of losing legitimate customers. The current deluge of restaurant demand may be the opportunity they have been waiting for. Institute the policy now while there is a queue to get in and get customers used to it and able to see its advantages in terms of lower prices and/or better service. The easiest way of implementing the new policy may be to route reservations through electronic reservation services that support this feature.

The no-show problem is so serious for some restaurants that they will take the plunge. Once they do, I predict they won’t come go to the old way, and customers will thank them.

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