No reservations could be best policy
The consensus comes from Oh and Su applying their model to real-life restaurants, including an Asian one in Philadelphia, which has about 100 seats at 40 tables. It fills 60 percent of those seats through reservations and the rest are walk-ins. Meals are approximately $50 and last two hours. Taking all that and more into account, the researchers found the restaurant could increase profits by 7.4 percent by giving a 5-percent discount on slower nights to customers booking in advance. Imposing fees on those nights didn’t make much sense, but Oh and Su say the owners could earn 14.5 percent more profit by charging a no-show fee equal to the price of a meal on busier nights like weekends.
Not every restaurant should follow that exact model, obviously. The authors suggest some restaurants would even be better scrapping reservations altogether, which is almost exactly what an email from Ada Street owners David Morton and Michael Kornick explained to their customers last week.
Starting on June 1, the Chicago restaurant limited reservations to just 5:30-6:30 p.m., with the dining room becoming first come, first serve after. “Reservations can be restrictive for a small, very busy restaurant,” the email read, “and we want you to have more opportunities to visit at whatever time you choose.” Previous guests can call 60 minutes ahead of visiting Ada Street to have their name placed on a guest list, and when the full party arrives, it moves to the top of the list.
Oh does note that restaurants also should factor in customers feelings and their reaction to tougher policies, and not just look at the numbers. “The restaurateur should be careful,” she says. “If they consider the chances of a customer making a repeat visit and customer goodwill, they may not want to upset [him or her] by charging such a high no-show fee.”
But, she says, if a reward is offered for those following through on reservations, the customer might take advantage more often and become a regular, loyal customer.
Of owners and operators surveyed in a recent Restaurant Hospitality poll, 63 percent of respondents said they believe collecting credit card information when reservations are made is the best way to discourage no-shows. Only 19 percent said not taking reservations is the best approach, while 13 percent said overbooking is the best approach.
OpenTable says 10 percent of restaurants nationally take credit-card numbers, but that number has been declining recently. A spokesperson for the online-reservation system says it takes no-shows “very seriously and our service is designed to make it easy for people to secure reservations, remember those reservations and if necessary, cancel/modify.” To mitigate no-shows, diners get a reminder email 24 to 36 hours in advance of their reservation, and another option at that point to cancel or modify them.