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- [00:10]
A
Hello. Welcome to Slate Money Food, our mini series on everything food related. We are talking this week about restaurant reservations, which are an absolutely fascinating subject. I'm sure it's something that a lot of people don't really think too much about. But people pick up that little corner of the carpet and look underneath and there's a huge amount of stuff going on underneath there which Marissa Conrad knows everything about. Marissa, hi.
- [00:39]
B
Hi.
- [00:40]
A
Introduce yourself. Who are you and how do you know about this subject?
- [00:43]
B
I'm a freelance journalist. I write about culture, food and economics. Overlaps very nicely into the restaurant reservation world. I recently covered the world of restaurant reservation platforms for New York magazine and I'm just personally fascinated by the topic.
- [01:00]
A
So we are going to talk about the platforms because of course there are platforms, aren't there? There's opentable and resi. We're going to talk about how restaurant reservations work from the restaurant end, from the diner end. We're going to talk about the secondary market in reservations. We're going to talk about concierges. All of that coming up on Slate Money Food. So let's start with just in general. Who needs reservations? Who are they for? Are they so that I can make a reservation so that I know there will be a table waiting for me? Is it mostly at higher end restaurants? Are they basically a tool for restaurants to be able to distribute demand, like who's, who's the main beneficiary of this whole ecosystem?
- [01:50]
B
Restaurant reservations are a fascinating ecosystem. I would say multiple people need them, multiple people benefit from them. The obvious person who is benefiting is you, the diner. You don't have to wait for a table. You can be sure that there's a space for you when you go in. That's all great, but the side of it I think people don't think about is how much the restaurants need to count on reservations. And it really helps them plan for how much food to buy if they can accept walk ins or not. If they know they're at 95% capacity, they're going to have to be turning people away. And that's where things get a little tricky. Because if you are the kind of diner who thinks, oh, you know, it's okay if I'm late or I don't show up tonight or I'm just not going to go to this reservation and I don't need to cancel it, then the restaurant is sitting there waiting for you to show up, waiting. And they're not giving your table to a walk in because they still think, you know, they're giving you a little grace period, you might come and then that impacts their bottom line pretty hard.
- [02:55]
A
So the first rule of reservations is don't be a dick. If you make a reservation, then show up for the reservation and obviously like the minute that you know that you need to cancel, if you need to cancel, then do it as soon as you can.
- [03:10]
B
Yeah, it's interesting. A lot of these restaurant reservation platforms that you're booking through, whether it's resi or OpenTable, they are now starting these pretty aggressive text campaigns where you'll get a text even 30 minutes before your meal, which never used to be the case, reminding you, a little friendly reminder, you're due at this restaurant in 30 minutes. They're really trying to prevent the no shows.
- [03:32]
A
And does it work? I mean, presumably they wouldn't do it if it didn't work, right?
- [03:35]
B
Yeah. I think it's so new. I haven't seen much data out on if it's working or not, but I presume it's a good idea. I mean, you're either going to ignore the text, but any decent person I think would hopefully at that point know if they're coming or not and at least reply a little N for not.
- [03:51]
A
Coming, which, I mean, I've always wondered that when I get those text messages and says, reply confirm to confirm or something, what happens if I don't? Do they assume I'm not coming?
- [04:02]
B
If you don't reply to that text message yet you're still intending on coming and you still show up, your table will still be there. Restaurants at the end of the day are very focused on serving their customers and they would never want to just give up a table and then have you come and then have them say, oh, no, we just gave your table away. So if you don't respond, you will still have a table. But again, if you're just a decent person, you should respond.
- [04:30]
A
I feel like now that everything is so easy and you can make a reservation in 10 seconds by clicking a couple of buttons on your phone, it's a lot easier to make a reservation, cancel the reservation, make it again, cancel it again, make another one somewhere else. And I feel like that's got to have changed the way that reservations work at the restaurant end compared to when everything was done by phone and there was a bunch of people would have been much more certain that they wanted that reservation when they picked up the phone and made the call. Compared to right now, it feels like it's a lot easier and cheaper and it's like a Free option. You make a reservation, and if you don't need it, you can always cancel it.
- [05:12]
B
I think restaurant reservations are one of the most fascinating parts of our entertainment economy for that exact reason. If you buy tickets to a movie, you're locked into that movie. If you buy tickets to a sporting event, you're locked into that sporting event. But as you said, with restaurants, we just decide, oh, I'll click and book this. Oh, I'll click and unbook it. Oh, I'll book another one. I wrote a story on restaurant reservations for New York magazine, and one of the diners I interviewed was very nonchalant about the fact that he'll just book four different tables for a Saturday night at four different restaurants, and then he and his friends can decide the night of which one they feel like going to. And restaurants have started to pick up on this fact and have started to block you from being able to do that. So, you know, if you're a restaurant on Open Table or on Resi or on Talk, you know, any of these various platforms that book reservations, those platforms now block you from making reservations for the same time slot.
- [06:15]
A
And they also know, presumably, if I'm on Resi and I make a bunch of reservations and they don't show up for them, then all of those reservations get aggregated somehow at the resi level. And then the next time I try and make a restaurant reservation, even at a restaurant I've never been to before, they'll get a little flag from Resi saying, this guy doesn't show up to his reservations very often. Or they might not even let me book it at all.
- [06:40]
B
Yeah, actually, OpenTable has a policy. I believe it's four no shows. It might be five. But if you reach a certain amount of no shows, they'll kick you off the platform for a certain amount of time. At least that was the case when I interviewed this man, because he had been kicked off the platform for doing that.
- [07:00]
A
And that's one of the promises of these things, is they're much bigger than just reservations. Right. That they include a whole bunch of information that the restaurants can include about who you are, what you like, where you like to sit, you know, all of these kind of things kind of get incorporated into the reservation platform.
- [07:19]
B
Yeah, absolutely. I mean, that's why there's competition in this space. So there are a few major players that you, as a restaurant, can decide to use as your booking service. So if I'm a restaurant owner, I could choose OpenTable, I could choose Resi, I could choose a service called toc. I could choose Yelp reservations. I would say those are the four biggest players in the space.
- [07:42]
A
Okay, so I'm going to stop you right there because OpenTable is owned by Priceline, a travel company. Resy is owned by American Express and also merged with Reserve, which was another one of these things. And then you have Yelp, which is a massive business in its own right and has started trying to get into restaurant reservations. But as far as I can make out, the only times I've ever tried to use it, it's been kind of nightmarish from a diner perspective. Those are the big ones that I come across certainly are opentable and Resi. And then as you say there's toc, but that feels different. TOC is like this super high end thing that started in Chicago which is still overwhelmingly about buying variable price transferable tickets for dining experiences. And that feels like qualit different to me. But I might be wrong about this.
- [08:32]
B
I can definitely walk through all of these things. You are right to some extent. The whole business model of Tock was founded on prepaying in some extent for your meal, which does make it different from the other services. And that prepayment might be in full for some kind of high end tasting menu, say you know, your French laundries of the world or, or that prepayment might be a small, say $20 deposit that holds your table and then is taken off your check at the end of the meal. TOCK is starting to offer free reservations, which brings it a little bit more in line with RESI or services like that. But I would also put them in a different category. I do think they are something.
- [09:17]
A
I mean Resi and Tock both, it seems to me, had this idea when they launched that some reservations have real value, just as reservations that you know, the amount you pay for the meal itself is significant. But the amount that you're willing to pay for a meal at 8 o' clock on a Saturday is almost certainly going to be bigger than the amount that you're going to be willing to pay for the same meal at 10:30 on a Monday. And it therefore makes sense to have some kind of, you know, 8:00pm on Saturday surcharge, which you can do through the mechanism of reservations. And Rezi tried that, it didn't really work and Tock tried that. And as we've seen from them branching out into more sort of standard open table y fare, it worked to a certain degree for a handful of restaurants, but it didn't sort of catch on. And it seemed to me a little bit like, you know, service included, no tip. Restaurants, everyone understands in theory that they're a great idea, but in practice, it seems to be very difficult to make it happen.
- [10:21]
B
It's a hard mindset for Americans to change, for whatever reason, that you think ahead and pre buy your tickets to so many other entertainment venues and events in life. But restaurants, we have this block in our minds almost that we can't pay ahead for them, and that seems crazy. I was reading in TechCrunch a February 2020 article, so the numbers are pretty recent, that they've been processing $2 million a day in prepaid tickets. So they're not doing nothing. But I think the majority of diners, when they go to book a night out, they're going to OpenTable or Resi. And OpenTable definitely has the market share in terms of the breadth and being in smaller cities. Resi, I feel, is very concentrated in larger metropolitan urban areas.
- [11:14]
A
There was a big fight, wasn't there, with OpenTable not so long ago, between OpenTable and the restaurants about who owned the data about the diners and how often they went out and their preferences and that kind of thing. And OpenTable was basically saying it all belongs to us rather than to the restaurants who are taking the reservations.
- [11:35]
B
Yes, that has been a huge point of contention as a restaurant. If I'm paying a platform to help book reservations, it's still nice for me to know who's coming in a little bit about them, their demographic, where they've eaten before, maybe any sort of information that I can then gather and use as data. And OpenTable had been criticized for hoarding that data a bit, keeping it to themselves, not really letting the restaurants know much about who was coming, who their repeat customers were. And one of Rezi's selling points is that it is more open with that data and restaurants like that.
- [12:15]
A
The other thing which really fascinates me about this space, and we've seen this, I mean, TOC has been around for what, a decade now? Something like that.
- [12:21]
B
TOC launched in 2011 only at restaurants in the Alinea Group. The founder, Nick Kokones, is one of the men behind Alinea, the restaurant in Chicago. And so they were doing it just at their own restaurants. And then in 2015, it became a service that other restaurants could sign on to.
- [12:39]
A
But one of the things you see with the Alinea reservations and other ones on top, where they are fully prepaid tickets and you just buy your meal in advance and then walk in and don't have to pay a penny is that it creates a secondary market and that people start buying and selling these reservations on. You know, I don't know if you can go on StubHub, but you can certainly do it on Craigslist. There's even a little bit, not a lot, but a little bit of sort of speculative buying that people will buy a reserv for, like, a hot evening a few weeks out and then sell it like, the night before to someone who really wants it at a profit. That seems like. I mean, it's definitely something that Nick Kokonis anticipated happening. He was like, this could be a feature rather than a bug. It could, like, really help everyone. But again, like, what's your view on that whole, like, weird secondary market in restaurant reservations?
- [13:33]
B
I don't have a problem with it. Again, no one's criticizing StubHub for reselling concert tickets.
- [13:40]
A
A lot of people are criticizing StubHub.
- [13:43]
B
But, yeah, fair enough. However, StubHub is still in business, and a lot of people use it.
- [13:48]
A
So did Nick Kokonis theory that hot reservations at peak times on Fridays and Saturdays would be worth significantly more than the same reservation at a less peak time? Did that play out in practice? Is that actually something which people have proved that they are willing to pay more for time slots?
- [14:11]
B
I think it's actually the reverse. I think it's working out that harder to fill. Time slots, when offered at a lower price, are then snatched up.
- [14:21]
A
Interesting.
- [14:22]
B
It's more the. Oh, my. Fridays and Saturday nights are sold out at the cost that I had originally anticipated selling for. It's not spiking those prices. It's then looking at your books and seeing, but no one's coming in on Monday night or Tuesday night and adjusting, lowering the prices a little bit, and then seeing if those tables sell. And that has been successful.
- [14:46]
A
And there's a new company which is getting into that space called Seated, which I'm kind of fascinated by, where they basically tell restaurants that they can take a whole bunch of, like, times where they have a bunch of spare inventory and put them on seated and get people to get, like, 20% or 30% cash back in the form of Amazon vouchers at the end of the meal, and then that will encourage people to dine at those times. That seems like a whole new form of, like, instead of charging extra for peak times, you just effectively charge less for off peak times.
- [15:21]
B
Yeah, it's almost like a flash happy hour. Right. Instead of having to decide ahead of time and put out the chalkboard that says from 4 to 8 tonight, we're going to offer 10% off or these specials. You can do it in real time on an app.
- [15:37]
A
I worry that it's a, it's, it's not good for the ecosystem, though, that someone who wants to go out to eat on a Monday night will normally just make a reservation and go out and eat on Monday night, but now they'll go on to seated and find whichever restaurant will give them the biggest discount and they'll just wind up spending less on going out to eat. And that's less money for the restaurant industry. Yeah.
- [16:00]
B
It almost reminds me of the Groupon model, which was very bad for restaurants. A restaurant would buy a Groupon thinking, okay, I'll give some money off this time, and then the person who comes in will love my restaurant so much, they'll come back and back and I'll make the money back. It'll be worth offering this discount. And that did not happen, at least in the Groupon space. And I could see that also being a liability with something like seated. You're the restaurant thinking, I'll try this seated thing and I'll put a discount on here and it'll draw customers in. And the whole point of that would be to get customers maybe to fall in love with your restaurant and come back. But it's been proven time and time again. I think with anything involving discounts that you don't get a lot of repeat customers, you get people who are just chasing the next discount and the next discount.
- [16:48]
A
The other question which I've been fascinated by is tell me how concierge services work. Famously, there's this idea that if you want an impossible to get reservation at some hot restaurant, then one way that people manage to do that on short notice is they can go via, like the concierge at the grand five star hotel in the middle of town. And there's some back channel there. And I'm fascinated, like, what way does the money flow in that and what are the incentives there? And why, why does that channel exist?
- [17:20]
B
So I think the channel of being able to get access via being a VIP customer has existed for a long time in various ways. The old trope of slipping the Maitre D20 when you get to the door, which I hope doesn't happen anymore.
- [17:38]
A
Is that bad? I shouldn't do that.
- [17:40]
B
It was a bit tacky. However, there are digital equivalents that maybe are just as tacky, but we don't see them as being so tacky because they're done behind the scenes. Actually, Resi is Introducing something called Resi Select. And it's an invitation only program. It opens up tables at hot restaurants for these VIP resiselect customers that wouldn't be available to just the normal folk. And it's been very ambiguous on how one gets to be a Resi select member. It appears to be some kind of invitation only system.
- [18:14]
A
But Resi knows how much my average check size is, right? So if my average check size is like $200 a person, then they'll be like, oh, Felix, come join Resi Select. And if my average check size $20 a person, they'll be like, yeah. No, I mean, that was always my guess about the five star hotel concierge type situations is that the restaurants would keep a table or two open for those people because they knew that those diners would be less price sensitive and be more likely to splurge on an expensive bottle of wine or something like that. Which may or may not be true, but I guess insofar as they do might be because it is true. Or the alternative is that there's some kind of payment going one way or the other. And I'm a little bit unclear which way the payment would go. Either the restaurant basically pays the concierge to recommend the restaurant and drive a steady stream of traffic to the restaurant, or else the hotel kind of, you know, would pay the restaurant somehow to keep tables open. I don't know how that would work.
- [19:17]
B
I think it could work in various ways. It could be a restaurant paying a hotel. I'm also not sure how that works. It could be a system where the hotel sends people to a restaurant and the restaurant sends people to a hotel. Old fashioned.
- [19:33]
A
I feel like these things are rarely formalized. I think a lot of it is just that the maitre d at the restaurant and the consequence at the hotel know each other, they do favors for each other. And it all becomes part of a sort of you scratch my back ecosystem in some way.
- [19:51]
B
But it's so interesting because restaurants just don't have maitre d's the way they used to. It's such a thing of the past. And so maybe these digital platforms are stepping in to fill that role.
- [20:03]
A
It is true. It's less of a hey, Mr. Salmon, how are you? We haven't seen you here in a while kind of thing. That's much less of a common dining experience, even at relatively high, high end restaurants, I think, than it used to be. Is that a function of everything going online and the reservation systems and you don't talk to people on the phone anymore, perhaps.
- [20:23]
B
Although at the very high end restaurants, I think they are keeping all of your information in digital files, which actually makes it easier for them to quote, unquote, remember you. So even if you haven't been for two years, if you're in their file, they can still make a big show over you and tell you, oh, I remember that you love sparkling water and you drink still and this bottle of Bordeaux seems like it would be up your alley. And really they're getting it all off a crib sheet. And that crib sheet has been kept digitally, which is just a lot easier for them to search and find, rather than big written out binders, which I believe was the method. Pre Digital TOC actually is introducing this year a diner profile page where people can actually fill it out themselves. So I as a talk user could go in and fill out what my dining restrictions are, what my allergies are, what my preferences are, even maybe what my birthday is. And then the restaurant has access to all of the things that I want them to know about me.
- [21:28]
A
Oh my God, that would be amazing to be able to like fill out a thing in advance and say, I don't like it when the waiter just comes around and automatically refills everybody's wine glasses. Can you let me do that? And they'll be like, okay, no problem.
- [21:42]
B
You know, we're in this economy where I feel like we're in this economy where as the buyer, the user, it's so easy to tailor the experience to every single tiny quirk we have. I just noticed on my Uber app, you can now select the level of conversation that you want from your driver, which essentially a nice way to tell the driver to shut up before you even get in the car. And yeah, diner profile page would be kind of something just like that. You are voicing your preferences before you even get there. There's something a little aggressive to me about that. It eliminates some of the face to face communication you might have with someone. But then again, it's nice to get to a restaurant and have them know what you want. And particularly with something like allergies or dining restrictions, that's also probably a great thing.
- [22:35]
A
And finally, how is this playing out in the sort of massive restaurant chain world in the Olive Gardens and Applebee's and P F Chang's, like, how do they deal with reservations?
- [22:53]
B
So Cheesecake Factory just signed on with Yelp reservations and it is a big deal for people who love Cheesecake Factory. They are all very excited. Historically, the larger chains like Cheesecake Factory or Olive Garden can have very long waits.
- [23:11]
A
The most impressive reservation system I've come across recently is the best restaurant chain in the world, which is, of course, Dinh Tai Fung. And they don't take reservations way in advance, but you can walk up and say, I want to eat your amazing soup dumplings. And they have this whole system with your phone number and tickets and like, staging areas. And it's super fast and super transparent. You know, where you are in line, they can give you, you know, a time to come back and stuff like that. And they just. They totally maximize throughput in an absolutely astonishing way. And I feel, I don't know if, like the way that Nick Kokonis rolled out talk for restaurants which he didn't own. I kind of have this feeling that at some point Din Tai Fung might try and roll out their tech for restaurants that aren't Din Tai Fung, but it would need to be a deeply popular restaurant like Din Tai Fang is. And I don't know if there's any restaurant in the world which has quite the same kind of cult following as they do.
- [24:15]
B
That's the thing. I think that type of system only works if you have a constant stream of people. And if you don't, you need another way. You know, when I was reporting the article for New York magazine about restaurant reservations, I got to shadow a few popular restaurants on a Saturday night and stand behind the host, stand and watch how these platforms work on the back end. And it is fascinating. These hosts really have to act very quickly, almost like steeding ninjas, juggling the people who are no, showing the people who are running late, the phone calls if they can fit someone in, and then deciding quickly if they can based on who's not coming and who might still walk in the door. And on the back end of these platforms, there's a whole seating chart, and you can drag and drop and reconfigure your dining room. It's really just so much work on the back end for a restaurant that I think the diner is not aware of. The diner just clicks a button, books a table, moves on, doesn't think much about it. It's nice to consider the restaurant side of it, I think. And if you know that about the restaurants, if you know how much it impacts them, if you aren't showing up or aren't calling ahead, if you're late or trying to squeeze an extra person in, having a four top and showing up with five and thinking it's not a big deal, it screws up the whole seating plan. It's like imagine planning your wedding and you have every single person meticulously seated and it takes forever to figure that out and then someone shows up with two extra people it throws off the whole thing. It's like that but constant and every.
- [25:58]
A
Night I still feel less guilty booking a four top and showing up with three though I feel that doesn't really change anything.
- [26:05]
B
I think you're right now booking a four top and showing up with two does leave some wasted seats where they could have split that table and then.
- [26:13]
A
Given it to the give you a two top. They can work but yeah I think four to three is the least guilty one you can do. I agree with you four to five is yeah that that screws everything up and groups of more than 6 in restaurants is always a nightmare for everyone. Marissa, Conrad, thank you so much for being with us. This has been absolutely fascinating.
- [26:35]
B
Yeah of course.