Managing Restaurant Reservations (and No-Shows)

Guests make reservations for several reasons: to prevent a large group from waiting, guarantee a table for a special occasion, or impress a client or business associate. Sometimes, having a reservation just makes dinner (and the diner) feel a little more special. Not matter the customer motivation behind making reservations, how restaurants handle them can impact their profitability and the success of day-to-day operations.

For years, restaurants have been partnering with mobile and online reservation services rather than relying solely on phoned-in reservations, but some have turned to non-refundable ticket systems or have done away with restaurant reservations completely. Many of these approaches for handling restaurant reservations are aimed at preventing losses caused by no-shows and last-minute cancellations, issues that can cost a restaurant¹ tens of thousands of dollars each year in labor, resources, and lost profits.

Changing Reservations

OpenTable, founded in 1998, has long been the most popular choice for taking and managing online reservations. There's plenty of competition in the market from emerging startups, but other online and mobile services² have found it difficult to unseat OpenTable because the leading reservation app is both popular and profitable.

In 2013, faced with a growing threat from Urbanspoon's Rezbook, OpenTable actually acquired³ it instead of continuing to compete against it. That same year, Yelp, despite a partnership with OpenTable, acquired SeatMe and turned it into Yelp Reservations, a venture that undoubtedly led to the partners parting ways⁴ in 2015.

Although the free-to-guests service provides convenience and a rewards program, OpenTable's biggest criticism⁵ often comes from restaurants that must buy the software and pay a monthly fee, as well as fees for each reservation. For restaurants operating on tight budgets with slim margins, OpenTable can become a costly investment.⁶ However, per its Terms of Use, the app may help restaurants prevent no-shows: guests will be banned for no-showing four times in a 12-month period and cannot make more than one reservation for the same meal.

Some of the companies implementing similar services at a lower cost to the restaurant, such as Resy and New York's Killer Rezzy, charge diners for premium reservations.⁷ Nowait, which was acquired by Yelp in 2019 and integrated as Yelp Waitlist⁸, allowed users to see how long a wait will be and figuratively jump in line⁹ prior to arriving at a restaurant.

The Ticketing Trend

Although online reservations are a common way for restaurants to manage reservations, some restaurants have turned to an efficient ticketing system to ensure profits. These restaurant tickets10 are non-refundable, priced per person, and must be purchased in advance, and they're growing in popularity. Chicago-based booking software Tock, released in 2015, grew from Nick Kokonas's desire to have a better reservation system for his own restaurants.

Some might decry restaurant tickets¹¹ for making dinner more complicated. However, the system's popularity is proven by Tock's presence in hundreds of restaurants in dozens of cities across the globe – and Squarespace's purchase of the startup in 2021.¹²

Preventing the Disappearing Act

Selling non-refundable tickets for a table may not cut it in restaurants outside of the fine-dining realm, but it may be one of the only fool-proof ways to prevent profit losses caused by no-shows. The other, of course, is for restaurants to implement a no-reservations policy, a luxury that restaurants that have trouble filling seats may not have. Not accepting reservations can scare off potential diners or groups of diners who don't want to wait in line,¹³ but restaurants with limited seating or in-demand spots may find that diners craving what they have to offer won't mind.

Restaurants that want to offer reservations, even through an online management system, will have to find ways to lower no-show rates that go beyond the typical day-of confirmation call. Some restaurants have resorted to embarrassing no-shows,¹⁴ which can be controversial and can damage your reputation or relationship with other diners. Taking a credit card number with each reservation and threatening to charge a no-show fee¹⁵ can make the reservation feel more like a commitment, but actually charging a fee without the guest's consent might skirt the lines of legality and be contested by the cardholder; requiring a deposit that is later applied to the final bill may be a more feasible solution.

References

1. H4C Suffers 54 No-Shows Over Two Weekends. Eater Montreal. Accessed November 2021.
2. OpenTable Began a Revolution. Now It's a Power Under Siege.. The New York Times. Accessed November 2021.
3. OpenTable Buys Urbanspoon's Rezbook Reservation System. HuffPost. Accessed November 2021.
4. Breaking Up Is Hard to Do: Yelp and OpenTable End Long Partnership. Eater. Accessed November 2021.
5. UPDATED: As Fees Become Problematic, Restaurants Move Away from OpenTable, But Do They Stay Away? Houston Press. Accessed November 2021.
6. Why OpenTable Is A Lousy Deal For Some Restaurants. Business Insider. Accessed November 2021.
7. New Services to Score Prime Reservations. The Wall Street Journal. Accessed November 2021.
8. Nowait Is Now Yelp Waitlist!. Yelp! Accessed November 2021.
9. From Hangry into Happy: innovative restaurant app help manage line-up chaos. Edmonton Journal. Accessed November 2021.
10. The Future of Restaurant Reservations: Literal Meal Tickets. Chefsfeed. Accessed November 2021.
11. Dinner: The Toughest Ticket in Town. Dinner: The Toughest Ticket in Town. Accessed November 2021.
12. Squarespace buys reservation platform Tock for $400M. Restaurant Dive. Accessed November 2021.
13. Table for 2? Get Ready to Wait in Line. The New York Times. Accessed November 2021.
14. Red Medicine Restaurant Shames No-Shows On Twitter. HuffPost. Accessed November 2021.
15. Most restaurants with cancellation fees never actually charge anyone. Business Insider. Accessed November 2021.