Restaurant revenue management: apply reservation management?

Abstract

Restaurateurs obviously want to turn their tables as empty seats equates to zero revenue, so to achieve the best revenue per available seat hour (RevPASH) they can work hard by scrambling at the door trying to orchestrate people into chairs or should they work smart and let the technology sort out the crowds…or a combination. The latest fad in trendy restaurants is to not take reservations. Many restaurant operators are confident and feel that their product is so good that customer’s will walk-in and wait for a table. The wait may be at the bar, in the lobby, on the sidewalk or even at another restaurant or bar across the street, but they will wait for a table in “the place to dine”. It seems that some restaurateurs of these trendy places cannot be bothered with the services of mobile apps like Open Table who take all the work away from restaurants by allowing customers to “book a table” in three clicks. The issue with these reservation apps is the cost to the restaurateur which is around 1.25 CDN per guest plus a one-time start-up cost for hardware and access. Every reservation system relies on staff to answer telephones and emails and/or manage software to then coordinate the process to ‘reserve’ the actual physical space. Reservation systems can work effectively if the reservation staff work error-free and the customers honor the booking by showing up at the time they requested (or booked), but in reality this is never the case. Restaurant staffs make errors and customers don’t show up. Major complaints from customers arise from errors in booking (phone/email) where the table isn’t available at the time (or even booked) and restaurant management complain (lost revenue)when guests are ‘no-shows’. To curtail the ‘no-shows’, some restaurant’s demand a credit card number with a booking and threaten a cancellation fee charge to those who don’t cancel in time. With this being said a restaurant can get a bad review by customers from the way a reservation is handled before they even taste the food. So the question this research paper attempts to answer is simple; in fine dining (trendy) environments, do customers who have pre-booked reservations spend more than the customers who “walk-in”? Data was collected by observing the ‘average guest check’ spending on revenue statistics on tables of two, three and four at five fine dining restaurants over the course of a 3 week period. The findings show that the mean guest check for guests with reservations was overall higher in all five restaurants with three of the five statistically significant using an independent t test as verification. This finding perhaps demonstrates that restaurant customers who make reservations are more valuable and restaurants that don’t take reservations may need to re-think their policy as this may affect revenue. More research is needed in other major centers to verify this trend in restaurant spending along with a study of the restaurants that do not take reservations. The findings of this research will enable restaurateurs to develop a reservation system that takes advantage of their seating plan to maximize the revenue per chair based on whichever reservation policy they feel comfortable with.