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Restaurants could soon be charging for reservations

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As reservation technology proliferates, restaurants already beleaguered by rising food prices have a growing challenge to grapple with – the no-show.

“I think it’s so easy, people can just cancel on a whim – you open your phone, hit a button and the reservation is cancelled,” says seasoned restaurateur and owner of trendy Toronto staple Farmhouse Tavern. “There’s no interaction, no guilty feeling talking to someone or explaining, I think the ease of cancelling has increased cancellations.”

Last Saturday evening, MacDonnell says he lost thirty guests as a result of cancellations and no-shows.

“If I only have 44 seats and lose 30, that’s a turn and a half in one room,” he says.

An estimated 15 per cent of those who make reservations don’t show up. It’s reached a point where the industry is looking for ways to innovate and try to recover some of that lost revenue.

“They’re a necessary evil – part of the benefit of a reservation to a restaurant is there’s some predictability,” explains Mike von Massow, an associate professor in the school of hospitality, food and tourism management and co-director of the University of Guelph Restaurant Research Project. “If that predictability disappears with no-shows it’s a cost because you’ve held a table.”

He says some restaurants using platforms like online reservation site OpenTable have taken to including cancellation fees.

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“I think there’s a perception if we have to pay for something we value it a little bit higher so we’re probably less likely to screw around with it,” he says.

Von Massow sees it as a growing trend in line with the sharing economy, things like Uber or Airbnb where riders and guests pay up front. He says he wouldn’t be surprised if concepts like Chicago-based Next, which sells tickets for meals at specific times ranging from US$75 to US$125 much like a concert or sports event, start to catch on more widely.

“You buy a ticket for dinner and if you don’t show up you lose the value of the ticket,” he says.

Farmhouse uses Pass The Table, an online platform, for a similar concept where diners can pay in advance to book out the two spots at the chef’s table for a pig’s head dinner on a Thursday night.

“You’re paying (Pass The Table) $20 and me $70,” he says adding that although it’s $20 more than just ordering a pig’s head dinner, it gets customers one-on-one interaction with the chef. “People are paying for that and 90 per cent of the time we have that booked.”

He also sees dynamic pricing, the process of lowering and raising prices to match demands, be it for premium seating or time slots in the evening, as an upcoming trend in the restaurant sphere.

“Why shouldn’t the restaurant charge (more) for their best steak on a Saturday night when they’re turning away reservations because they’re full versus a Monday night?” says MacDonnell. “Restaurants are one of the only businesses in the hospitality industry that doesn’t have premium or dynamic pricing.”

Von Massow says he thinks a lot of the cold feet surrounding charging for reservations or using dynamic pricing stems from a fear of how customers will react, especially given that there’s often a restaurant a couple doors down the street.

“The restaurant industry is tough, it’s not a high margin business,” says von Massow. “But we have to be a little bit more creative and we have to give our customers some credit and (I think) they understand – if we’re creating value they will respond positively.’ ”

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