Latest / Restaurant Business with Fexingo: Food Service, Hospitality, and Independent Operators / How Restaurant Reservation Systems Changed the Industry
Transcript
- Lucas: So you walk into a restaurant, the host smiles, says 'I see you booked with Resy' — you barely think about it. But that booking system has probably had more impact on that restaurant's bottom line in the last decade than the wine list or the menu design. Luna: That's a big claim. I mean, I know OpenTable's been around forever. But how much difference can a reservation platform really make? Lucas: It's not just about taking bookings. Think about what a reservation system actually does. It captures data — who you are, when you dine, what you order, how often you come back. For a restaurant, that's gold. But more importantly, it solves the no-show problem. Luna: No-shows are brutal. I read somewhere that some restaurants in New York were seeing no-show rates of fifteen to twenty percent on weekends before they moved to digital systems. Lucas: Exactly. So let's start there. Fifteen percent of your Saturday night covers — gone. And you can't fill those tables last minute because you've already turned away walk-ins. That's tens of thousands of dollars a month for a busy place. Digital reservations cut that dramatically because they require a credit card or a deposit. Luna: But isn't that relatively new? I remember restaurants using OpenTable in the early 2000s and it was just — book a table, show up, no penalty. Lucas: Yeah, the early model was basically an online phone book. It didn't solve the core problem. The real shift happened around 2014, 2015, when platforms like Resy and later Tock introduced pre-paid reservations and cancellation fees. Now, if you don't show, you lose thirty, forty, fifty dollars a head. That changes behaviour. Luna: And suddenly the no-show rate drops to single digits. Lucas: Exactly. Tock, which started in Chicago, built its whole model around pre-paid dining. The founder, Nick Kokonas, he also co-owns Alinea, which is arguably the most famous tasting menu restaurant in the US. He knew exactly how much no-shows cost a fine dining kitchen. So Tock's system requires full payment upfront for tasting menus. That's now standard across high-end restaurants. Luna: But what about the casual places? Your neighbourhood Italian joint that doesn't have a hundred dollar per person spend? They can't ask everyone to pre-pay. Lucas: Right. And that's where the differentiation between platforms matters. OpenTable still dominates volume — they have around sixty thousand restaurants globally. Their model is more flexible. You can set a small deposit, say ten dollars a head for a Saturday night, or just require a credit card with a cancellation window. That alone cuts no-shows by thirty to forty percent. Luna: Let's talk about the data side for a second. You mentioned ordering history. How much do restaurants actually use that? Lucas: It depends on the operator, but the best ones use it constantly. Resy, which is owned by American Express now, gives restaurants a very detailed guest profile. You can see that a customer has been three times in the last six months, always orders a specific bottle of wine, and has a seafood allergy. That lets the host or server personalise the greeting. It sounds small, but it drives loyalty and check averages. Luna: So it's essentially a CRM for restaurants. Lucas: Exactly. And that CRM is becoming essential. Because the game now is revenue per seat, not just covers. If you can turn a table two and a half times on a Friday instead of two times, that's a twenty-five percent revenue increase without adding a single square foot of dining room. Luna: And reservation systems help with that by managing the flow. They know average dining times, they can stagger bookings. Lucas: Yes. Some systems even use dynamic pricing, which is controversial but spreading. A table at seven PM on Saturday might have a surcharge of twenty dollars per person, while the same table at five PM on Tuesday is free to book. This is yield management, exactly like airlines and hotels have done for decades. Luna: I've seen this with some high-end places in San Francisco. They call it 'demand-based pricing' and they're pretty upfront about it. But diners don't always love it. Lucas: No, there's pushback. Some people feel nickel and dimed. But the economics are hard to argue with. A restaurant has fixed costs — rent, labor, ingredients. If you can fill the off-peak slots at a discount and charge a premium for peak, you smooth out demand and increase total revenue. A few restaurants have reported revenue gains of five to ten percent just from dynamic pricing. Luna: Who's the big player in this space now? It feels like Resy and Tock are the innovators, but OpenTable still has the installed base. Lucas: OpenTable is still the volume leader, especially outside major cities. But the interesting battle is between Resy and Tock for the premium independent segment. Resy has the AmEx backing and a very polished consumer app. Tock is more focused on the pre-paid model and events. And there are newer entrants like SevenRooms, which is more of a full CRM that integrates with your POS system. Luna: So an independent operator today has real choices. It's not just 'sign up for OpenTable or die' anymore. Lucas: Right. And that's changed the leverage. Ten years ago, OpenTable charged restaurants one dollar per diner seated through the platform. Now, with competition, that fee has come down, and platforms offer more value. Some restaurants are even building custom systems using off-the-shelf booking APIs. Luna: Custom? That sounds expensive. Lucas: It's not for everybody. But a multi-unit operator with a decent tech budget can do it. The benefit is you own the data entirely. You're not subject to a platform's algorithm. But for ninety-five percent of restaurants, a third-party system is the right move. Luna: I want to circle back to something you said earlier about Alinea and Tock. Wasn't there a controversy about Tock charging restaurants a percentage of the pre-paid amount? I remember reading that some owners felt it was too high. Lucas: Yeah, Tock charges a three percent fee on the transaction, plus a monthly subscription. For a restaurant doing a hundred-dollar tasting menu, that's three bucks per head. Some operators grumble, but compare that to the cost of a no-show — which is essentially a hundred dollars of food waste and lost revenue — and it's a bargain. The industry has largely accepted it. Luna: So the reservation system has basically become a profit centre, not just a convenience. Lucas: Exactly. And that's the big shift. These platforms now shape restaurant strategy — what time they open, how many seatings they offer, even what they charge. I talked to a chef in Portland who redesigned his entire menu around the fact that his Resy data showed his regulars preferred shorter, cheaper tasting menus on weeknights. He created a 'Resy special' that's only available through the app. Luna: That's pretty clever. It also locks in the customer to that platform. Lucas: Right. And that's the platform's goal — to make the restaurant dependent. But for the operator, it's a trade-off. You get data and demand management, but you lose some direct relationship with the guest. If Resy disappears tomorrow, you don't have those emails, those phone numbers. Luna: That's a real risk. I've heard of restaurants building their own email lists specifically because of that fear. Lucas: The smart ones do. They use the platform for bookings but capture guest contact info at the table for their own CRM. It's the best of both worlds. The reservation system is the engine, but you need to own the steering wheel. Luna: Speaking of engines — these conversations only happen because of the work we put into them. And a couple of dollars a month from listeners genuinely makes a difference. If you've gotten something out of this show, buy me a coffee dot com slash fexingo keeps us ad-free and independent. Lucas: Yeah, it really does. We don't run ads, so listener support is what keeps the lights on. Even a few dollars helps us cover research and hosting costs. So if you find value here, that's the place. Luna: Alright, back to reservations. Lucas, you mentioned the risk of platform dependency. Are there any examples of restaurants that successfully broke away from OpenTable? Lucas: Yes, a few. Some high-end restaurants in New York, like Le Bernardin, switched from OpenTable to Resy a few years ago. They said the data integration was better, and they liked the consumer experience. But they had to invest in training and marketing the change to regulars. It's not trivial. Luna: So what's the one piece of advice you'd give to an independent operator listening? If they're thinking about their reservation system right now. Lucas: Think about your guest data as an asset, not a byproduct. Choose a system that lets you export that data easily. Negotiate your fee — you can almost always get a better rate than the listed price. And consider using a pre-payment or deposit for peak times, even if it's just five bucks. It will pay for itself in reduced no-shows. Luna: Good advice. And maybe don't put the most expensive wine list on the same page as the booking confirmation — that's a different episode. Lucas: Ha. That one's already in the can.