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Should you have to pay for restaurant reservations?

Bram Cohen makes the case for a new system:

The restaurant continues to charge the same amounts it does currently, with the same menu, but there's a 'seating fee' for sitting down which might be charged if the restaurant sells out in advance. The amount of the seating fee is determined by when the restaurant becomes completely booked, with the fee going down the later the selling out happens, possibly going down to zero at the end.

By making a reservation when the potential seating fee is a certain amount, a customer is declaring that they're willing to pay the seating fee for that time period if it is necessary, but they aren't penalized for making an early reservation unless it would have been necessary to do an early reservation to get a seat. By waiting to make a reservation until later, a customer is declaring that they are unwilling to pay a higher price, but also allowing for the possibility that the restaurant will become fully booked and they won't get a seat. One of the nice features of this system is that the reservation system is essentially unchanged, allowing for trivial support of reserving particular time slots and tables.

Just to be clear, as I understand Cohen's idea, you'd only be charged if the restaurant was indeed full. If they didn't fill up, the reservation would be free. The practical effect of this would be that good restaurants will get more expensive. If I were making changes to restaurant economics, I'd get rid of tipping and "free" bread.

(Via Marginal Revolution.)

By Ezra Klein  |  May 6, 2010; 9:26 AM ET
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What this analysis appears to miss is the value to the restaurant of knowing the minimum number of people who are going to be there, and the fungibility of restaurants. Do you also pay the seating fee if you don't show up for your reservation and the restaurant puts someone else at the table?

Posted by: paul314 | May 6, 2010 9:32 AM | Report abuse

Come on no reference to Grant Achatz's new project Next? That is a different pricing model that also takes scarcity into account. He's going to sell tickets for a prix fixe that will vary somewhat due to the day and time. That's a more reasonable idea. More realistically I've seen a number of restaurants that offer cheaper prix fixe options on a specific Sunday-Wednesday night, and ones that only offer expensive tasting menus during peak hours. Restaurants already know how to price select their customers pretty well.

Posted by: tmorgan2 | May 6, 2010 9:40 AM | Report abuse

The problem with this is that the "seating fee" will create a deterrent, especially if it's a non-fixed amount or there's a chance that you won't get your reservation filled. People in general are *really* averse to those kinds of surprises.

Posted by: jfpbookworm | May 6, 2010 9:45 AM | Report abuse

Seems too cute by half, and let's face it...the only result of this will be that richer folks will simply get to buy out the place ahead of time. Regular people who'd like to have a nice anniversity dinner or something wouldn't be able to call in advance without the larger fee, or risk being shut out of the full restaurant on the day they'd like to go.

No thanks. I'm with you, no more "free" bread, and pay servers decent wages to stop the institutionalized begging.

Also...I have to ask: If a restaurant that's always full can't afford to stay in business, there might be a fundemental issue that simply throwing extra fees at people won't solve.

Posted by: TheBBQChickenMadness | May 6, 2010 9:56 AM | Report abuse

Why is it that these sliding-price, market-efficientizing arguments always seem to overlook the value to consumers of certainty? Even a fixed reservation fee, which you paid for a reservation no matter what, would be better than this.

Posted by: AaronSVeenstra | May 6, 2010 10:21 AM | Report abuse

Ugh. Reminds me of the airlines: pay an extra fee to get an aisle or window seat; pay a fee to get a seat in advance of check-in. No thanks. It's too complex, and it irks me to think you need to pay for the honor of getting a seat so that you can pay a high price to eat. Hello: we're the patrons, paying money for them to serve and try to please us, not the other way around. If you want to eat there and pay for the meal and wine, it should be first come first served for reservations. No fees: it's like greasing the palm of the maƮtre d' in the old days.

Here's one thing I don't mind. If you make a reservation at, say, Blackbird in Chicago for a certain number of people (I don't remember if it's 4 or 6 you have to guarantee with your credit card; and if you don't cancel 24 hours in advance (or something like that), you pay a hefty fee. That seems fair, since they risk losing money on your table.

Better yet is the new Grant Achatz plan for "Next," mentioned above, about which I'm so excited. I already signed up to be notified when the tickets go on sale for the first "excursion"--to 1912 Paris. Can't wait for Hong Kong 2036 and Sicily 1949, etc. Buying a ticket in advance is brilliant. Of course, there are probably already 10,000 people signed up to buy the tickets online, and the chances of getting one are slim. But the idea is great. Watch for scalping, however.

Posted by: JJenkins2 | May 6, 2010 10:39 AM | Report abuse

I'm old fashioned. I like the idea that there are a few areas of life where everyone has equal rights as those with endless amounts of money to toss around.

So I like roads that don't offer special high-speed toll lanes to rich folks in Mercedes and Bimmers. I like having an equal shot at an aisle seat on the plane. And, while I realize this proposal is primarily intended for higher-end restaurants, I still like having an equal shot at my occasional reservation for one, without paying extra.

I'm dumb enough to think that trivial things like these improve social cohesion and help us all live together more easily. They lubricate a society that is inevitably unequal, so we can gain the (somewhat overstated, somewhat real) benefits that inequality bestows upon us.

(Heck, I even like public schools that bring together people of diverse economic and social backgrounds!)

I realize these are small matters in the face of a creative new opportunity to further extend the reach of the God-Almighty market. (And that "resistance is pointless"!) I just can't help it. Like I say, I'm a fossil that way.

Posted by: bcamarda2 | May 6, 2010 11:08 AM | Report abuse

Cornell's School of Hospitality Management has studied both tipping and reservation fees -- their data is worth a look.

My personal experience is that a restaurant (like a physician's office) cedes revenue when those who make reservations fail to show up on time and/or expect seating for an unlimited duration. In one venue, there is already a policy of pre-paid reservation; that is, at the time you place your reservation, your credit card is charged for the total value of the reserved seating and, if you arrive late, additional charges are added. Moreover, if you leave a tip of less than 15%, a charge tip of 20% (15% for the server, plus the required 5% for the State) is added automatically.

Works great! Those who complain are typically the ones who are no-shows and/or tardies, with well-behaved customers seeing no effect at all.

Posted by: rmgregory | May 6, 2010 11:47 AM | Report abuse

"Should you have to pay for restaurant reservations?"

I think the answer is yes if the restaurant owner implements this type of system and no if they don't.

My guess is that restaurants wouldn't implement this system because most of their customers wouldn't like it.

I'd imagine that imposing a seating fee for full restaurants means that the restaurant gets fewer people in the door, lower sales per table on days with the reservation fee (being a few bucks down at the start probably makes people more budget conscious), and in many cases since the restaurant isn't 'full' as often due to fewer patrons the seating fee doesn't get paid as an offset.


So far the market currently agrees with you!

Posted by: justin84 | May 6, 2010 12:00 PM | Report abuse

Ezra, many restaurants already do something very much like this. Thing is, though, they frame it as discounts at off-peak hours rather than as an extra fee at peak hours or for reservations -- a choice supported by prospect theory, which says that people are loss-averse, and a choice that suggests to customers a higher "true" value of the food they purchase.

High-end restaurants generally avoid this because they don't want customers to get in the mindset of trying to save money, which is what the proposed plan does if customers know about it beforehand. If customers don't know about the surcharge before they arrive at the restaurant, then they're likely to have their experience soured by the unexpected loss. And, broadly, if there is no custom of charging for reservations, then people will treat any non-zero price as an outrage, much as people react to baggage fees on airlines or restaurants charging for water.

I also disagree with you on charging for bread, by the way. For the restaurant, the bread is great business, because it fills up customers with relatively cheap calories, allowing the restaurant to reduce portion sizes on the more expensive entrees while still leaving customers feeling satiated. Customers, meanwhile, derive utility from the feeling of being provided with free stuff; the takeaway from Ariely's results in the link should be not that people are stupid but that the act of paying for something is intrinsically unpleasant. Restaurants cater appropriately to that preference by providing free bread and water.

Posted by: jeffwacker | May 6, 2010 12:15 PM | Report abuse

I can't for the life of me understand the need to deviate from the simple system of first come first reserved. A booking fee just seems to be another way of making money.

I hope it will not become another bad American idea that, like so very many others over the years, has contributed to the world's ills.

Posted by: corners | May 6, 2010 12:27 PM | Report abuse

No way a plan like this would fly except in a few major metropolitan areas. People are going to be very skeptical of the reliability and honesty of a restaurant to actually adjust the "fee" after the fact based on the number of reservations received. A few dishonest restaurants will definitely take advantage of the extra bucks and put the entire system in questions. I'd personally much prefer a reservation guarantee. Something like a credit card guarantee that if I don't cancel a predetermined number of hours in advance, fail to show up or am more than 15 minutes late I agree to paying this penalty. However, I would also like to see some commitment on the part of the restaurant that I would be seated within 15 minutes of my confirmed reservation time or I would be compensated in some manner. I have on at least 3 recent occasions waited over 1 hour after my confirmed reservation time with little more than an apology from the owner/manager or host. Only 3% of the general population use what are widely considered to be upscale and/or specialty restaurants so any change, including charges, to reservation policy would have minimal impact anyway and for those, such as myself, who find such a policy elitist, greedy and unnecessary I would simply avoid those restaurants who chose to implement such a policy. I guess it's also fair to state that I am one of those people who will make a trip to the box office to purchase my concert and show tickets to avoid the ridiculous fees charged by TicketMaster and other online ticket outlets.

If a restaurant is doing well enough to survive during the current economical downturn I think it would foolish to implement such a policy. Many high end restaurants are closing their doors due to lack of business - you'd certainly think that those surviving would not do anything the might cost them customers.

Posted by: chrismarks1 | May 6, 2010 12:27 PM | Report abuse

*I can't for the life of me understand the need to deviate from the simple system of first come first reserved*

Well, one reason is that it creates shortages, as all first-some-first-served systems do.

The correct answer to this problem is to avoid all of those restaurants where there are significant doubts about whether you can get a reservation.

Posted by: constans | May 6, 2010 1:05 PM | Report abuse

Not going to happen in Los Angeles. "Reservations" are for the rubes, while people with connections get good tables at good times whether they make a reservation or not.

Posted by: randrewm | May 6, 2010 1:34 PM | Report abuse

I always assumed that free bread and chips were a way of filling the customer up with low-cost product, allowing you to charge the same amount for a meal but offer smaller amounts of relatively expensive goods like meat. I wonder if there's data on this point?

Posted by: adamiani | May 6, 2010 3:17 PM | Report abuse

This is the exact opposite of what a rational restaurant should do. They should offer discounts to people who schedule ahead and then honor their reservation in a timely fashion. With more reservations, the restaurant has greater certainty about how busy it will be on a given night, and can adjust staffing and supplies accordingly.

Posted by: tomveiltomveil | May 7, 2010 1:22 PM | Report abuse

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