Restaurants embrace premium reservations to target big spenders
The OpenTable website on a mobile phone arranged in Dobbs Ferry, New York, May 1, 2021.
Tiffany Hagler-Geard | Bloomberg | Getty Images
Under pressure from rising costs and still feeling the hangover from pandemic losses, restaurants are embracing reservations that target higher-income diners as more consumers book their tables ahead of time.
The pandemic changed how many people ate out, driving food delivery sales higher and hobbling buffet-style eateries, a segment that was already struggling. But one of the lasting changes to dining behavior has been the increasing popularity of reservations, particularly those made online.
When cities and states rolled back lockdown rules, many implemented new orders for restaurants to help with contact tracing, such as requiring customers to book tables in advance. Even after vaccination requirements disappeared, higher demand for reservations has stuck around. Booking Holdings’ OpenTable reservation service said in 2022 that it connected more than 1 billion people with restaurants every year. That number has climbed to more than 1.5 billion consumers, as of Monday.
“We definitely see that the demand and love of restaurants has been unleashed,” said Hannah Kelly, chief marketing officer of Resy, OpenTable’s main rival.
As a result of those pandemic-fueled changes, restaurants and the companies that help them book their tables are targeting big spenders with premium reservation options to drive higher sales. The strategy echoes the broader push across industries to encourage customers to pay more for better experiences, such as they can get by buying airlines’ first-class tickets, Tide’s laundry detergent pods and Apple‘s AirPods Pro.
“It’s not just about getting bodies in the door anymore,” SevenRooms co-founder and Chief Product Officer Allison Page told CNBC. “It’s making sure the restaurant is getting the right body in the doors, whether that’s customers that visit frequently or have a higher average spend per cover.”
With backing from Danny Meyer’s Enlightened Hospitality Investments, SevenRooms offers restaurants tools such as online ordering, waitlists and reservations — and then it shares more customer data with them than Resy and OpenTable do to help them target specific diners.
About two-thirds of SevenRooms’ restaurant clients use its software to promote special experiences or sell upgrades when customers book reservations. Page said the move toward premium restaurant reservations can partially explain why it feels like it’s so much more competitive to book a table in advance these days.
“A lot of those reservations are being saved for top customers,” she said.
For example, booking a table at celebrity favorite Carbone in Las Vegas will be nearly impossible for the average diner. But MGM Rewards members who have at least gold status will see more desirable reservations available, thanks to SevenRooms.
Similarly, Resy’s Global Dining Access program offers exclusive reservations at some of the most in-demand restaurants, such as Balthazar and Le Bernardin in New York City. The booking company launched the program in 2021, two years after American Express bought Resy to add more benefits for its cardholders. The exclusive reservations are only for customers with select AmEx cards, including the company’s platinum option, which carries a hefty $695 annual fee.
Resy’s Kelly said the program now has more than 650 restaurants, primarily in the biggest U.S. cities.
Kirk Estopinal, a partner at New Orleans restaurant Cane & Table, said he initially had hesitations about setting aside tables solely for American Express cardholders.
“I kind of don’t like the whole ‘Disney FastPass line’ of restaurant reservations,” he said. “I had some concerns about it, just having people basically pay for access to what should be a democratized situation in my mind.”
But about nine months ago, Cane & Table took the plunge and joined the program. Estopinal said setting aside a few tables for those reservations has given the restaurant some extra wiggle room for walk-ins or allowed diners to linger if the seats weren’t booked ahead of time.
“The whole point is to catch a fish in the end, right? Whether that fish is a walk-in or from the Global Dining Access program,” he said.
Estopinal said he hasn’t seen any metrics that show that Global Dining Access members spend more money than the typical diner, adding that many of Cane & Table’s customers are on vacation and are already willing to spend more on their food and drinks.
But reserving tables just for big spenders and loyalty program members isn’t the only way that restaurants are looking to bookings for extra revenue.
SevenRooms’ Page said the company helps restaurants brainstorm different ideas for charging reservation fees. But the key is to make sure that extra money comes with a better experience for the customer. For example, a rooftop bar could charge a fee for bookings made at sunset or the Bellagio Resort in Las Vegas could charge for a table that faces its famous fountains.
Tailor has required customers to make reservations and prepay for their meals when they book tables ever since it opened, in December 2018. The Nashville restaurant pitches itself as a “unique dining experience” with two seatings every night. Reservations on Thursday and Sunday cost $100 per person, while weekend bookings run $125 per head. Tailor also charges a service fee to replace the tipping model.
Vivek Surti, the chef and restaurateur behind the supper club, said the business model makes operating a restaurant much easier. Knowing how many customers will show up every night results in less variability in his cost of goods and cuts down on food waste, helping his overall profit margins.
Since the pandemic, customers have been more willing to prepay for their meals, even as the restaurant’s prices have doubled compared with pre-Covid, Surti said.
“We want to make sure that we provide a great experience, that we’re buying the best possible product that we can, that we’re giving our employees a very good livable wage and salary,” he said.