On Friday I was so enamored with the bold changes made by Alinea and Next in the restaurant reservation model that I almost ignored the specter of scalping. Almost as an afterthought, I said that I hope scalping doesn’t become a problem with restaurant tickets.
Well, a few hours later I came across this New York Times article titled “Getting a Good Table by Flicking an App, Not Greasing a Palm” about how a group of new apps are selling reservations for cash. The apps claim they are bringing transparency and higher availability to a process that is fraught with frustrations for users. Restaurants who are already paying to take reservations through Open Table don’t want to charge more for reservations and they certainly don’t want others doing so for them.
There are essentially two business models introduced by these apps: one with the support of the restaurant, with the restaurant getting from $10 to $50 per table to share their prime tables, the other simply making reservations at multiple restaurants and then sell them to diners at a flat fee or with an auction.
Neither one of these models seem to benefit the restaurants but they do reflect a pain point that Nick Kokonas of Alinea and Next identified: Open Table’s current “reserve if a spot is available” isn’t working for both diners and restaurants, especially during peak times (like Saturday night) and for popular restaurants. Diners just want to be able to make a reservation during peak times and at popular places while restaurants live in fear of reservations not showing up resulting in a table sitting idle during those same peak times. Robert Bohr, an owner of several popular Manhattan restaurants explains: “There’s an urban legend that’s the nightmare of every restaurant owner in New York. It looks like this: four people, driving through the Lincoln Tunnel at 7:30 on Saturday night, deciding which of their three 8 o’clock reservations they are going to keep.” Nightmare scenario indeed.
Start-ups gain a foothold in pain points such as this, especially where there are inefficiencies and lack of transparency in the existing systems, and the target users have money to spend. Sure, this is a classic first world problem but one that both sides are willing to throw money at to solve.
What model will win in the end, it’s hard to tell. Alinea/Next’s model seems harder to implement today for a restaurant and they might find it easier to cooperate with an app, but in the long run I think the restaurants will want control of the reservation process completely, especially the popular, busy places. Nick Kokonas said it best about the system he built: “it creates transparency of process for customers and builds trust and loyalty.”