Markets in everything, dining edition

Don’t take no for an answer:

New services that sell reservations are also cropping up., for example, books tables at top Manhattan restaurants and resells them.  Buyers pay a $450 annual membership fee plus about $30 per reservation.  The site, which specializes in last-minute reservations, was launched last year by Pascal Riffaud, a former concierge at the St. Regis in New York and the Ritz in Paris.  Mr. Riffaud says he won’t reveal his technique for getting tables.  When diners sign up they get a welcome email explaining that reservations are made under fake names.  This is so they can be secured in advance.

Here is the story, which also claims that four weeks’ out is the best time to get a table at a popular restaurant. 

Reservations are hard to get at top restaurants for at least two reasons: restaurant owners want a table to be seen as a status good, and the restaurant knows that who gets a table affects the long-run reputation of a restaurant.  Many restaurants, for instance, don’t want too many tourists, or too many ugly people.

Do non-market-clearing prices, in this instance, boost social welfare?  The reservations market, by allowing people to buy themselves into the queue, lowers the overall ability of restaurants to build up their images.  On the other hand, the queue-breaking may be limiting what is otherwise excess product differentiation for the purposes of increasing market power.

Or we could fall back on a simple libertarian rule: if the restaurants consider the practice (obtaining a reservation under false pretenses) fraudulent, don’t allow it.

Speaking of reservations, here is a new underwater restaurant.


All a restaurant has to do to make this guy's business worthless is to check I.D.

But many of the people the restaurants *do* want coming are also probably unwilling to give their real names, making ID checks counter productive. You think movie stars and politicians really want to give anyone a few hours, much less a few weeks, warning about where they'll be eating dinner? Imagine a secondary market in selling celebrity reservation information to paparazzi.

How do you really know what superb food is when you're limiting your dining choices to the set of restaurants that do not require reservations?

The definitive point on the ethics of this sort of service is that restaurant meals are only paid for after the fact, based on the food ordered, while reservations are free. That means when Primetimetables books a bunch of reservations and doesn't sell them out, the restaurant is the one that eats the lost revenue. This is what distinguishes it from ticket scalping, for instance--at least in that case the venue is getting the face value of the ticket, the price they chose to charge for their service, while the scalper has to bear the risk of failing to resell. Hence my feeling that such services should be made illegal, and in fact will be made illegal if they actually catch on.

(And no, the practice of "securing" your reservation with a CC#, which many restaurants pretend to enforce, does not work; they can't actually charge your credit card without signed authorization, so requiring one is just a psychological incentive to induce you to show up or cancel in advance.)

There are already reports of several restaurant groups cracking the code of Primetimetables reservations (what time they are made under what fake names from which phone numbers) and refusing to honor them. The question whether restaurants should be doing more to capture the marginal demand for prime time reservations, last minute reservations, etc. for themselves is an interesting one. Many restaurants already practice a limited form of this by charging more for dinner than lunch, but I seriously doubt consumers would stand for airline-style differential pricing of either the food or the reservations themselves based on demand at the time reservations were made.

And, as pointed out, "hot" restaurants successfully recapture some of the added value of prime time/last minute reservations by keeping them for celebrities who will enhance the value of the restaurant in the eyes of the rest of their customer base. (As to Mike's point--this isn't L.A.; paparazzi aren't much of a factor in NY, and the ones that are here don't need any special tip-offs to hang out in front of the Waverly Inn every night.) Similarly, "big deal" restaurants hold back their reservations for the business executives, American Express black card holders, etc. who are more likely to spend exorbitant amounts on wine.

And finally, to Henry: Jonathan, and I, are not necessarily limiting the quality of the NYC restaurants we eat out at by almost never making reservations. Except for the two or three most formal, most of the great restaurants in NYC serve their full menu at bar areas reserved for walk-ins. Not only do you get a closer interaction with your server, but bar dining also marks you as a local and someone who is there for the food (not to impress a date or on a business dinner), which means a better chance of comps or special courses and a quicker route to being known to the restaurant.

Of course you can't eat at the bar at Per Se, which in my experience actually was worth the insane rigamarole of redialing for half an hour, two months in advance to the calendar day beginning at 9:58 am sharp. Incidentally, though, Per Se and the French Laundry perform a version of the customer discrimination above by offering solo diners the 14-course menu normally reserved for VIPs.

Restaurants' Move:

Charge a PRICE (not deposit) for the table reservation (this could be done online with a CC). Reduce food pricing accordingly.

The challenge in price selection lies in measuring activity in the underground reservatoins market, which would otherwise make a good proxy for excess demand / bidding up.

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