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Revenue Management in Restaurants: Unbundling Pricing for Reservations from the Core Service

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Abstract

A substantial minority of restaurant guests would be willing to pay separately for a restaurant reservation, while a much larger group is not supportive of this approach, according to an online survey of 297 U.S. residents. Those respondents who are most likely to accept the idea of paying for a reservation represent customers who are also relatively familiar with this practice. The survey respondents were reacting to three possible scenarios for unbundling the value of the reservation from that of the meal itself. Based in part on actual industry practice, the three scenarios are (1) a reservations company charges for a reservation but does not share the proceeds with the restaurant; (2) a reservations company charges for a reservation and shares the revenue with the restaurant; and (3) the restaurant charges a reservation fee without involving a third party. For revenue management purposes, familiarity with the unbundling practice is related to guest acceptance of that practice. Since numerous companies now sell prime restaurant reservations as a separate product, it seems likely that over time the guests’ familiarity with paying for at least some reservations will grow, along with their acceptance of the practice.

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2016-03-24

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restaurant reservation; revenue management; variable pricing practices

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Required Publisher Statement: © Cornell University. This report may not be reproduced or distributed without the express permission of the publisher.

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