November 16, 2018

This blog is based on the document cited below from Sheryl E. Kimes (dated 18 Dec 2010). What I have done here is try to bring the idea of this document up to date – 8 years after it was first published.

Kimes, S. E. (2013).The future of distribution management in the restaurant industry [Electronic version]. Retrieved Oct 2018, from
Cornell University, SHA School site: http://scholarship.sha.cornell.edu/articles/831

INTRODUCTION

Traditionally, and even still today, any restaurant that takes reservations has relied on the telephone (or someone walking in to make a reservation). Customers these days though expect convenience and are less likely to want to pick up the phone to speak to someone. This has forced restaurants to rethink about how, and if, they should take reservations. Restaurant owners say that third-party aggregators (like OpenTable, Resy etc) feel like a necessary evil that must be used for “discovery” of their restaurant. This was the case back 5 years ago but this is changing (ref #7) as search (Google) and social media are making it easier to find and connect directly to the restaurant and also give the restaurant its own voice. In this article, we review the core distribution channels and summarize their advantages and disadvantages and hopefully provide restaurant owners/managers with sufficient information to help make a decision on where to focus their efforts.

Restaurant Distribution Channels:

  • Telephone bookings
  • Restaurant website – online bookings
  • Third-party site (aggregator)
  • Social Media, email, search and chat

Making a restaurant booking

Telephone Bookings

The idea of telephone bookings gives the restaurant owner a feeling or more control over how they take bookings but in most cases, the owner and/or manager doesn’t always get to be the only one answering the phone. Other staff can and do answer the phone and without any system in place; reservation requests will come in and be written down on slips of paper and receipts for the manager to decipher later on. With a large percentage (ref #1) of the restaurant industries workforce being foreign, English may not be their first language either. This can also be a problem for customers who find it difficult to get across what they want when making the booking.

With Telephone bookings also, customers can find this inconvenient because of the hours that the phone can be answered and the inconsistent way it is answered.

Restaurant Website

Restaurant Website

Most restaurants have their own website, publishing their location, menus and other details. Bookings here are typically offered via email, online form or booking widget from a 3rd party provider. Customers won’t see information on competing restaurants (the exception here can be if you embed an aggregators widget as opposed to a non-aggregator booking provider).

Restaurant choice

Third-Party sites (Aggregators)

Aggregators offer bookings at a number of restaurants and will show customers real live availability. If there is no availability at a given restaurant then it will suggest another one from its inventory of restaurants. When a customer makes a reservation, they will typically get confirmation on the screen and an email or SMS or in-app notification. The restaurant will also get a notification of the booking and may have access to a digital diary. The restaurant usually has the option of putting all or some of their inventory on the aggregator platform. When that inventory runs out through the system will prevent a customer from making a request as allocations are always real-time.

Aggregator sites also usually offer a digital diary and/or table management system. They may also allow you to track guest history (for preferences and tracking no-shows).

As Aggregator’s go OpenTable is the biggest player through the years and largest market share (now with 40.83%) (ref #2) of the market (3+ times the amount of the next best). It claims it seats 23million diners per month worldwide at its 40,000 restaurants in its inventory (ref #3). Open Table will suggest several restaurants based on your location/search criteria etc and ONLY allow real-time bookings. If your restaurant is on it but has no inventory set as available on the platform it will suggest another restaurant to the customer. Customers can discover restaurants through the Open Table website or app(s) and restaurants can embed their booking widget on their website. Aggregators typically charge a flat rate and booked per-diner cost(ref #7).

Social Media for restaurants

Social Media, Email, Search and Chat

On average 30% of all time spent online is on social media. Restaurants can in some cases create profiles and place booking links into them (Facebook for example)(ref #7).

Search is important as its usually the first point of discovery for customers. It is also where you can end up competing with an aggregator (if you are signed up to them) for ad space and positioning on the search results.

Chat is probably new and perhaps not quite pervasive but with platforms like Facebook Messenger and WhatsApp on the rise people will expect to be able to start a chat with your restaurant and inquire about menus, when you are open or make a booking for example. There are 2 options here, 1 is that you answer the requests in person and the second that you allow a chatbot to handle at least some of the enquiries (opening hours and menu links for example or even to take a booking). With chatbots, it needs to be made clear that it is a bot and offer the option to wait to speak to a human.

Comparison of Distribution Channels

DescriptionDistributors Channel
Telephone*Online
RestaurantRestaurant websiteThird Party SiteSocial Media, Email, Search and Chat
Hours of OperationLimited to opening hours (Typically)ConstantConstantMixed depending on use (if using bots or some automation it would be Constant)
ConsistencyLowHighHighMedium
CostMedium**Fairly lowLowFairly low
Marketing OpportunitiesSomeSomeStrongStrong
Personal ConnectionMedium/HighMediumLowMedium to High
Customer ConvenienceLowMedium to HighHighMedium to High
Restaurant ControlHighMediumLowMedium
AccuracyVariesHighHighHigh
Record Keeping AccuracyLowMedium to HighHighMedium to High

*In the original research document there was a column for “Call Centre” but we just didn’t see this in the market and so have omitted it.

** In the original research document this was cited as “Low” but you need to pay someone to do this and so we think this is Medium if not High

*** In the original research document there was no “Social Media” column

THINGS TO CONSIDER

Before deciding what to do, you have to consider a number of things:

  1. Customer preferences
  2. The effectiveness of an online booking system
  3. Other benefits they may get (digital diary, guest history, table management)

Restaurant phone computer

Customer Preferences

A lot of restaurant operators would prefer that customers call them to make a reservation. This is because they feel that they are connecting, and it is more personable than a voiceless email for example. Customers though generally prefer the convenience of being able to book at any time and not have to wait until the restaurant opens and hope that someone picks up the phone (or leave a voicemail). They also don’t want to speak to someone and this is made even worse if someone has an accent and they struggle to understand each other.

Effectiveness

A worry for restaurants is whether they would be paying for bookings that they would have gotten anyway (either as a walk-in or phone in bookings). (ref #7)

Another consideration is whether online bookings make it more likely that someone will be a repeat customer.

Some people blame online bookings for a number of “no-shows” and say that people are less likely to be a no-show if they book on the phone (ref #6).

Other benefits

The added services/apps offered by the third-party may sway you into thinking it is worth it. Offerings like an online digital diary can make it easy for the owner/manager to review what bookings they have on a given day and plan ahead as required. Some systems provide a guest history and marketing modules. Also common is table management to help visualise and manage when a customer is in and when expected to be out of a table (this should always be made clear by staff and online bookings if this is the case).

Restaurants in the Future

WHAT DOES THE FUTURE HOLD?

Third-party sites like Open Table are under siege (5) from newer entrants focusing on niches within the industry (ticketing systems like Tock) and partnerships with Airbnb (Resy and Formitable). The price point is also a big issue for restaurants (and the fact that restaurants pay for customers they has anyway -usually around $/€1 per diner plus a monthly flat fee ~$€295). Previously I would have thought from a discovery point of view OpenTable was the place to be but with online magazines (Eater, Infatuation and TimeOut for example) as well as social media (Facebook, Twitter and Instagram) and search (google) customers have many ways to find a restaurant and not be limited by OpenTable’s inventory. Review sites like Yelp and TripAdvisor also offer the ability to take booking as an extra option on their sites.

In terms of the discovery of your restaurant, Google is now making it easier for customers to reach the restaurant direct with its Knowledge Cards and they contain all contact details for your restaurant (ref #8).

(Update 27 Nov 2018) – AirBnB has started listing restaurants and has signed some partners (Resy being one that they also invested in). Listings are pretty limited so far.

In terms of communicating with restaurants, platforms like Facebook Messenger allows customers to start a chat and the advent of Bots allow restaurants to automate some of this. I think adoption of this is low and its hard to know if it will become prevalent considering that a lot of restaurants still don’t take online bookings (a form on a restaurant website is not online bookings).

Some restaurants will take that leap of faith and remove the phone booking capability as Blue Smoke did in 2002 (ref #5).

(update 27 Nov 2018) – In June Google demonstrated a prototype assistant that could call and make a booking. I think we are still far off this being available and working in the real world but it is interesting tech to see.

https://www.eater.com/2018/6/27/17507752/google-assistant-duplex-restaurant-reservation-robot-phone-call

 

CRM’s just haven’t taken off and while some restaurants will say that they want data! Data! Data! on customers, the reality is that they are too busy to put the data in or even look at it. Plus we now have privacy as a major issue (GDPR) and this fear has really put a stop to any demand for this type of system.

Online Ordering and Delivery services (E.G. JustEat, Deliveroo and UberEats) could disrupt the market but these are not for everyone and it does depend on where your restaurant is located and also whether these services exist there. In speaking to restaurant managers, we know it works for some locations and not others while the experience also with the delivery service is bit inconsistent.

CONCLUSION

There is no one fit all solution for every restaurant. Really each restaurant needs to experiment to find out which channels work best for them and focus on a few areas rather than spread themselves thin and try cover them all. It might suit a restaurant to be on an aggregator for discovery but to also optimize their own website and brand and take direct booking requests under that too. What is important to realize is that this is a changing landscape and you must stay on your game to keep ahead.

 

References:

  1. https://www.bighospitality.co.uk/Article/2016/12/15/Foreign-nationals-make-up-43-of-UK-hospitality-s-workforce
  2. https://www.datanyze.com/market-share/restaurant-reservations
  3. https://en.wikipedia.org/wiki/OpenTable
  4. https://www.socialmediatoday.com/marketing/how-much-time-do-people-spend-social-media-infographic
  5. https://www.nytimes.com/2017/08/29/dining/opentable-restaurant-reservations.html
  6. https://www.bighospitality.co.uk/Article/2017/01/23/How-restaurants-are-reducing-no-shows
  7. https://medium.com/tock/opentable-is-making-restaurants-buy-back-their-own-customers-over-and-over-and-over-again-c778abbbe135
  8. https://support.google.com/business/answer/6331288?hl=en