San Francisco's extremely popular Nopa restaurant uses OpenTable to manage its reservations.  / <a href='http://www.nopasf.com'>Nopa</a> San Francisco's extremely popular Nopa restaurant uses OpenTable to manage its reservations.  / <a href='http://www.nopasf.com'>Nopa</a>
Strategy

The Battle for Diner Loyalty Begins with Reservations

Are diners more loyal to their favorite restaurants or loyal to the method they use to reserve a table? That’s the fundamental question for consumer-facing reservations services competing for diner loyalty.

While two-thirds of restaurant reservations still happen on the phone, the third-party reservations services that support restaurants continue to work to make the digital experience more appealing. Digital reservations come through a few different pipelines: directly with the restaurant, usually through a widget on its website; through a reservation service’s app, like OpenTable, where a diner can see all available restaurants on any given reservations network, and, increasingly, third-party partners like Google and Facebook, who work with the existing reservations services to offer reservations via search or recommendation. (If you’ve heard the buzz about Instagram offering in-post reservations, it’s likely on this model as opposed to Instagram working with restaurants directly. They’ll work with the reservations providers that are already working with the restaurants.)

Resy CEO Ben Leventhal tells Skift Table that about a quarter of its reservations are made through Resy-specific channels, like the mobile app with the majority coming through the restaurant’s own channels. Google and other third-party partners are included in this number. While OpenTable doesn’t break down the percentages in this way, it does share that less than 10 percent of its bookings come via third-party partners.

As the way diners reserve tables evolves with our technology, reservations networks face a decision: Do they work to court diners for brand loyalty to the network itself, or focus on helping restaurants establish loyalty with diners directly?

Different Approaches, Same Goal

Both strategies have the same goal: increase bookings at restaurants. For industry leader OpenTable, which nets $1 per diner it brings to a restaurant via its own channels, they have skin in the loyalty game. The company benefits financially by creating a robust network of diners who equate OpenTable with reservations wherever they go, pulling out their phones to use the OpenTable app to book before trying any other channel. It’s reflected in their marketing efforts, as consumer marketing SVP, Scott Jampol, says, “OpenTable is going to be 20 years old next year. I think back to this marketing engine that can fill empty seats at restaurants, that’s really unique. That’s hard to build. We have now 23 million diners seated at restaurants every single month. It’s taken us 19 years to build and it’s not easily imitable.”

OpenTable’s loyalty program, something that’s been a part of its product since the early days. Jampol calls it their stalwart program. “We’ve been innovating on it and we’re going to continue to do so,” he says. The program is straightforward: when a guest books a reservation through OpenTable, they receive points — typically 100 points per reservation. 2,000 points, or 20 OpenTable reservations, nets you $20 in free dining at participating OpenTable restaurants. In 2015, the company added the option to redeem points for Amazon gift cards, though for less cash value; 2,000 OpenTable points equals a $10 Amazon card.

In an effort to increase its rewards program relevance, and presumably attract those diners who aren’t interested in pulling out a $20 gift card at dinner, the company launched a rewards-for-access program in Boston last year, allowing diners to trade OpenTable points for access to prime-time tables at popular restaurants, and the program has since expanded to the Philadelphia market. These tables are only available via OpenTable to people with a certain number of points. It’s like an airline model: status equals access.

Not Just About the Points

In the absence of a formal loyalty program, a good experience with a reservations app or service can keep guests coming back for more. Everything from app design to speed to table availability makes a reservations service useful and exciting to diners. If you know that opening one app is almost always going to get you a great table at a great time, that app will likely be your go-to in an indecisive, where-should-I-reserve situation.

For example, Reserve CEO, Greg Hong, says that his company’s software is the best on the market for flexible, dynamic table management, maximizing the number of table turns and guests per service. This means that a guest opening the Reserve app is more likely to see table availability. “Loyalty programs are useful but need to be done well. The big functional debate we have is the difference between having a global loyalty program or a program specific to a restaurant or restaurant group. For most operators, that’s far more relevant than having a global loyalty program, and I think for diners it is too.”

“We haven’t built loyalty into our brand offering yet,” says Resy CEO Ben Leventhal, “but I think it’s probably something we’ll do in the future.” Resy has incorporated several loyalty products into its restaurant product offering so that they can implement their own loyalty programs. “For example,” he says, “restaurants can allocate reservations to different subsets of their customer base. They can create a window of opportunity for people who live in certain zip codes around the restaurant, for example.”

By offering more tables and giving locals an easier time reserving, restaurants can use Resy software to foster and reward loyalty. “Our loyalty functionality is really around removing as much friction as possible from the reservation experience for your best customers.” (There’s a ton of opportunity around loyalty with Resy’s recently-launched Airbnb partnership, as Skift’s Deanna Ting has reported.)

Yelp has its own loyalty program, though it’s based more on its robust review network than its reservations product. Users can sign up for Cash Back with a credit card, and find restaurants that participate in the program when they search Yelp. When diners pay for their meal at a participating restaurant with the same card registered with Yelp, they get 10 percent cash back directly on their card. In this way, it feels like a way to reward guests who are already loyal to the network.  About 10,000 Yelp-listed businesses participate in the  program; most of them are restaurants. Yelp Reservations is used in 5,000 restaurants.

The perpetual hurdle for any network-wide rewards program is that it needs to apply to a large range of restaurants, from fine dining destinations to a more casual neighborhood business. According to Hong, “The challenge is figuring out a one-size-fits-all approach when you have so many restaurants, or in the same vein, when you have diners with so many different preference as well.”

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