Many Reservations

SAN FRANCISCO (01/26/2000) - It's Saturday night at the Black Cat, one of San Francisco's trendiest restaurants. Just ahead of me in line, the intimidating host - dressed in heavy makeup and cowboy hat - relegates a couple without a reservation to an hour's wait at the crammed bar.

I've reserved my table a few days in advance, doing it online and mentioning in my e-mail that it's my husband's birthday tonight. Worried that we will also end up drinking at the bar due to some computer glitch, I hesitantly approach the host: "Reservations for two, 8 p.m., Halm."

"Meesha Halm?" she lights up. "We were just talking about you. It's your husband's birthday, isn't it?" She glances down at her black terminal. "Did you want a particular champagne sent to your table?"

My service at the Black Cat popped that night, but can a faceless online reservation system consistently help restaurants run their dining rooms better and improve rapport with hungry customers? Just a couple of years ago, highbrow restaurants would have turned up their noses at the suggestion that they relinquish control of the reservations book to something as vulgar as a machine. These days, though, restaurateurs no longer argue whether online reservation services will take off, only when and which ones.

There are more than 20 companies that offer online restaurant reservation services, all vying for what some estimate as a $2 billion annual business within the next few years. Right now less than 1 percent of restaurant reservations are placed through the Net. No one thinks consumers will ever entirely abandon the telephone. But these companies have grand plans that go beyond simply making reservations.

"We want to improve every interaction between restaurants and customers," says Paul Lightfoot, CEO of restaurant search and reservation site Foodline.com.

"This means providing dining information, preferential reservations, enhancing customer services, putting more butts into seats and eventually monetizing that relationship."

Unlike first-generation Internet reservation services such as SavvyDiner.com and RestaurantRow.com, which operate low-tech concierge programs (they place the call for the customer and take up to 24 hours to confirm the request), today's technology lets customers conveniently make reservation requests directly from their computers. A patron either logs onto a restaurant's Web site to see table availability or goes to a portal site and searches for a restaurant by name, cuisine, neighborhood or desired dining time. A request for a reservation usually gets an almost immediate e-mail response. Some software also allows customers to ask for a table over the telephone or in person.

Online reservations could be a boon for restaurants - and some are already reporting favorable results. On the plus side, the services can accept reservations at any time, track their customers' behavior to provide personalized services such as identifying regular customers and their preferences for seating, and use direct-marketing techniques to drive business on slow nights, fill cancellations or offer premium seating.

But the bevy of software companies peddling these services have yet to bring a critical mass of restaurants online. Market leaders OpenTable and Foodline have raised more than $16 million in venture capital, but only 361 restaurants out of the 100,000 in the U.S. have signed up. And the restaurants that are wired only fill a small percentage of their seats online.

"Our biggest obstacle with restaurateurs is technofear," says Andy England, OpenTable's VP of marketing. "Our job is to make it easy to use and demonstrate the value. When they realize that the computer is actually enhancing customer service and lets them add the human touch, they will change their minds."

Companies approach online reservations in a variety of ways. What differentiates them is whether their systems require proprietary hardware and software, the level of control restaurants maintain over the reservation process and how restaurants pay for the service.

OpenTable and Foodline charge for proprietary hardware and software used in the restaurants and also get a per-head transaction surcharge. Reservation and customer information resides on the restaurant's machine. Restaurants use an electronic reservation book, and customers have access to its full inventory (though a block of tables can be set aside for unannounced regulars and celebrities). The restaurants can derive additional value through placement on dining destination sites.

Pure technology plays like xTime are developing Web-based applications that can be accessed by both the consumer and the restaurant via a browser from any platform - including PCs, PalmPilots, even wireless handheld devices. In this scenario, restaurateurs aren't married to proprietary hardware and, although they can use the Web to replace their paper reservation book, it doesn't require them to do so. Restaurants would pay a flat licensing fee for the services.

Zagat.com and other companies flying under the radar are developing interfaces that look seamless to the customer but would actually act as clearinghouses for multiple reservations sites. Those consumer-based services offer restaurants access to the greatest number of patrons, regardless of which proprietary service they've signed up with. The customer could end up paying a transaction surcharge, a la MovieFone, for this broad access.

"We are totally focused on the customer," says Carolyn Everson, VP of business development at Zagat. "The advantage of working with all the leading systems is that we can provide our customers [with] the ability to make reservations to any one of our restaurants featured in our guide."

But while software companies drool over the potential profits to be made in the hospitality industry, there's still that technofear to contend with. "We don't want to put a machine between us and our customers," explains Richard Corraine, general manager of Tabla, a New York restaurant renowned for its customer-friendly manner. Marco Maccioni, who maintains his family's legendary hands-on approach at Le Cirque 2000 and Circo, concurs: "My first contact with the world is through the telephone. I would lose control if I didn't take reservations myself." Restaurateurs also worry about loss of critical data if the service crashes, breaches of confidential customer information and lack of technical support - and face fears that these startups could fold at any time.

But many restaurateurs who have entered the digital age seem pleased, so far.

Jim Mead, general manager of Straits Cafe Palo Alto, which books approximately three reservations a night through OpenTable, says the software makes it easier to manage table turnover, as well as to keep track of customers. "When someone calls up and makes a reservation for 'Mead,' I can look at the computer and ask, 'Is this Jim Mead?' The customer loves it."

Others, like David Gingrass of Hawthorne Lane in San Francisco, are not satisfied with the current crop of products and are trying to influence the next generation of software. "These companies can't reach their long-term goals without us," he says. "As long as they are going to build it, I might as well go along for the ride." Gingrass adds that the software must allow restaurants to customize elements, such as the way reservation data is displayed and how quickly a table turns over, rather than force them to change the way they operate in order to comply with a standard program.

Given the low penetration rates, first-mover advantage might not be enough to win the race. While Foodline and OpenTable are frantically trying to sign up restaurants in key metropolitan markets, they are also cutting partnership deals with information sites like Ticketmaster Online-CitySearch, Zagat and Transmedia, and with Internet service providers, which have already established considerable customer traffic and restaurant relationships.

Brick-and-mortar services like SavvyDiner and RestaurantRow are also players in the online field. Although they offer clunky, low-tech services, each has extensive restaurant guides and currently books roughly 3,000 reservations a month - more than all the online competitors combined. To date, Foodline has secured a $5 million investment from CitySearch. It also recently licensed its technology to New York magazine and RestaurantRow, and is in talks with Zagat to do the same. OpenTable plans to announce a similar partnership in the next few weeks.

Online reservation companies are also looking at charging restaurants staggered fees depending on the level of marketing exposure and management service they provide. Likewise, customers may end up paying different prices, depending on whether they get a table for four on a Saturday night at a hot spot like Moomba in New York or a table for two at 5 p.m. at Chevy's.

The virtual equivalent of slipping the maitre d' a cool $50 won't be commonplace anytime soon, but then again, changing anything in the restaurant establishment is about as easy as getting a table at Spago on a Saturday night.

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