What Is Restaurant 'Surge Pricing,' and Should You Be Scared?
The Uber era has marked several shifts in culture, from the proliferation of AUX cord literacy to a decreased willingness to ride public transit at 3 a.m. even when it's quicker. The San Francisco start-up's business model, in particular, has spread far beyond the realm of the service economy and transportation. Take surge pricing. Restaurants have begun experimenting with the payment system, which is used by companies like Uber and Lyft to charge riders more during busier times of the day and less when the roads are clearer.
In early 2018, the buzzy London restaurant Bob Bob Ricard announced it would begin experimenting with a similar model, which was really just a glorified early bird special—25% lower prices during off-peak seatings (like Monday lunch) and 15% off "mid-peak" seatings (dinner on Tuesdays and Sundays, for example.)
And yet, the notion of paying a premium price for premium time slots continues to cause concern among diners who are worried this will become the norm. (Last year, the Bob Bob Ricard announcement was picked up by news outlets around the world.) And an informal survey of my fellow staffers resulted in a resounding response of: "We don't like this one bit."
Here's what you need to know.
Is surge pricing really new?
As Bob Bob Ricard owner and founder Leonid Shutov pointed out to Bloomberg, timing-dependent price-tweaking has been standard practice across many industries for years. “The idea just came from looking at how the rest of the world functions,” he said. “Airlines wouldn’t be able to exist, the business model wouldn’t work unless you could balance supply and demand. Everything that we have taken that is widely accepted in the modern economy and applied to restaurants, seems to have worked.”
Much commotion was made about Shutov's announcement as the notion gained steam throughout 2018. At Bloomberg’s The Year Ahead: Luxury conference in November, Alinea Group co-founder Nick Kokonas predicted it as a major trend for 2019.
"I’m a big advocate for dynamic pricing,” Kokonas said during the panel, which was moderated by Kate Krader. He suggested that meal prices should vary depending on the amount of reservations logged into the system.
The idea of restaurant surge pricing has been around as early as 2015, the year that OpenTable discovered that people weren't opposed to paying more for certain reservations.
“When research revealed that many OpenTable diners are willing to pay for last-minute, prime-time reservations at popular restaurants, we launched into exploration,” wrote Vannie Shu, who lead global product marketing for consumer platforms at the company, per GeekWire.
Nonetheless, the notion is polarizing. "It makes sense, but I am just not the target audience," one woman told me. "Rich people probably would absolutey do this."
Is this really the future?
Well, it's not going away. As the Houston Chronicle's Chris Tomlinson noted on Monday, "computerized reservation systems allow airlines, hotels and the Houston Astros to raise or lower prices as demand changes." Tock, the online reservation site founded by Kokonas that's already been adopted by many of the world's top restaurants, makes these adjustments easy for restaurants to implement. By selling restaurant reservations as tickets, owners can reasonably sell higher-priced options at more coveted time slots.
"Once consumers become accustomed to buying tickets for restaurants, surge pricing is the next logical step," wrote Tomlinson, later adding, "In the not too distant future, restaurateurs will also gather enough data to customize a meal at a price point that suits their customer."