Web sites vie to bring 'dynamic pricing' to restaurants

Nation's Restaurant News, August 21, 2000 by C. Dickinson Waters

In a quest to bring airline-like dynamic pricing and elementary-yield management to the restaurant industry, a trio of new e-businesses have set up shop on the World Wide Web.

Each of the new ventures: iDine.com, Yougottaeat.com and Dinnerbroker.com, hold out the promise of increasing customer traffic in off-peak hours by offering potential guests incentives in the form of discounts. Some also offer to get consumers tables during traditionally hard to book periods, such as Friday night or during the holiday season -- for a surcharge.

But the dynamic pricing services' approaches to delivering guests to the table differ and each venture has added a unique wrinkle or two to the concept.

It is difficult to judge how well consumers are taking to dynamic pricing in restaurants because of the newness of the concept and the services. A fourth such company, MoneyRules.com of the San Francisco Bay area, recently decided to sell its intellectual property rights and get out of the business -- even before its public christening -- after a deal fell through to partner with Internet portal Food.com.

MonkeyRules.com partner John Haywood, a veteran of research and development and concept development for companies such as Stuart Anderson's Black Angus, Metromedia Restaurants and Jerrico, said his group had come to believe that "free-standing" dynamic pricing Web sites would not do well. "You need to drive a lot of eyes past the site," he said of why his organization sought out a deal with a major portal.

John Cunin of San Francisco's Cypress Club restaurant is participating with DinnerBroker.com. After two weeks with the program, he said he was unaware of any takers for a discounted table during off hours or of guests who had offered to pay a surcharge for a table during prime dining hours.

Cunin said he had expected some activity the second week after prominent media coverage of DinnerBroker.com, but added that he was not discouraged. "It's still a little early. They [diners] still have to learn about it," he said of the public's need to discover and explore DinnerBroker.com.

Saying he ultimately anticipates getting more action from diners looking for a premium table than a discounted table, Cunin added, "October and December, when the city is full and no restaurant seats are available, that's when these guys will show their mettle -- or at least that's when they have an opportunity to do so."

For their part, the dynamic-pricing brokers are making an effort to let operators and consumers alike hear their stories.

"An empty seat is an expensive piece of furniture," said Greg Robitaille, president and chief executive of Chicago-based iDine.Com. "We target guests with incentives the restaurants themselves design, giving them a powerful tool to help them fill empty tables."

Borrowing some of the yield management and customer-loyalty strategies of airlines, iDine.com offers two frequent diner programs, iDine Premium and iDine Choice. Both programs require consumers to enroll on the iDine Web site by registering at least one, and no more than three, credit cards. Both options use the registered credit cards as the means of tracking and redeeming awards. iDine Choice is free to consumers, while the premium program charges a $49 sign-up fee.

The iDine Choice program awards points to diners for each dollar spent in a participating restaurant during specified incentive periods. The meals must be charged to a registered credit card. Dining points can be redeemed for future discounts or free meals at participating restaurants or converted to frequent flyer miles.

In theory, restaurant operators will be able to drive traffic and provide incremental revenues by adjusting the number of points per dollar awarded to encourage guests to come in during slack times or on off days. Restaurateurs can continuously update their incentive offers on the Dine site to reflect changes in table inventory. Customer loyalty to participating restaurants will benefit too, as consumers seek to build and maintain their portfolios of award points.

Fees for restaurant operators are transaction based and are calculated on the basis of the number of points awarded. Restaurants pay only when iDine members dine during an incentive period.

"We price our points much the way airlines price their frequent flyer points," said Robitaille. "Approximately 2 cents per point."

The iDine Premium program is a twist on the frequent diner/discount card that offers members a 20-percent discount at any participating restaurant without the need to carry or present a special card. The 20-percent discount will be reflected as a credit on the monthly statement.

San Francisco-based DinnerBroker.com is a reservation system that straddles both ends of the price sensitivity spectrum. It offers diners willing to pay extra for a table at prime time in a hot restaurant access to the table, while also giving bargain-hunters an incentive to book a table during non-peak hours.

"We are a revenue-enhancement tool, we look at the demand utility in the restaurant and trying to load balance," said Ben Dehan, founder and chief executive of Dinnerbroker.com. "Reservation pricing allows us to bundle menu pricing with access to the table. We act as an exchange and broker the price of the table."