The Problem of No-Shows
Imagine running a successful evening at your restaurant, where every seat is reserved. The kitchen is prepped, staff is ready, and the mood is set for a busy night. Yet, as the evening unfolds, multiple tables remain empty due to last-minute no-shows. This scenario is all too familiar for many restaurant managers and poses a significant challenge, particularly during the busy holiday season when maximizing revenue is crucial.
The Impact of No-Shows
No-shows can severely impact a restaurant’s bottom line. When customers fail to show up, the potential revenue from those tables is lost, resources are wasted, and opportunities to serve other guests are missed. While this issue affects the restaurant industry, it also happens in other sectors like airlines, hotels, healthcare and event management, where missed reservations and appointments can lead to financial and operational challenges.
How Prevalent Are No-Shows?
No-shows and cancellations are a common issue that can vary in frequency depending on location, customer base, and type of restaurant. A recent study in the U.K. found that 14 percent of consumers have not shown-up for their reservations. Similarly, Barclays found that 37 percent of U.K. adults who dine out regularly cancel on the day of the booking.
Why Do People Not Show Up?
Understanding the reasons behind no-shows can help create better prevention strategies. Some common reasons include:
- Forgetfulness or change of plans
- Difficulty in canceling reservations
- Double-booking or booking without intent to commit
- Cost concerns, where guests may decide against dining due to budget constraints
A survey by Go Technology found that 29 percent of consumers didn’t show up because they decided it would be too expensive, while 27 percent cited a change of plans. These insights underscore the importance of addressing various customer motivations behind no-shows.
Strategies to Ensure Customers Show Up
- Reminders: Sending automated reminders via email or text can help reduce no-shows by keeping reservations top-of-mind for customers.
- Deposits: Requiring a small, refundable deposit can create a sense of commitment for the guest and reduce the likelihood of last-minute cancellations.
- Credit Card Guarantees: Implementing credit card guarantees where customers provide their card details and face a fee for not showing up can be effective in deterring no-shows.
What About Credit Card Guarantees?
According to Barclays, 34 percent of U.K. restaurants take card details when booking and charge a cancellation fee if people don’t show up. Based on research on reservations policies I did about 15 years ago, customers were very comfortable with credit card guarantees.
I decided it was time to take a look at customer attitudes towards credit card guarantees again. I recently conducted a study and found that most diners are comfortable with credit card guarantees, particularly those living in urban areas. I surveyed 353 U.S. residents over 18 who had made a restaurant reservation within the past year and found that the 51 percent with prior experience with credit card guarantees were significantly more comfortable with them than those without.
Additional Insights from My Study
- Experience Matters: Respondents who had prior experience with credit card guarantees were much more comfortable with credit card guarantees, indicating that familiarity with these policies can foster acceptance.
- Demographic Differences: Younger respondents were significantly more comfortable with credit card guarantees than older age groups. This suggests that younger customers may be more accustomed to booking practices that require financial commitments.
- Urban vs. Non-Urban Comfort: I also found that participants from urban areas exhibited significantly higher comfort levels with credit card guarantees compared to those from non-urban areas. This finding means city-based managers can be more open to requiring credit card guarantees for urban diners, while those in rural areas might need to balance or modify their strategies based on local customer comfort.
- Impact of Penalty Amounts: Interestingly, I did not find significant differences in customer responses to a $5 no-show fee versus a $25 fee. This implies that while diners may accept the concept of a guarantee, the actual fee amount might not be the primary factor influencing their comfort or decision to return.
Does Busyness Affect No-Show Perceptions?
The survey also examined whether the busyness of a restaurant impacted customer perceptions of credit card guarantees. The results showed no significant difference in perceived fairness or acceptability between busy and slow restaurants. This insight suggests that implementing credit card guarantees may be viable regardless of how busy the restaurant is, as long as the policies are clearly communicated to customers.
Translating Comfort to Real Behavior
While surveys indicate that people are generally comfortable with credit card guarantees, actual behavior can differ. Customers may claim to be okay with guarantees in theory, but their willingness to book at a restaurant with strict policies could shift in practice. This is why it’s essential to balance enforcement with clear communication and customer education. Restaurants must ensure their policies do not inadvertently drive potential customers away.
Approaching Credit Card Guarantees
- Benchmarking: Start by looking at what your competitors are doing. You likely don’t want to be the first in your market to implement a credit card guarantee. Understanding the market standard can help set expectations and reduce pushback from customers.
- Start Small: Implement credit card guarantees for a few super-busy meal periods—times when you often have to turn guests away. Use a 24-hour cancellation policy to allow customers to cancel without a fee if necessary.
- Make It Clear: Clearly communicate why you’re implementing this policy. Emphasize that it helps keep tables available for guests who want to dine but might not have been able to secure a reservation due to no-shows. Let customers know that the policy is in place to minimize wasted seating and ensure more diners can enjoy their experience.
- Make It Simple: Ensure that the process for canceling is straightforward and easy for customers. This reduces frustration and encourages people to cancel responsibly.
- Track Results: Monitor metrics like cart abandonment to see if the policy is creating friction in the booking process.
Are There Other Solutions?
Some restaurants adopt an overbooking strategy to protect themselves against the uncertainty of no-shows. Even with strategies like reminders and credit card guarantees, it’s never certain exactly how many customers won’t show up. Overbooking helps reduce this risk by maximizing the number of customers served, ultimately boosting revenue by filling more seats that might otherwise go empty due to no-shows.
While overbooking can often be effective, it comes with its own set of challenges. For instance, if all booked customers do arrive, restaurants might need to ask guests to wait or invite them to the bar with complimentary drinks or snacks. Unlike airlines, which may need to ‘bump’ passengers or hotels that ‘walk’ guests to other locations, restaurants have a bit more flexibility in managing unexpected full capacity. Careful management and customer-focused handling of these situations are key to balancing the benefits and potential downsides of overbooking.
I’ll talk some more about overbooking in a future article.
Conclusion
Managing no-shows is crucial as the holiday season approaches, where every seat matters for maximizing revenue and delivering exceptional service. Credit card guarantees, supported by transparent communication, can be an effective solution to secure bookings and reduce no-show rates. When combined with other strategies such as reminders and easy cancellation processes, these guarantees reinforce customer commitment while maintaining trust. By tailoring these practices to align with customer behavior, you position your restaurant for sustained growth and long-lasting relationships with your guests.
Sherri Kimes is an Emeritus Professor at Hotel School at Cornell and specializes in pricing and revenue management. She has actively involved with teaching, conducting research and consulting in restaurant revenue management for the past 25 years. She is passionate about helping restaurants increase profitability. She can be reached at [email protected].
