A recent discussion on LinkedIn promoted this post. As a regular restaurant eater I have always been surprised that dining establishments are offering fixed pricing - rain or shine - that is the same every day of the week, every season, even on public holidays.
Why the same appetizer, salad or main dish cost the same on a Tuesday evening (super low demand at many restaurants) and Saturday evening (super high demand). At 6pm and 8pm? Or meal pricing for the last available table at the restaurant? The same questions for pricing for drinks and cocktails at the bar.
Travel consumers are used to paying different prices if travel booked at different times or paying premium for more coveted inventory. Ex. Airline seats booked in advance vs last minute or hotel rooms with sea view vs parking lot. So why not pay premium for the most coveted restaurant tables or most desired times at the restaurant?
Analytics can easily identify high vs low demand. F&B revenue management should start using dynamic rates, it’s no brainer!
At the minimum, F&B should introduce variable pricing using the simplest formula for differentiated pricing: Ex. Standard demand=100%; high demand=120%; low demand=90% of the standard price, etc. A simple, but effective variable pricing example from Australia was offered by Larry Mogelonsky, P. Eng., where restaurants offer prices that are 10% higher over the weekend and 15% higher on public holidays.
Happy Hour is variable pricing that typically involves selected items from the menu, not the full menu. Dynamic pricing is real-time pricing based on real-time demand plus customer data, which should come from the restaurant CRM and partially residing with the table reservation vendors like Open Table, etc. Ex. Why offer the same pricing to a regular patron and an out-of-towner who would never visit the restaurant again?
Variable pricing is a good start that any restaurant should have before implementing dynamic rates and before restaurant-specific RMS enter the sector. One such startup RMS vendor is DynamEat, offering dynamic pricing and Smart Menus technology. DynamEat is already live in some Radisson hotels and will soon be available for all the properties. All the concerns of the F&B management that clients won’t accept dynamic pricing were proven wrong.
Restaurant RMS improves profits and inventory management, as well as staff compensation and service delivery.
Just imagine what could be achieved by using an AI-powered F&B RMS and dynamic pricing based on real-time demand and real-time customer data derived from the restaurant CRM!
Also read the related article: Dynamic Pricing in Restaurants: Feast or Famine?