Dynamic pricing for restaurants?

Paul Winch-Furness / Photographer
Bob Bob Ricard is using dynamic pricing

Some restaurants are starting to follow more closely the revenue management practices used by airlines and hotels. Dora Furman reports

Consumers are most familiar with the use of yield (or revenue) management in the travel industry, as airlines, hotels and car rental companies constantly alter rates based on revenue channel, day of booking and date of future use.

Consumers continue to be extremely savvy shoppers, adapting the way they shop, from changing the time of travel departure (“I can save £200 if I leave at 5am!”) to managing the time and place of booking. Now, they’ve got it down to a fine art.

Businesses such as Uber are leveraging similar yield management tactics, using dynamic pricing to adjust rates by the minute. What sets them apart from the airlines and hotels is the immediate need their services fulfil for customers. Although a customer can book a future journey, the service is most commonly called upon for instant use.

Interestingly, while restaurants have historically utilised yield management through tactics such as printed coupons, app-based offers via the likes of Groupon, day-of-the-week promotions and early-bird menus – the techniques are less advanced compared to what has been happening across the wider hospitality industry, reflecting a more static and less flexible pricing strategy.

The above raises the question, are restaurants leaving money on the table? Should operators be invoking a more flexible pricing structure? Additionally, should they charge a different price for the same product on different days or during different hours of the same day?

Norse restaurant in Harrogate moved to a bigger site thanks to crowdfunding
Norse in Harrogate is experimenting with variable discounts

Already popular in the US, some UK restaurant operators have recently started trialling dynamic pricing. One such example is the high-end London eatery Bob Bob Ricard, which is cutting 25% off its bill for off-peak diners, whilst independent operator, Norse, based in Harrogate, is experimenting with set discounts that vary according to the day of the week. Norse has now moved the trials on to Tock, a booking platform which enables customers to choose from a four or eight-course menu at £40 and £60 respectively – booking via two methods. The first option is to leave a £15 deposit, which is removed from the final bill. The second is a ticket-based system for diners who want to secure additional value by obtaining a table at a reduced rate and then finding a date to use it when slots are released. Advance tickets range from £25-35 for the four courses and £40-55 for the offer to try eight. Prices change based on demand, as well as by day and time.

Dora Furman is Vice President, Revenue Management Solutions
For further information about Revenue Management Solutions (RMS), visit
 www.revenuemanage.com or call 020 3755 0960

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Author: Institute of Hospitality

Established in 1938, the Institute is the international professional membership body for managers and aspiring managers who work or study in the hospitality, leisure and tourism industries. We help more than 10,000 hospitality professionals in 100 countries grow their knowledge, professional profile and expertise offering a wide range of high quality membership services such as targeted and regular industry networking events, hospitality qualifications and extensive online quality resources such as free management guides, Hospitality magazine, webinars, ebooks and ejournals. To learn more about our many member benefits, view our website or email membership@instituteofhospitality.org

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