Should restaurants charge for no shows?

12th Feb 2018

A long standing debate in hospitality once again reared it’s head today, that of cancellation fees. On show this time is the 4 AA Rosette Restaurant Black Swan in Oldstead, whom The Caterer comments has been threatened with bad reviews over anger from their potential customers over their cancellation policy.

            The debate in the industry continues to be, at what point could and indeed should a restaurant introduce a policy and enforce said policy in the light of cancellations. With an average restaurant suffering up to 20% of no shows in any given week, this is no laughing matter and a 2015 survey reported a staggering cost to UK businesses of £16 billion a year. This is likely to be down to many factors, including the high level of competition and consumer choice, and a casual attitude towards booking commitments. Most shocking of all are anecdotal reports of people routinely booking multiple venues in advance to avoid disappointment, before making a last-minute decision on the night.

            So how can businesses overcome these hurdles and still win over customers. Whilst the industry as a whole recognises this is becoming a more and more serious problem, there remains to be a “one size fits all” approach. The most straightforward approach is to adopt a policy that suits your establishment, and fits the business ethos. It is fairly standard now to put in place a cancellation policy such as 24 hrs notice on large tables, say over 8 people. This can be enforced with the use of a credit card which could be charged in the event that the table is a no show. Many reservation software programmes out there now have secure facilities built in to hold details. Some businesses go further and enforce the cancellation to all bookings on their busiest nights.

            But how can you avoid upsetting your customers when you put these policies in place. Keep your policy on cancellation clear and concise. This policy must be referred to in person if taking bookings over the phone, and on any form of software used to make the booking. Put a clear Cancellation policy on your website. Businesses can take it one step further and drop a courtesy call or email reminder of their booking. It is useful to make sure that this communication is made before the cancellation policy.  Reminding a customer 24 hours before their booking of your 48 hour cancellation policy is not only bad sense, but can antagonize a customer who genuinely has forgotten or has become ill and needs to cancel.

           Deposits can be a solid way of generating revenue prior to the event and secure loyalty from the customer for that booking. A recent poll indicated that 42% of UK restaurants have some sort of policy of taking deposits for bookings of some form to help insulate against no shows on premium evenings, such as New Year’s Eve, Valentines, Mothering Sunday and of those surveyed, 32% said that their customers were sensitive to the need to protect the business against no shows.

            A novel approach to no shows is to sell tickets for the “event” and this has seen some success in America. Alina and Next in Chicago have generated sales of over $20 million (£13.7 million) in pre-sale tickets in the last two years. This pioneering concept can have its place, particularly if you are considered one of the top restaurants in the country but will suggest this is a long way off from being popular in the UK.

            What is clear, is that restaurants and pubs are no longer content to sit by and watch their profits disappear out of the window by no shows. What needs to happen though, is better clarity on cancellation policies and more communication between the business and its customers.  

        


Further reading