Some individuals have turned resale dining reservations into profitable businesses.
But it's at a cost to both diners who struggle to secure spots on platforms like Resy, and restaurants that these people claim to be sucking up their income.
Lawmakers are working to dismantle third-party booking services such as Appointment Traders and Resx, who claim to be leveraging the booking process and creating unfair systems.
Platforms like Resy, owned by American Express, are working with lawmakers and the National Restaurant Association to support the “amplification” issues facing the most in-demand restaurants.
The company said the issue is not just high-end restaurants, but restaurants in high demand.
New York was the first to take action against these services by passing the Restaurant Reservation Prevention Act.
The law prohibits third parties from selling restaurant reservations without the facility's consent. The law came into effect in mid-February, and now California lawmakers are poised to follow suit.
“We're just fighting for our lives, especially in New York,” Amy Zhou, executive director of operations at Greasious Hospitality Management, told Fox Business. The management company owns and operates Michelin-starred Court Korea Steakhouse Restaurants in New York City, Miami and Singapore, as well as the New York-based cocktail lounge undercoat and fried chicken restaurant Coqodaq.
Zhou said restaurants usually see about 5%-10% of books for one night. In 2023, it jumped to 25% “seemly one night,” she said.
Industry profit margins range from 5% to 10% when things are going well, so “If a quarter of the book doesn't appear, that's most profits just down the drain,” Zhou.
Zhou, who has worked in the business for over a decade, said he will program the bots to help people understand when restaurants will release all their reservations at the same time.
The moment they are released, the bots take each with the intention of reselling it at a premium price.
Despite all reservations being taken, not all of them are for sale and remain in the restaurant with no shows, she said. Zhou's team also discovered that several reservations were on sale that didn't actually exist.
Another problem is that people who program bots to take away resale reservations often use invalid credit or debit card information to secure reservations.
As a result, restaurants are unable to collect no-show fees when they fail to resell their reservations.
The restaurant not only noticed that 25% of its reservations were not suddenly playing shows, but also began to see the same name being used repeatedly to book reservations.
Jonas Frey, founder of the Appointed Trader, said that although the service is costing its fees, he is trying to access the booking for people who are new to how to protect it.
The platform is charged between $80 and $100 for bookings, with prices exceeding $200 at peak New York. Frey earns a 30% fee on non-Prepaid reservations and 20% on prepaid reservations.
“Because of the spots, more and more people want to eat in several places, market prices efficiently allocate this rare resource,” he said.
Frey said the platform that allowed people to sell and purchase pre-orders in New York has not led to no-shows as his system tracks “sell slew rates.”
If a user uploads more than 10 reservations without selling at least half of them, the account will enter a warning state and will not be able to upload more lists. Accounts will be banned if sales fall below the quarter.
However, Zhou said the issue was so “bad” that it had to hire additional people to review reservations and cancel reservations from bot accounts before New York passed the Restaurant Reservations vs. Piracy Act.
Rivero told Fox Business that less than 2% of restaurants on its platform are affected by the issue, but he admitted that while the number is relatively small, the issue “has a major impact on these restaurants.”
Resy established a task force dedicated to supporting it last year.
“There's no way a person can book 100 within two seconds,” Libero said. “We will block you and we will cancel your account.”
Libero refused to provide details of the company's behind the scenes methods to prevent people from bypassing their measures. However, he shared that the task force has developed an automated, scalable process for scanning that site daily for such individuals.
Additionally, the company has improved its credit card verification system to prevent users from loading the same credit card into multiple accounts. Rivero said the company maintains a zero-tolerance policy for these bot accounts.
He added that part of the strategy is to employ a variety of tools and continually adapt the approach.
“Those people are constantly changing their approach, but we are trying to stay one step ahead of them to continue helping their restaurants,” he said.
Zhou said frontline staff, including bartenders and servers, are the ones who have been taking the biggest hits out of the issue.
“We are salespeople, so if you expect a certain number of sales to come and those people don't show up, you have your entire salary in the evening,” she said.
Dorsia founder Marc Lotenberg is a member-only platform that works with restaurants, including its elegant hospitality management portfolio, advocating for banning bots and booking resellers, describing them as “a hospitality industry epidemic.”
“These bad actors will take advantage of demand, store reservations and force diners to pay outrageous fees. None of these benefits the restaurant or their staff,” Rotenberg said. “If someone drops hundreds or thousands of dollars just to secure a table, that's money they're not spending in the restaurant. They're leaning on the food, drinks, or people who actually make the experience great.”
Dorsia is a certified platform to ensure high demand bookings. Since the law came into effect in New York, its businesses have skyrocketed 35%.
Libero said Resy is in talks with lawmakers to support restaurants in other states, including Illinois and Florida.
“There are a lot of people who want to fall behind this. They want to do the right thing and make sure the arena is as fair as possible at the end of the day,” Zhou said.
Opentable, which supported the New York bill, is pleased that California is taking similar steps to protect restaurant revenue. CEO Debby Soo told Fox Business that the company is “pleasant to see the state take a strong stance to support the restaurant.”
Like Resy, Opentable is investing in high-tech solutions to help mitigate bots and bad actors. The company is implementing measures such as credit card holds and deposits.
Additionally, Opentable has a global team of internal risk and fraud experts who monitor systems 24/7 to identify and address suspicious activity. The company is also integrating AI models to further enhance account security.
