The peak/off-peak pricing model, coming soon to a restaurant near you: Grant Achatz, of Chicago’s Alinea, plans to open a new restaurant with a unique pricing model. “Ticket price will depend on which seating you buy – Saturday at 8 PM will be more expensive than Wednesday at 9:30 PM,” says the restaurant’s website. “This will allow us to offer an amazing experience at a very reasonable price. We will also offer an annual subscription to all four menus at a discount with preferred seating.” Readers, what do you think will happen? (HT:?Brian LaFlamme)?[%comments]
What’s a Saturday Night Reservation Worth?
TAGS: food
and 
. You can also watch it on 
as a food blogger, I can tell you the folks behind Alinea can do no wrong as of late. Look up how they decided to publish the Alinea cookbook. Variable pricing is going to work for Achatz and his investors because there’s a premium on the experience they’re selling. The kind of people willing to pay $300 per head for a 3 hr dinner will be down with this. There will be people who wanna shell it out on Sat nites, and those who are not in the green as much will get in at weeknights to say they’ve been.
All in all, pretty genius.
It works in daily fee golf (weekend green fees are higher than weekday; courses charge ‘twilight’ fees later in the day than in the morning), so my guess is that its probably going to work with restaurants as well. Golf courses have been doing it for decades, so my question is, what took the restaurants so long?
I agree with the poster who commented that this model already applies for lunch menus.
However, I would position it differently. That is, as discounted seating for mid-week reservations rather than paying more for the privilege of a weekend reservation. Unless the whole point is to make it seem exlcusive.
The discounted positioning will appeal to those seeking a good deal, and the result is otherwise the same for the business.
I suppose the positioning ultimately depends on the brand they’re looking to create.
1. I predict the restaurant will fail. Not because of this pricing scheme necessarily; it’s just that most restaurants fail, so this seems like a safe bet.
2. I suspect the first commentor has the zeitgeist right: “I don’t want to pay a premium because I’m eating out on a Saturday night. Not when there are a thousand other restaurants without all the hoop jumping.” I suspect most people will respond negatively to the pricing proposal.
Rate design (the structure of prices) is a tricky business. People have very conventional ideas about what a “right” price looks like, and tend to regard unconventional pricing as some kind of exploitation. People HATE the idea of paying extra to bring carry-on luggage onto a plane. And lots of people feel aggrieved that the new health care law requires individuals to buy health insurance.
Yet very similar outcomes can be achieved without frustrating public expectations by designing rates to use more conventional pricing mechanisms. If an airline increased its fares by $X, and then offered a $X discount to any passenger that declined to bring carry-on luggage, I bet that there would be no public outcry. Similarly if Congress raised taxes by $Y, but offered a $Y refundable tax deduction for people who could demonstrate that they had health insurance meeting certain minimum qualifications, no one would be challenging the proposal’s Constitutionality.
So why don’t the price-setters do this? Airlines know the buying public focuses heavily on the “base” price for airline tickets, and treats add-on fees as an afterthought. Similarly, politicians know that the public hates anything called a tax, regardless of its relationship to parting with money. Gov. Pawlenty of Minnesota implemented a “user fee” on cigarettes to avoid using the T-word.
It’s not obvious to me that restaurants face quite the same dynamic. The restaurant could re-phrase its pricing scheme and simply advertise that the restaurant offers discounts for people who dine on Wednesdays or whatever. Discounts relative to what? Relative to the “standard prices” – that is, the prices charged on Saturdays, although the restaurant needn’t emphasis this point. This phrasing would provide customers with the same pricing scheme as before, but avoid drawing attention to the fact that customers pay extra for the privilege of dining on Saturdays.
3. But who knows? Maybe the way the restaurant has described its pricing scheme will prove to be a boon to the new restaurant – if only due to the publicity it’s generating.
No one has still pointed out that this will (correction: may) cause prices to be cheaper on weekdays, so whoever is complaining has no reason.
To the queues vs market ineficiencies: a local supermarket chain has checkouts with paid plastic bags side by side with checkouts with free bags. For an additional 10×2 cents you often find these checkouts empty. To counter the adverse reaction to the perceived price differentiation, the supermarket advertises these checkouts as environmentally-friendly as they incentivate customers to bring their own bags.
At the high end, restaurant meals may well be Veblen Goods (forgive me, actual economists, if I am misusing that term, I only know what I’ve learned from wikipedia) — to some extent, they’re in demand because they are expensive and hard to get.
Because of the status element in high end dining, offering a discount on Wednesdays might actually decrease demand — because there’s no status in taking your client or your girlfriend out for a discount meal. You might as well bring a coupon!
But charging a premium for Saturday? That doesn’t so much affect Wednesday, and it might well make Saturday *more* desirable.
For this caliber of restaurant, I would gladly pay extra for the ability to get a reservation. It can be very difficult to get any reservation whatsoever regardless of price, so this opens up more opportunities depending on what I am willing to pay.
Also, the concept behind this particular restaurant is unique, and the individuals producing the establishment are currently run the highest rated restaurant in the North America (#7 in the world), according to http://www.theworlds50best.com/alinea-rises-to-7th-wins-the-best-restaurant-in-north-america/3294
To me it makes perfect sense. There is greater demand for a seat on a Saturday night and less demand for a seat on a Wednesday night. Prices should reflect that. It ultimately lowers costs during off-peak times and lowers the price barrier for people to experience unique and experimental cuisine.
I think the commentators predicting failure for this restaurant don’t understand who Grant Achatz is or how popular Alinea is. Alinea is considered the best restaurant in the US and the cheapest “tasting” menu you can order there is $150 per capita (the fuller “tour” menu is $225). Most folks are also pairing that with wines that will run at least $75/head. So I predict that “Next” will be packed with people wanting to try Grant’s cuisine without having to shell out over $200 for a meal. Additionally, the “season tickets” package seems like a genius way of ensuring repeat business over the course of time. (Chicago has enough restaurants that normally you might only go to a place like this once in a year.) I think this is going to be a huge success and Achatz will have to auction off the tickets or raise his prices.