The reservations war is heating up: OpenTable has launched last minute table alerts, Yelp has created its own reservation system, and more companies seem to join the space every day. Entering the fray next month is Resy, an app that, according to CEO (and Eater co-founder) Ben Leventhal, is all about "flipping the model" of existing reservation systems.
Simply put, Resy allows diners to pay for access to hot tables on tight timelines. Instead of charging restaurants a fee for every cover booked, Resy is partnering with New York City restaurants like Minetta Tavern and Charlie Bird to provide reservations. By charging customers for the convenience of booking the exact table they want at the exact time they want it (without the hassle of, say, calling a phone number 30 days in advance), Resy seeks to give restaurants an opportunity to earn "incremental revenue" from their reservations. For customers, using the app is a matter of time and convenience. "There's a price tag associated with the seat now," explains Leventhal, "but really what we feel like we're doing fundamentally is improving exponentially the experience of getting a reservation."
In the interview below, Eater talks with Leventhal and his co-founder Gary Vaynerchuk about their brand new app and why now is the time to enter an increasingly saturated market. Vaynerchuk, founder of WineLibrary.com and an investor in several successful startups including Uber, addresses some of the concerns about Resy, especially the fact that a pay-to-play system might feel "elitist." He tells Eater, "I actually think it's the reverse. I think there's a gross misunderstanding of how hard it is to actually get into these places and that the minimal cash expense...is actually going to allow for more democracy, not less."
Leventhal and Vaynerchuk also delve into the future plans for Resy, the details of how the product will work, and what has changed in the New York dining scene that created so much demand for reservations. "Restaurants are now this category of entertainment," explains Leventhal. "There's a notion that instead of Saturday night being dinner and a movie or dinner and a show or dinner and a club, it's dinner."
What is Resy and what does it do?
Ben Leventhal: Resy's a mobile app for people who love eating out at great restaurants but hate hassling for reservations. What we do is we partner with restaurants that we think are amazing and we give them the vehicle to put their premium seats and reservations on Resy and customers pick those up and get to enjoy an amazing meal.
The online reservation space is obviously quite saturated and some of the big players have also started angling into this hot table space. Like OpenTable launched those alerts. What makes Resy different from the products that are already out there?
BL: I think a couple of things are happening in reservations. Restaurants are now this category of entertainment. There's a notion that instead of Saturday night being dinner and a movie or dinner and a show or dinner and a club, it's dinner.
Even though there's excess demand, it's very hard for the restaurants to really see any uptake in business.
That has created an outsized demand for great restaurants as this entertainment category, but the seats are still limited, they're still only… if you're Balthazar there's still only 190 seats in the room and no matter what you do you can only put 190 people in there at one time. Even though there's all this excess demand it's very hard for the restaurants to really see any uptake in business as a result, unless they can get people to eat not only at 8:00 but at 6:00 and 10:00 and 11:30.
Gary Vaynerchuk: I would also ask you the question — and the audience — of what's the difference between Yahoo, Google, and Bing? The answer's nothing. In theory, if none of them existed, if we all sat here and said 'what are the differences?' The difference is product. At some level, how this space all plays out is who's creating the best product for the end consumer. At some level I think that's also a variable, more specific to your question that is going to play itself out. Who's just better at it?
You mentioned partnering with restaurants. What does that partnership look like exactly?
BL: It depends on the restaurant, but each of the restaurants on Resy are turning over some of their reservations to us so we can offer them to customers, to our customers. Those tables will vary in price, two bar seats on a Tuesday night at Charlie Bird might be ten bucks a piece and Saturday night at Minetta Tavern might be closer to fifty.
I know services like OpenTable would take a cut per cover...
BL: ...Right. We're flipping the model. This is something that we hear from restaurants all the time: Why should I be paying all this money for a reservation service if I can fill these tables myself? We're flipping the model, and so the restaurants will never be paying us to book tables. We do a revenue share with the restaurant and it depends on which restaurant it is, but they'll be generating revenue, increments of revenue, from these reservations.
Gary, what drew you as an investor to this project and to the restaurant reservation space?
GV: Ben. Ben and I were at interesting points when we had dinner in December. I was just telling him that I was about to announce a fund. We've been friends for four or five years and have had a lot of conversations [along the lines] of: wouldn't it be neat if we got a chance to work together one day? I feel like we've always thought that was in the cards somewhere along the line. I'm an investor at Uber and I believe in two way marketplaces, and Ben was talking about "restaurant 3.0," and "Where's the whole industry going?" We got into the conversation, it's something that I've given some random thought to, we started jamming over a nice meal and it happened very quickly.
It's harder and harder in a city like New York for a restaurant to be profitable.
BL: The restaurant business is at an interesting place I think. I think that this notion of it being entertainment is important, because even though it's entertainment, the margins are getting thinner and thinner and it's harder and harder in a city like New York for a restaurant to be profitable. A very good restaurant is lucky if they're running a profit margin of 10%. So that's an interesting context to start thinking about reservations in a different way, right. If there is a real opportunity for the restaurants to generate incremental revenue at a time when their margins are thinning, then that's a pretty interesting thing for us to be thinking about and for us to be trying to solve for restaurants.
GV: The world's changing and this model has existed forever and it's an overhead and it creates an opportunity to become a profit center. Consumer behavior's changing. We want everything now, time is of a premium. Editorial matters ... I think about the person who comes from Denver on a business meeting who isn't going to know where to begin to look for where they should eat, let alone get in, right? … I'm always looking for somebody who I think has the talent to pull something off, whether it's myself or the people that work for me or the companies I'm involved with, whether I invest in them or I'm deeper involved like I am with this product. For me, Ben has those talents where I can see us becoming deeper into helping people experience New York and other major markets.
By the way, I'm a fairly in-the-know guy, in the scheme of things, but not deeply enough in the food scene. For example, I'm speaking in Anaheim in two days. I'm going to drive up to LA the night before and I have a flight in the morning on Saturday. I have two dinner meetings that were scheduled, both of which had to be moved and now my whole night's open. What I'll do is go to the next friend and meet up with them, but the biggest reason I probably don't eat by myself in other places has less to do with I think it's sad or I'm social or because I actually like it (sometimes I'll eat room service in my hotel). It's because I don't know. The thought of how much I wish this existed in LA right now for me, where it's time, where I don't want to plan ahead of time. When I get in my car after my talk to just open the app and be able to go to some place that's good, that's interesting.
[Photo: Courtesy of Resy]
How has it been getting restaurants to come on board?
BL: It's been great, I mean it's been many, many really good conversations and I think every restaurant group has to decide what the right path to signing up for Resy is. For some it's very easy, for others they want to make sure they're calibrating the value proposition correctly and making sure that their notion of hospitality is preserved. I think restaurants see the opportunity here and I think it's not about anything but creating a service that for many customers is actually the most hospitable way of getting them through the door.
It's amazing that still there is no apparatus really out there for getting a last minute reservation. The world is calibrated to people who are okay going on OpenTable 30 days out, or who don't mind making four phone calls or sending three or four emails and going back and forth and figuring out, okay I got that one. That's a process. There's tons and tons of friction there. I think the restaurants understand that there's lots of friction there but there hasn't really been great solve. The friction from the restaurant side comes from a couple of things: The idea that they need, they have this scarce inventory and they need to make sure that it's going to the right people, it's getting allocated correctly. Things like OpenTable, the cancelation and no show rates are very, very high. They don't know who the customer is that's coming in through OpenTable. To have that uncertainty around very, very valuable inventory is a problem for the restaurants.
The minimal cash expense is actually going to allow for more democracy not less.
GV: The other thing that I'm really excited to see play out ... I think there's a mis-notion that everybody's going to say, well I have to pay now, and this is elitist. I actually think it's the reverse. I think there's a gross misunderstanding of how hard it is to actually get into these places and that the minimal cash expense which is maybe the upgrade of a dessert cost is actually going to allow for more democracy not less.
And how would you address the concern that Resy is taking hot tables off the market for people who aren't willing or able to pay extra for them?
GV: They don't exist, they don't exist.
BL: It's a great myth of the restaurant business that those tables exist in the first place.
GV: Look, you're in the space, right? You know how many of my employees here are like why can't [I get in]?
BL: ...[Like] Sushi Nakazawa is [booked] out, right? If I email the right person, if I email the owner suddenly there's going to be a table for me tomorrow night. You go on OpenTable it says there's no tables left. There is an idea that the people … There's a romance to this notion that restaurants are first come first serve. Okay, they're not, right? We know that they're not and it goes back to this notion of the restaurants need to get the most out of their most valuable tables.
GV: The end consumer actually will have a chance.
BL: So far that's… the only way to maximize those tables is to say well we know that there's some VIPs and we know that there's going to be some neighborhood people that come in at the last minute. We're going to hold all the tables and see what happens around those two categories.
Resy is giving the restaurants an opportunity to offer tables to more people.
What Resy is doing is creating another store of value that's giving the restaurants an opportunity to actually offer the tables to more people. When you buy a table on Resy the restaurant knows you're going to show up. They're going to know who you are and they're going to have an opportunity to create a relationship with you as a customer. Those things as an apparatus don't exist other than at each individual restaurant which are doing those things to some extent or another but largely, they're not doing them themselves. There's pricing obviously, I mean … there's a price on every table, right? But there's a much bigger idea here around us unlocking inventory that was never before available to the general public.
GV: There's also the fact that we are living in a world now where people value time and in a 24/7, 365 world you're more than welcome to sit there for 45 minutes and try to catch the call on the 30th day. You're more than welcome to use 30 or 40 minutes of your assistant to get that and those are real dollars and I would argue those dollars, you're going to save. I mean look; when my assistant tries for an hour to do something, he doesn't… I pay him by the hour when I break down his salary. It will be more than what I would pay to get into these restaurants … Not to mention, it's all just completely a time based system.
BL: I just want to emphasize that other part of what Gary was saying which is that those other tables are still available … If you have all the time in the world and you want to book 30 days out or you want to tell your assistant to pound away at the phones and the email for an hour you can still do that, those are not the tables we're talking about.
In a way what the booking fee buys you is the chance to have what certain insiders and certain VIPs have access to?
BL: I think it buys you the opportunity to save a ton of time to get an instant confirmation of something that you previously spent a lot of time trying to figure out.
GV: [Resy] closes the loop of serendipity. I mean look, even for the best neighborhood customer, you just might get unlucky, you just might. You might go to the place you always go to and they might have just put everybody in every table, there just might not be a table. Then you walk four blocks and you… Look, I'm very aware of the yin, which is like, free stuff now costs money. I very much know the yang. I lived it with Uber; I lived it. Everything started with "Yeah, right, in New York, why? There's a billion cabs." Everything starts with that because there's cynicism around change. My whole career is built on that. When I launched WineLibrary.com, people told me nobody would put a credit card into a computer because it was 1996 and that was scary. Where somebody might say "oh this now cost me thirty bucks, something that was for free," when they realize wow, I used to walk five blocks, then there was nothing there, then I had to think, then this. You start adding up the value of time and it starts becoming really interesting.
Can you tell me any of the restaurants that you have on board so far?
BL: We've signed up the McNally restaurants, so that's Balthazar, Minetta Tavern, and Morandi. Charlie Bird in Soho, we're excited to have on the platform. Lure Fish Bar and John McDonald's restaurants. Those are some of the restaurants we'll launch with.
My understanding is that you're launching in New York but do you have your eye on other cities?
BL: I think LA is a no brainer for us, I think Miami's a no brainer. I think that ultimately we'd like to be in any city where people love food and restaurants. Those are the cities that we'll probably start with ... Obviously London and Hong Kong.
Other online reservation systems have been also expanding into that table management and waitlist management area. Is that something you see in Resy's future?
BL: Yeah, I mean we would like to build a great operating system for our restaurants for sure. We see a ton of opportunity there. The tools that restaurants have at their disposal now to communicate with customers and to maintain those relationships are not very good and there's real opportunity there.
Fundamentally, we'd like to create a system where restaurants feel more in control of their tables and more in control of their reservations and feel that they're really maximizing their inventory. That's why we're starting with premium reservations and we'll expand the platform from there.
Are there any details about how the system works or why you wanted to build it in the first place that you can share?
BL: I think in terms of how it works, we're really using examples like Uber, like Hotel Tonight where you tap the screen twice and you get the thing that you want and I think that that's really fundamental for us. As Gary was saying, as we've been talking about, it's easy to dwell on the fact that we're paying, that there's a price tag associated with the seat now but really what we feel like we're doing fundamentally is improving exponentially the experience of getting a reservation.
We now have this magical device, this phone where you touch the screen twice and you can get all these things. You can't touch the screen twice yet and get the exact table you want and that's the thing we're trying to build... That's the experience and then once you book the table you're going to get a text, when you're on the way to the restaurant you're going to get a text message that says something like "hey, there's an off the menu mac and cheese that the chef will send you if you ask for it." Arriving at your table, it can be so much better. That's really what we're trying to do with Resy is to totally reinvent that experience, from figuring out where you want to eat, to sitting down, because that's when the restaurant takes over and that's when it's fun. That's when the ride really takes off, but getting there, so far, sucks. I think that we have a good idea about how to fix that.
And what's the launch plan?
BL: We'll launch in New York in June. It'll be a beta launch in so much as we'll work out the kinks and look to expand in September into more restaurants in New York and to other cities.