Are customers ready to accept revenue management practices in the restaurant industry?

Abstract

Purpose -The purpose of this research is to investigate the application of revenue management practices to the restaurant industry. We want to observe customers' readiness to accept revenue management practices based on price variation, booking policy, table management, and control duration. We also want to measure the impact of these four practices on customer patronage intention. Design/methodology/approach -A survey was conducted with 251 respondents. As we had several latent variables, we used partial least squares (PLS), a variance-based structural equation modeling method. Findings -We found that the majority of these practices are perceived unfair. The only two practices that are considered as fair are price variation between lunch/dinner, and cancellation in case of late. The most unfairly felt practice is the policy related time spent at the table. Results also showed that the perceived fairness of these practices influences customer patronage intention. We observed that price variation according to the lunch/dinner period, Weekday/Weekend period, and time of the day will influence the desire to frequent the restaurant. Booking policy will also impact customer patronage intention. Table management and control duration policies do not impact customer patronage intention, even if these practices are perceived unfair. Practical implications -Restaurant managers, desiring to apply revenue management practices, should be aware of the fact that practices linked to price variation will have a stronger influence on the customer intention to revisit the company than control duration practices. Moreover, restaurant managers must "educate" their clients by clearly communicating the advantages of these practices for the customers. Originality/value -Even if several studies focused on the fairness perceived of revenue management practices in hospitality industry, there is a lack of research about the impact of price variation and control duration on patronage intention, especially for the restaurant industry. This is the first time we measured the concrete impact of price variation, booking policy, table management, and control duration on patronage intention. Moreover, we integrated several new practices that have never been studied in the past such as the date of booking (e.g. 5% reduction if the booking was done 4 days in advance) or the fact of changing tables for dessert and coffee.

Perceived fairness of revenue management practices in casual and fine-dining restaurants

“…Within the context of restaurants, perceived fairness is a diner’s belief that the outcome of a meal is reasonable and that the cost and benefit of the dining transaction are commensurate for both the restaurant and the diner (Bolton et al , 2003). Researchers have found that perceived fairness is an antecedent of both purchase intention and repurchase intention (Etemad-Sajadi, 2018; Grewal et al , 2004; Haws and Bearden, 2006; Taylor and Kimes, 2010; Xia et al , 2004), as consumers are less likely to patronize companies perceived to be unfair (Kahneman et al , 1986a; Kimes and Wirtz, 2002). Customers may even punish an unfair firm by traveling an additional distance to purchase at another firm and avoid patronizing a firm known to conduct business unfairly (Kahneman et al , 1986b).…”

“…Accepting reservations is a well-established practice in the foodservice industry that assists restaurants in reducing arrival uncertainty to effect duration control (Kimes, 2004). Past empirical studies have investigated various elements of restaurant reservations including overbooking (Tse and Poon, 2017), imposing booking conditions onto guests (Etemad-Sajadi, 2018) and charging fees (Etemad-Sajadi, 2018; Kimes and Wirtz, 2016). Etemad-Sajadi (2018) determined that guests perceive it is fair for restaurants to add reservation stipulations such as requiring a credit card to confirm a reservation, charging for no-shows or late arrivals and canceling reservations of late arriving guests.…”

“…Past empirical studies have investigated various elements of restaurant reservations including overbooking (Tse and Poon, 2017), imposing booking conditions onto guests (Etemad-Sajadi, 2018) and charging fees (Etemad-Sajadi, 2018; Kimes and Wirtz, 2016). Etemad-Sajadi (2018) determined that guests perceive it is fair for restaurants to add reservation stipulations such as requiring a credit card to confirm a reservation, charging for no-shows or late arrivals and canceling reservations of late arriving guests. Recently, reservations have become an additional revenue stream as some restaurants are now charging diners to make reservations (Judkis, 2016; Wells, 2015).…”

Key Activities of Menu Management and Analysis Performed by SME Restaurants in Malaysia

“…Having identified that the key concepts of menu management consist of menu analysis and revenue management, researchers and practitioners who approach this topic from a practical perspective may express scepticism and limitations of applying such concepts within a practical setting. The successful application of menu analysis and revenue management techniques require consistent records of sales data, well defined strategy, knowledgeable and committed teamwork within a restaurant to execute successful menu analysis and revenue management techniques (Etemad-Sajadi, 2018;Kimes & Beard, 2013;Raab & Zemke, 2016). The above literature review presents the major concepts that are commonly practiced within menu management.…”

A research on customer experiences and perceptions for Michelin starred restaurants

“…It is known that one of the basic concepts defining luxury restaurants is high price (Lee and Hwang, 2011). The price change at various times during the day or during the week affects customers' intentions to go that restaurants frequently (Etemad, 2018). The most important topic that Michelin star restaurant's managers should pay attention to is price-performance management.…”