Bot wars - The arms race of restaurant reservations in SF
diogomonica.com
diogomonica.com
There's something frustrating about reading this. Perhaps its that a technological advancement that was supposed to make life easier is being capitalized on by a small group of technically competent people, shutting out the average user.
I was thinking of going to PAX next year a few hours ago and decided to do a bit of research. For this year, the 4 day tickets apparently sold out in 23 minutes, and the rest within 5 hours. I'm having a hard time imagining how its going to be possible for anyone to get some this coming year without a bot.
Who wins?
Based on the bot's code [1], it looks like all they ask for is a phone number and an email address. It might be a good idea to at least require a captcha, if not a credit card deposit of a few bucks.
Maybe we should start trial runs of this feature..
o Send me an email if the price drops below $_____
o Send me an email and put 1 item in my shopping cart for me if the price drops below $_____
:)
Ultimately this is not about technology, it's about economics. Surely the restaurant should raise their prices until not enough people want to book 2 months in advance to make bots and make this an issue. Or PAX should raise their prices so they don't sell out in 23 minutes but still sell all their tickets before the show. Or either business should increase their capacity. Or perhaps they are capitalising on the fact that they are oversubscribed as some kind of marketing device. Either way, any time there is a limited supply of something people are going to figure out ways to get some, and if the limited supply is available on the web, people who understand the web will have an advantage.
For example: PAX is trying to build a community event. The target demographic is not "wealthy people who love games", it's "people who love games" Changing the price results in a different convention.
Similarly, a popular $20 restaurant can't double their prices to keep demand manageable, because a great $20 dinner that costs $40 will reduce the perceived quality of the restaurant.
A number of top restaurants (otherwise booked, on a Saturday night, for 2 weeks) auction off a single table, where 50% of the proceeds go to the restaurant, and the rest to a foundation for gastronomical research.
Another approach is to require a credit card and charge almost the price of a full dinner if you don't show up. The 41 in Barcelona goes one step further and makes you pre-purchase the entire meal.
Some guests will spend another $300 on an expensive bottle of wine. I think it's fine to let some people pay extra in advance to be guaranteed to get a table.
In effect, part of the "effective price" will be the monetary cost, and the other part of the price will be wasted time/emotions/connections/whatever that discrimiminates those who get the ticket from those who don't. This is basic, well researched economics, with plenty of real life examples in various countries, regimes and industries.
The common options include:
a) $x + significant time spent waiting in line - some wait in line and get nothing; some value their time a lot and don't attempt buying.
b) $x goes to the original supplier, $y goes to scalpers/touts/your employee bribes - the stuff gets sold at money market price, but someone else gets the difference;
c) lottery - either intentional lottery, where everybody has a chance of getting a ticket for $x despite that it's market worth is >$x; or an unintentional lottery, where random factors (showing up at the right time, getting a reservation that someone else cancelled) determine if you can or cannot get the ticket. In both cases, the "buyer" might be motivated to resell it if possible, since it's possible that he paid $20, he wouldn't go if it cost $100, but someone else wants to pay $100, so ...
d) (ab)use of advantages - political connections, bots, whatever; you buy at $x and sell at the market price.
In any case, (most) buyers don't get the intended effect of cheaper price; but the seller loses out. Only the middlemen benefit, without adding value. (In one sense, they add back the value that the seller reduced by mispricing)
I've seen what happens in USSR when the majority of economy functions this way - trust me, in most cases raising the price is actually the appropriate response; because otherwise there is so effing large amounts of effort&resources that is wasted - the seller gets $x, but the buyer anyway spends "market price" of $3x to compete with other buyers by giving $x of cash and $2x of wasted, unproductive effort.
In the example of (a), there is no middleman, and the set of buyers becomes biased toward those who are dedicated over those with more money, because they intentionally distributed the effective price over multiple...payment channels (? I'm not much of an economist). Edit: actually there is a middleman; I recall the Wii launch, where I knew a guy who waited in line just to sell them on eBay. But still, there are "true fans" waiting who might be priced out at market value.
In the lottery style where tickets go on sale at x time and it's a free-for-all, some significant percentage of this round of sales will go to people that "deserve" them and get to enjoy a reasonable price with negligible non-monetary cost. Yes there will be some money lost to scalpers, but this can be reduced by forcing resellers into an official exchange channel where the original seller gets a cut.
Burning Man is an event where demand has exploded over the past few years and the supply cannot keep up. The organizers are also very concerned about getting the right people the tickets without jacking up the price. They have evolved a somewhat complex multi-pronged approach with lotteries, high-price presales, and a homegrown exchange system (STEP), where I believe they mandate reselling at face value.
edit: On second thought, I have neglected the cost of the people who expend time/effort and miss out completely. But, I still think there are benefits to pricing below market value with a sufficiently robust strategy.
PS: your answer isn't allowed to be captcha.
The issue here is bots, so the solution should be to make such reservation / booking sites unfriendly to bots. Then the event organisers / restaurants can choose to adjust their prices based on the actual demand and their long term vision instead of trying to play some silly price war with ticket touts.
You can draw randomly, you can determine who you want to come and invite them, or you can determine who want it the most by asking them to pony up a lot of resources - money or waitingtime (live queues) or effort. It's your choice, unless you refuse to decide, and let scalpers/botwriters decide for you and take everyones money for that.
Kid Rock Takes On The Scalpers
http://www.npr.org/blogs/money/2013/06/25/195641030/episode-...
Summary
http://www.npr.org/blogs/money/2013/06/27/196277836/kid-rock...
1) More shows.
2) Beat the scalpers at their own game.
3) Go paperless.
4) Don't sell the first two rows.This is sort of like estimating the weight of a cow by assuming it's perfect sphere with a radius.
But this isn't entirely surprising. It's a common sentiment on Hacker News, where highly complex markets are reduced to incredibly simple single-variable, Econ-101-stye supply/demand curves. The poster usually then goes on to believe they've solved some major problem and wonders how everyone else can be so blind as to see such a simple solution.
But far be it to leave at just snarkiness. There are a whole slew of reasons why pricing as a lever cannot be used to fine-tune demand. Simply off the top of my head:
- Desirability of restaurants is heavily determined by their pricing context. That hole in the wall Thai place with the IKEA chairs is a great place to get $5 Pad Thai, and is always crowded. If they charged $15 the expectations for service, food, decor, location, etc, would be entirely different. Cannot simply pull the price lever.
- Desirability of restaurants is heavily determined by perceived authenticity. That Chinese restaurant where all the Chinese immigrants eat is popular with everyone because it communicates authenticity. It loses that authenticity if it prices itself out of reach of the people who lend it authenticity. Funnily enough, authenticity is frequently derived from the working-class everyman. Cannot simply pull the price lever.
- Restaurants are divided into price ranges, with not a lot of intermediate prices. This limits the "resolution" to which you can tune your pricing before you jump into the next range (which comes with expectations, authenticity, and other issues as above). There are demand cliffs moving from one range to the next - in other words restaurant pricing is not a continuous function and cannot be modeled as such. It's not even a "sorta kinda linear" curve.
- As price increases demand does not drop off linearly, or close to linearly. If you've got a line out the door for $5 burritos, a $6 burrito may cause only a small dropoff in customers, while a $7 burrito may cause your business to largely dry up. The holy grail of "that price where everyone who wants a burrito can get one without waiting very long" may not be achievable by simply pulling the price lever.
Pricing food is complex. Until the day where all food becomes standardized, commoditized, and we can treat our restaurants like we treat our nuts-and-bolts supplier, it will remain like this.
And after this, the minute someone opens a restaurant where food is not standardized, commoditized and that can't be treated like a nuts-and-bolts supplier... a market is (re)born.
That's a strange phenomenon I've also noticed, since posters here usually have the opposite instinct in any other field. Most systems end up complex and difficult to model by simple rules, unless you restrict your model to a specific range of parameters or behavioral regime. Do you want to know how increasing or decreasing pressure affects fluid flow? Most knowledgeable people would immediately say that it depends: does the pressure change impact the flow regime? If it stays within a flow regime, there is one answer. But if it changes from laminar to turbulent flow or vice-versa, the answer may differ. What initially seemed like a simple relationship has a confounding factor of macro-scale regime-switching.
But in economics, HNers feel somehow confident just giving a blanket answer without analyzing the situation. Price and demand of restaurants are linearly related; raising minimum wages increases unemployment; etc. Blanket statements they'd never make in an unqualified form in fields they actually know about, somehow become fine in a field they haven't studied. Nobody seems to feel the need to inquire, well, is it a simple relationship, or can changes in a parameter change the operating regime? Very strange.
I have to disagree with your point 2: The blue-collar working man doesn't want to queue with a bunch of students for half an hour for his food, however authentic it may be.
But there is a major difference - if you spend three hours in a queue, you lost those hours and noone gained from that. If you spend three hours writing a sniping bot, noone really needs it. But instead if you spend those extra three hours even sweeping streets at minimum wage, and pay that extra money for more expensive tickets - then the seller has gained extra money, which (on scale) increases supply and the world has gained some useful work.
A better solution would be to charge for making a reservation, and give that charge back as a credit against the meal. You don't have to raise prices, you increase the probability that someone making a reservation intends to show up, and when you have a no-show, you get compensated for the empty table (and can still give it to a walk-in.)
Restaurants like State Bird are a bit of a poor example, anyway. Regardless of their reservation book they're going to fill all their tables every night anyway right now, and they don't particularly want larger (5+) parties anyway because they're tiny. I think they want prices low enough that they can establish a loyal clientele that will keep them going once they're no longer the "hot spot" in SF. Or maybe (gasp) they like offering their food to a broader range of customers. Chefs tend to be a little more down-to-earth.
Feel like if they market this move a little better, they could convince their loyal customers that this will allow them a better chance at getting reservations.
State Bird Provisions however has so much demand that there is a line for walk-ins hoping for a cancellation an hour before the restaurant opens and they appear to not actually hold back much (any?) inventory specifically for walk-ins.
But generally speaking yes, you will often be able to call a restaurant and get a table or possibly walk in even when their online reservation system shows up as full.
Also, you can also put yourself on a waitlist at many restaurants. If someone calls to cancel, before they release the reservation back to the online system, they'll go through their waitlist and call and ask if you want it instead.
hi jordan.
(only works in places where you are a regular and a good tipper)
You can also nook from the phone a couple of days in advance usually.
Perhaps:
- People in certain modern, urban situations crave certain types of creative expression that seem to be very hard to find in these environments.
- Social patterns place a high value on being seen to have had an experience, that provide a reward similar to being the artist.
- People capable of producing these artistic experiences are initially perhaps not so interested in managing the people who are the recipients of their creativity - they are more interested in creation.
- Once money and/or fame becomes involved, the artists are unlikely to widely share the skills that lead to the creativity arising, are motivated to protect methods of production, fetishize the product and create strong brands.
These factors together create this 'hipster' effect where small points of creativity are heavily focussed on and take a long time to replicate.
I'd hypothesize that this situation would go away if people were broadly connecting with meaningful, personal creative pursuits. Or, if the artists flipped their model once they smelled success and were motivated to share everything they were doing, allowing the experience to be rapidly replicated.
"A hipster is someone who enjoys the things I do, but in ways I disapprove of"
I can't think of a worse customer experience than taking someone on a date, waiting in a congested line outside at night for 45 minutes only to be told that there are no tables available.
Not getting a reservation on the other hand just means that I can just go somewhere else.
Find a bigger venue. Open another store.
Maybe they should just deploy to Heroku or Appengine and have them scale to meet their table needs.
Or to put it more crudely: If your aunt had balls, she'd be your uncle.
I doubt it; I doubt many would do that at all. In some situations corporate fast-food joints do take reservations (White Castle on Valentine's Day evening is the only example I can think of at the moment) but in those situations they are cashing in on people considering it a novelty. The novelty drives demand to levels that it otherwise never achieves.
If there were only a single Chipotle in NYC, there would almost certainly not be enough demand to require a reservation system (and if they used one anyway, their business would surely suffer). Perhaps you would be willing to call in a reservation for Chipotle, but one person calling in reservations for fast-food isn't going to sustain a business.
Basically people will especially go out and get the McRib when it "comes back" and then get tired of it.
If McDonalds was limited to only one location, there would almost certainly be long lines, waitlists, and reservations. The ubiquity of McDonalds, and the fact that they can meet demand enough so that no one needs to wait more than a few minutes contributes to the luxury of not having to wait for a Big Mac.
You essentially need a completely new staff--including a completely new creative staff. This is important, and a large part of why most chefs who own multiple restaurants generally have fairly diverse properties that present different menus. But diversification still requires wheelbarrows of money; "the fastest way to make half a million dollars is to start a restaurant with a million" probably applies even more acutely to opening more than one.
One way to stop that: Raise ticket prices. If Kid Rock charged more for his tickets, scalpers wouldn't be able to sell them at such a big markup.
But Kid Rock doesn't want to raise prices.
"I don't want to break you by coming to see me, " he says. "I want to make as much money as I can, but I don't need to drive around in a tinted down Rolls-Royce or Maybach and hide from people because I felt like I ripped them off."
http://www.npr.org/blogs/money/2013/06/27/196277836/kid-rock...
EDIT:
The real ideas of Kid are described not in the quote but in the rest of article; it's worth taking a look at.
It's the internet age as well and he realizes that. The moment he tries to charge a market price for every ticket, he starts eroding his fan base.
Surely it wouldn't surprise you, for example, if someone accepted a lower salary for a job that they enjoyed more than a better paying job?
Concert tickets are also being bought this way by bots for scalpers.
Ebay sniper bots are commonly used.
High Frequency trading is the high end this.
Perhaps it is unavoidable, perhaps other means for selling things online should be sought out, text messages with semantic replies required or something?
On the topic of scalpers, Louis CK apparently hired [0] scalpers to help build some anti-scalper checks (I assume it is similar to fraud detection rules: multiple purchases from the same IP, out of town billing addresses) that runs on his website where he now sells all of his tickets. If you get flagged by a rule, the ticket goes to will-call, so you have to show ID and the credit card at the event. That small step to prevent it significantly reduces the resale value for a scalper who can't attend the event.
Here's the interesting part: It worked! Roughly 25% of all tickets for major shows fall into the hands of scalpers. On Louis CK's last tour, of all 125k+ tickets he sold, than than 1% were scalped. [1]
What's really terrible about the whole scalping business is that it would be solved, but only by the people who care least: The venue has a perverse incentive allowing scalpers to buy every last ticket they can get their greedy little hands on. As long as a ticket gets sold, they don't care. Screw the fans.
Possibly NSFW language in these links. [0] http://www.wbur.org/npr/162514765/louis-c-k [1] http://boingboing.net/2012/07/06/louis-cks-direct-sales-conc...
Everything I've seen trying to explain the scalping phenomenon appeals to the idea that this is completely backwards from true. Specifically, the theory is that the venue's incentive is to fill seats, which is why tickets are so dramatically underpriced (price too low -> shortage of seats -> all seats get filled -> the act appears to be popular). From the venue's perspective, a seat sold to a scalper is a seat they lose money on and that might not be filled during the performance (since the scalper's incentive is to charge a realistic price), which is a double loss to the venue.
In sum, selling tickets to scalpers gets the venues an amount of money they don't want (they were guaranteed to sell out anyway), in order to generate an effect they don't want (some seats will be empty during the performance). Where's the perverse incentive?
Yeah, playfield got leveled because now everybody and their dog can use snipers (hey, where's the reward for technical competence?). So the "game" looks similar to before automation, but is more complicated. A positive feedback loop of increasing complexity if you like. For me, "the only winning move is not to play". </rant>
This doesn't make sense, really. You enter the price you're willing to pay in an auction; what everyone else bids is irrelevant to you.
If you are getting outbid, it's because someone is willing to spend more money on the item, bot or not. Don't bid low trying to get a deal. Bid what you are willing to pay, and it works every time. It's a very efficient system.
We're in a capitalist system, the price you pay the scalpers is the "real" price of the concert: it's the law of supply-and-demand.
Now, if scalpers win every time, this is an issue with the original ticket sellers, not the scalpers!
If Shell started selling petrol at half standard price and some guy comes round to fill up a tank and then sell it to people at 95% standard price, that's Shell's mistake, not evil behaviour on his part.
They are speculators. People have instinctive dislike for speculators as they produce nothing and in scalpers case provide no benefit (such as liquidity) to society.
Speculation is just another word for betting, I don't think that's an inherently bad thing.
The existence of scalpers is curious. Artists could get the money they do. There are reasons why they still exist, one of them being that artists use scalpers to get cash in hand.
There is a really good episode of Planet Money that looks at why there are scalpers, how they work and what can be done by artists if they don't want them to make money:
http://www.npr.org/blogs/money/2013/06/27/196277836/kid-rock...
Moreover, I have also participated in a few lotteries for various things (e.g. Half Dome permit), but did that completely by the book.
A few things that help make system fair (TM):
- price them right, maybe even charge a bit premium for reservation vs. walk-ins
- make cancelation non-free and charge at reservation time, even a few dollars prevents spurious reservations "just in case"
- have a waiting list, if there is a cancellation, you can automatically sell it to someone else
- do some load management, e.g. weekend prices, discounts...
1. Don't take reservations.
My favourite restaurant operates on this basis. On a Friday or Saturday night you will queue for up to an hour for a table. If you prefer to avoid peak hour, there is rarely any queue for lunch. I've eaten there over 100 times and I still don't begrudge the time spent in the queue.
2. Run a lottery
Popular theatrical productions are great at this. If you don't want to book months ahead (or can't afford to spend hundreds of dollars), Book of Mormon offers a ticket lottery before every show. Just show up at the theatre and enter for your chance to win one of 21 discounted, front-row tickets.
To clarify, I'm not suggesting that the establishment in the OP wants to let the poor and/or technological illiterate to attend. However other places have managed to do so without hurting their brand.
Want to eat at $POPULARRESTAURANT - you set a bid min and max and off you go.
Its allocating scarce resource at the most efficient level.
Also, is scraping legal? I would imagine, at the very least, the OP and others are violating the TOS. I have written a few scripts of my own for fun, but I would be careful about bragging about it on a public blog.
http://insidescoopsf.sfgate.com/blog/2013/07/25/are-automate...
Everyone else, who has been fighting to get a reservation for months the old fashion way, will not decry your loss.
And I doubt very much you would risk getting blacklisted for sniping reservations off their site, since you appear to love the restaurant so much.
Honestly though, I don't understand why this needs to be available over the web in the first place. If your restaurant is that posh, I'm sure you're not going to lose business by making people call in their reservations. You'll still need to have someone answering the phone anyway, so it's not like you're saving money by cutting an employee. Whatever meaningful benefit having an online reservation system might have provided is clearly lost in the absurdity of this situation.
Ferrari also has a long-standing policy of manufacturing "one fewer car than the market demands."
And it seems to work.
Places like Burger & Lobster or Meat Liquor usually have very long queues at prime times.
Probably only a matter of time until a side-business of people who are willing to wait in lines for you emerges.
A perceived upshot is that the restaurant must put an emphasis on quality at reasonable prices, otherwise they won't draw those crowds and I'm definitely not going to wait for a crappy meal.
However, the "no reservation" method itself seems to help draw crowds too. Kind of like the lines outside a night club seem to draw people. Throw in a bit of edgy branding with some cool marketing and it pulls well - having an "image" works.
Queuing is a bit of a cultural thing/expectation over here. Having someone cut in line can be a huge no no. If someone bought their way into the queue, I could very well see it causing some highly vocal responses. But I'm sure there are people out there trying it out.
All tickets for the year are gone on the first day they become available and then lo and behold you can suddenly buy the tickets (for a considerable markup) elsewhere. The folks scooping up the tickets like this are parasites. The solution is to limit the number of tickets per person or to disallow reselling.
(Haven't tried for a while out of frustration, might be different now)
I know, slightly tangential to the article.
Thing is, is there really that much of an arbitrage opportunity with restaurant reservations? Is there a place I can go purchase restaurant reservations?
If it doesn't matter, they should raise prices.
This is an issue in NYC. Some $300/night restaurants have you hyperclicking the moment the reservations open up.
- detect obvious bots (e.g. clients requesting form without loading CSS or JS or filling it in instantly), suspicious IPs (EC2, VPS hosting) and release smaller batch of seats to them (don't deny completely in case of false positive).
- create waiting list and give reservations randomly to people on the list (while the list can be spammed as well, humans would still have better chance than reserving between 4:00:00 and 4:00:01). Also bot authors would have to be creative to avoid creating easy to spot patterns of names/times in the list.
(Why do "suburbanites" seem to get so much stick nowadays?)
if this restaurant is so popular, isn't it too mainstream for hipsters? /philosoraptor