How do substantial deposits/prepayments benefit in the reduction of no-shows and cancellations?
Taking deposits or prepayments to prevent no-shows or late cancellations is not a new trend, its value is often overlooked or evaluated as not the right process for the restaurant. It’s becoming more frequent to capture a card to secure against a booking, however, this process is not often a foolproof safeguard with the foreboding possibility of chargebacks, cancelled cards and prepaid cards holding zero funds.
I have often spoken with restaurants who are hesitant from requesting a prepayment from their customers due to potentially causing pushback, loyalty friction or debate that their clientele and service style doesn't justify this. However, does this hesitation outweigh lost revenue from a no-show or late cancellation on a busy Saturday night?
Sven Hanson Britt, the co-founder of London-based Oxeye, trialled a decrease in their reservation deposit which produced some surprising results. The restaurant originally took a booking deposit of £50 for their tasting menu and experienced zero no-shows or late cancellations for a year, out with the odd customer emergency cancellation where the customer would reschedule for another date. However, when trialling a decrease for 3 months to a £5 deposit, this resulted in a no-show within the first week's trial and an increase in advanced and late cancellations. The restauranteur also made a point that the booking figures were the same amount at both deposit prices. The restaurant's policy also stated that for no-shows they would charge the full menu price to the card. This restaurateur's brief trial has proven the effective impact of a substantial deposit/prepayment on bookings. It deters customer booking behaviour of making a tentative booking or being a spread booker, without a negative impact on booking numbers.
If the proven impact of deposits/prepayment from a fellow restaurateur has not swayed you to begin adding the policy to your establishment, why not try conducting a trial yourself? We suggest first trialling payments on a special fixed menu, for example, afternoon tea bookings or Mother's/Father's Day and gauge how many no-shows/cancellations you receive vs. your normal average figures. If you are unsure of the best booking policy and practice for your establishment, we urge you to take a look at the maths here or the card vs. deposit decision article here.
With the current economic climate and the hospitality industry still feeling the effects of the pandemic, we predict substantial deposit/prepayment is going to become more common for all varieties of establishments to secure their revenue and improve cash flow. simpleERB can help you securely take deposits/prepayments on bookings and special fixed menus/events with our flexible set-up options. Find out more about the process here and how to add a payment to a special fixed menu here. simpleERB can help to process this from both online and phone bookings securely through our payment integration feature.