Let's say I'm running a 60 seat restaurant, and he has claimed 10 of the seats for a Friday night. I have bought supplies to cook for 60 guests. If he doesn't sell his 10 seats, I'm left cooking for 50 guests, and now have excess food, which is highly perishable, and can make up anywhere from 30 to 50% of the costs of the dishes I'm serving.
In addition, places that do accept reservations well ahead of time are less likely to receive 'walk-in' guests, as the reputation of only taking reservations discourages people from trying their luck.
He advertises last-minute reservations, so he's probably cancelling his reservations a few hours before service, which is nowhere near enough time to re-book those tables, given that anyone interested would have simply booked at a different restaurant.
Every NYE people scramble for reservations. Many people will book at 2-3 restaurants to have options. As a result, everyone who is going on that night has a reservation, and everyone who doesn't have a reservation goes to a house party or stays home. You never get walk-ins on NYE (or Valentine's day for that matter).
Sure, maybe trendy restaurants on a busy strip can make up the difference. And maybe this is most restaurants in SF, I don't know, I'm not from there.
But if it's a destination restaurant, it often can't make up lost reservations on such short notice because no one will plan their evening around a chance at possibly walking in to a restaurant known to only take reservations.
Either way, any success he gets will be short lived, as SF restaurants will soon start taking CC numbers en-masse, or selling tickets like Alinea. They'll cut him out of their business, and if he tries dealing with them face-to-face, he'll be blacklisted. The fact that he's already created such outrage on Twitter may seem encouraging to him, but he's basically already killed any chance he has of creating goodwill.
Recently someone in our city tried scamming restaurants for free stuff by claiming to be a member of the press, was outed on Twitter and swiftly blacklisted by every restaurant in the community. When you run a business that has capital costs potentially in the millions for 5-20% margins if you're lucky, you don't react well to people scamming you.
If someone buys a reservation from him and doesn't show up at the restaurant, I'm not sure if it's entirely his fault. With that kind of disregard for reservations, there's a big chance that they would've stood up on a reservation they made themselves for free.
4 hours.
somebody else may use that slot
Emphasis on 'may'. The restaurant may also not get a last-minute call for a booking or a walk-in client at the right time.
Managing reservations and paying employees to man phones is part of the operating cost of a restaurant. Not to mention, this could be automated with software that ties customers to credit cards and reservations.
The harm to the restaurants right now is potential lost income and lost tables. Keeping a card on file would negate the lost tables and keep players like this app from skimming value off the top, unless they were willing to wager their own money on the resale value.
What I see here is a service that allows people who didn't plan far enough in advance to be able to enjoy an experience at a premium (or maybe a fee/penalty cost) that they otherwise would not have. The customers of this service have already incurred a penalty of sorts.
I don't see this as (yet) an abusive economic system that disgustingly inflates prices in some sort of a monopoly-style hierarchy (which ticket scalping does). There is unprecedented room to badly abuse this system, and I would hate to see that happen.
However, I think what he did should not incite so much hatred. I personally am against this sort of thing but that doesn't mean I am going to spread hate. Ticket scalpers, though...
In another variety, I've seen newspapers/blogs do this sort of advanced-fake-reservations and give them away as prizes. I'm not sure which is worse.
I would hope that restaurants take measures to make these kinds of things difficult to pull off. Maybe assess some additional tip amounts if the reservation name doesn't match anyone in the group, or asking for an ID when they first enter the restaurant (although I think this would be bad customer experience).
There's so much room for abuse with solutions that needlessly disrupt the experience.