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.
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.