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Technology

Meet the start-up with an airline-style method to fill up restaurant seats with more diners

Eatigo treats each restaurant seat as a perishable good, just like an empty airline seat

PUBLISHED : Friday, 29 June, 2018, 8:02am
UPDATED : Tuesday, 03 July, 2018, 6:01pm

When American Airlines pioneered charging passengers different air fares in the 1970s, the carrier drove up profits and helped revolutionise the industry. In Thailand, technology start-up Eatigo wants to replicate that innovation in the restaurant sector.

Eatigo, founded in 2013 by four ex-telecommunications industry professionals from Thailand, Singapore, India and Germany, is in the business of helping restaurants fill up empty tables by offering discounts to diners at different times of the day via its mobile app.

“The restaurant industry is worth US$2.6 trillion and it’s a market that’s absolutely huge, and yet it operates at a capacity of about 30 per cent,” said Eatigo co-founder and co-chief executive Michael Cluzel in an interview on the sidelines of last week’s Techsauce Global Summit in Bangkok, Thailand.

“If we can increase capacity by just 10 percentage points to 40 per cent, that’s an incremental market size of US$600 billion. It’s an absolutely green field, a blue ocean of opportunity.”

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Eatigo treats each restaurant seat as a perishable good, just like an empty airline seat, according to Cluzel. He said fixed costs, such as rent and staff expenses, are incurred each hour that a restaurant seat is left vacant. Most restaurants typically have a period of inactivity during the day, which means these businesses are not operating efficiently.

“Once the hour is up, the money you could [have made] on that table is gone,” said Cluzel. “Restaurants have been experimenting on their own, offering things like ‘happy hour’, but that’s a dumb discount because it applies to everyone who walks in … [rather than] charge different people at different times different prices for the exact same thing.”

Restaurants on board the Eatigo app are able to offer discounts at different times. The discounts for diners range from 10 per cent to 50 per cent, depending on the time a customer makes a reservations and the number of people in the booking.

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A customer who makes an off-peak hour reservation for a restaurant through the Eatigo app is more likely to get a larger discount than another person making a booking during peak hours at dinner time.

Eatigo uses algorithms to crunch data provided by its merchants. Its system proposes the number of seats and the amount of discounts a restaurant should offer to maximise profit. The company goes as far as to guarantee a profit on every diner seated, said Cluzel.

That system enables restaurants to increase revenue, while providing diners with a way to not pay full price for a meal if they reserve through the Eatigo app. The company generates revenue by charging restaurants based on each booked seat through its app.

Eatigo’s airline-style method of searching for discounts at restaurants is now available in six markets – Thailand, Singapore, Malaysia, Hong Kong, the Philippines and India.

In Hong Kong, Eatigo broke even after just six months of operation, according to the company. It said business in the Philippines, which started in July last year, turned a profit in about four months.

Eatigo’s efforts have come at time when many consumers are already adept at finding bargain airline seats and hotel rooms through online travel agencies, such as Ctrip, Expedia and Booking.com.

Its use of algorithms to automate that search also reflects how savvy investors have become accustomed to using robo advisers, digital platforms that produce financial advice on investing.

With strong prospects in Asia, Eatigo has raised a total of US$15.5 million in funding. Its Series B financing round in 2016 was led by American travel and restaurant booking service TripAdvisor.

That showed how financing for technology start-ups in Southeast Asia has been growing. The region’s technology sector recorded investments totalling US$6.3 billion across 422 deals last year, up from about US$300 million for 100 deals in 2012, according to data from venture capital research service CB Insights.

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Eatigo’s success has also been helped by what Cluzel calls the “eating-out culture” across Asia, where people have their meals in restaurants more often compared to markets like Europe. In addition, Asians are always in search of good deals when dining out.

For its next stage of growth, Eatigo is exploring the potential of expanding its discount model to merchants who run food stands, Cluzel said.

“Our ambition is to go from McDonald’s to Michelin,” he said. “We’re continuously looking at how to expand both upwards and downwards. Food is ubiquitous, everybody eats but they eat different things … I want to make sure we have an offer for everyone, whether you want to eat fried chicken or have molecular fine dining.”

Our ambition is to go from McDonald’s to Michelin
Michael Cluzel, co-chief executive at Eatigo

Still, Eatigo must deal with competitors that have emerged in several markets with a similar business model, such as Offpeak in Malaysia. Having a first-mover advantage has not always been a guarantee of continued success, a recent example of which is ride-hailing giant Uber Technologies’ retreat from China and Southeast Asia.

“If you look at the other companies in this industry, none of them have been successful,” Cluzel said. “We’re clearly the market leader because we came up with this business model, and understands what works and doesn’t work.”