‘Black market’ dining reservations sell for thousands. States want to stop that.

Editor’s Note: In May, Gov. Joe Lombardo signed Senate Bill 169, which prohibits third-party reservation websites from listing restaurants without their permission. The bill, sponsored by Democratic state Sen. Fabian Doñate, passed the Legislature unanimously and goes into effect later this year, on Oct. 1.

The following story, originally published by Stateline, provides insight into the issue, which is affecting restaurants in popular dining destinations across the country.

NEW ORLEANS — This isn’t just any old list.

With tables spread across several distinct dining rooms at the storied Commander’s Palace restaurant, managers must calculate precise labor needs and open up the reservation list for just the right number of rooms at the right time for each dinner service.

“If I spread the reservations out too much, it feels like you’re sitting in church,” said operations manager Steve Woodruff. “We have an old saying: Nothing dresses up a dining room like customers.”

In recent years, emerging third-party online platforms selling hard-to-get dinner reservations have created headaches for popular restaurants like Commander’s Palace. New platforms such as Appointment Trader auction off the most desirable tables for hundreds or even thousands of dollars.

And unlike other platforms that contract with restaurants, such as OpenTable, the reservation trading apps work outside of a restaurant’s control: Anyone can make a reservation (often for free) and sell it for a profit, with the platform taking a commission on the sale.

During this year’s Super Bowl weekend in New Orleans, one table at a French Quarter restaurant went for more than $2,100.

When customers spend that kind of money before the meal, Woodruff said, it heightens expectations and alters a diner’s perception of value without restaurants even knowing. He said the apps also can force restaurants to run a service with empty tables if those online platforms don’t find buyers — putting the risk on the business, not the customer.

“If you resell a concert ticket, you had to risk something to buy the ticket. There’s no risk here,” he said.

The issue is increasingly gaining the attention of state lawmakers.

Commander’s Palace and the Louisiana Restaurant Association successfully lobbied for a new law banning the resale of reservations without the consent of restaurant operators. Earlier this month, Republican Gov. Jeff Landry signed the bill, which gained unanimous approval in every committee and floor vote.

The Louisiana law follows the signing of bills by New York Democratic Gov. Kathy Hochul and Florida Republican Gov. Ron DeSantis. A similar measure passed by the Illinois legislature is awaiting action by the governor. California and New Jersey are also eyeing such protections.

“I know what it takes for people to build a brand,” Republican state Rep. Troy Hebert, who sponsored the Louisiana bill, said in an interview. “I mean, think about it: You’re making money off of my brand, and I didn’t even know about it.”

He said online reservation platforms can use automated technology to quickly secure reservations, holding them hostage from other customers. Hebert noted that restaurants can still choose to work with any of the online reservation trading systems.

“We’re not preventing people from running those types of models,” he said. “They just need to get the permission of the establishment. That’s it.”

The new law allows the attorney general to issue platforms a $1,000 daily fine for each restaurant they’re selling reservations for without permission.

Appointment Trader founder Jonas Frey told Stateline that lawmakers are only hearing from powerful restaurant associations and the reservation platforms they contract with like OpenTable and Resy, which have pushed for these new laws.

Frey said restaurants often show no availability online even when they have free tables.

“It’s one of the reasons why Appointment Trader works so well, because people with the relationship to the restaurant generally get these tables,” he said. “We didn’t make this problem — the restaurants are doing that.”

He said the site can actually help restaurants avoid no shows because most trades occur on the day of the reservation. And many restaurants require a credit card for a reservation, meaning a consumer could be charged even if schedules change and they can’t use their reservation.

“In my mind, it’s atrocious: You’re liable for something, but then you’re not allowed to sell it,” he said.

Consumers completed 50,000 transactions on the platform last year, he said, with a no-show rate of only 1%. While restaurants have raised concerns about people making lots of reservations to flip a few online, Frey said his site blocks sellers who list too many openings without selling them.

So far, these “black market” restaurant reservations have been most problematic in the nation’s hottest dining destinations, including Chicago, Las Vegas, Miami, New Orleans and New York City, said Mike Whatley, vice president for state affairs and grassroots advocacy at the National Restaurant Association.

“It’s the places where there are those reservations that if you aren’t logging on right at midnight a month out to get the reservation, you’re not getting them, where these challenges have arisen, where you’re seeing piracy take place,” he said.

Whatley added that this wave of state legislation is reminiscent of one that followed the rise of third-party delivery services such as DoorDash. In some cases, delivery platforms posted restaurant menus and sent drivers to pick up orders without permission.

“And restaurants were going, ‘Hey, why am I on this website? I didn’t give authorization for that,’” he said.

Whatley said some restaurants have responded to reservation traders by requiring deposits to make reservations, decreasing the likelihood of no-shows.

“There’s a lot of interest in states where this isn’t a problem yet, getting ahead of it and just passing something on a bipartisan basis so that it never becomes a problem down the road,” he said.

Commander’s Palace first learned of these platforms early last year when a customer asked why he couldn’t get a table on the restaurant’s website but saw one for sale on Appointment Trader. Woodruff said the new law is important because the restaurant and its reservation vendor struggled to tell which reservations came directly from customers and which came from reservation traders.

“It didn’t feel like we could fight it effectively on our own in house, because it’s like a game of Whac-A-Mole,” he said.

Located among historic mansions and Victorian homes in the city’s Garden District, Commander’s Palace is more of a campus than a single restaurant. Nicknamed “Big Blue” among the staff for its striking teal paint job, the restaurant sprawls across nearly 12,000 square feet and is known for dishes like turtle soup and gumbo.

In business for more than 130 years, Commander’s Palace is among the city’s most famous spots. Reservations can be difficult or impossible to land, especially between October and May when tourists and conventions fill the Big Easy.

Proponents of reservation trading platforms argue they can provide customer flexibility. But Woodruff says it’s only those websites that are winning — while consumers and restaurants lose out.

In the foyer of the restaurant, Woodruff pulls up a big screen at the podium displaying the tables for every meal service. The restaurant is a must-stop for many tourists, but it’s the locals that keep the place running year-round.

Wearing a white shirt and black braided leather suspenders, Woodruff scrolls back to the recent Mother’s Day brunch service. The screen shows the history of each customer. Some have dined here dozens of times, some more than 110.

“These people spend every family special occasion with us,” he said. “There’s an awful lot of local goodwill that I try and cultivate.”

Stateline reporter Kevin Hardy can be reached at [email protected].