Can you refer to public venues as rooms?
Solution 1:
OED defines "room" as:
A compartment within a building enclosed by walls or partitions, floor and ceiling, esp. (freq. with distinguishing word) one set aside for a specified purpose; (with possessive) a person's private chamber or office within a house, workplace, etc.
At some point, something that meets the technical description will be too large or too small to be considered a room, e.g. a closet. Some "rooms" have specialized functions and are not typically considered rooms: e.g. a garage.
Some buildings are essentially one big room, such as a barn or a hangar.
Some rooms are so big that they are called "halls". e.g. a Great Hall
A great hall is the main room of a royal palace, nobleman's castle or a large manor house or hall house in the Middle Ages, and in the country houses of the 16th and early 17th centuries. At that time the word "great" simply meant big. -- from Wikipedia
Specifically, in the context of a restaurant, I would guess that most restaurants serve their guests in a dining room. If the ceiling is very high and the room is very wide it might be a dining hall. I would use a thesaurus to look at the various synonyms for "room"; if one of them matches the kind of space the people are in better, then it might be more natural to use that.
Solution 2:
Yes, according to standard definition, "room" is fine in this context, regardless of what type of place it is (except, as MrShiny has said, for very large spaces): http://www.merriam-webster.com/dictionary/room
Of course, if the diners are sitting outside the restaurant, "room" would not be appropriate. And if you mean that there was loud applause, but it did not fill the whole restaurant, then you would need to rephrase, eg, "Applause surrounded the table" or similar.
Solution 3:
A stage performer will sometimes refer to a small venue or restaurant space as 'the room'
- You have to get a better feel for the room.
- That's not a good room to mess around in.
- Play to the room.
In this context, 'the room' can also refer to the general atmosphere including the people that will probably be found there and their attitudes.