CASE STUDY

OpenTable:
Your Reservation Is Waiting

O
penTable is the leading supplier of reservation, table management, and guest management software for

restaurants. In addition, the company operates the world’s most popular platform for making restaurant reservations online.

OpenTable was founded in 1998 by Chuck Templeton, an entrepreneur who was struck by the difficulty that people often
had trying to make restaurant reservations over the telephone. From there, OpenTable has grown into the world’s leading
provider of online restaurant reservations, with nearly 60,000 restaurants around the world using OpenTable’s system, and
31 million diners per month booking restaurant reservations via OpenTable’s website and mobile app as of the end of 2019.
Open Table automates the reservation-taking and table management process, while allowing restaurants to build diner
databases for improved guest recognition and targeted e-mail marketing. OpenTable’s website and app connect directly to
the thousands of computerized reservation systems at participating restaurants, and reservations are immediately recorded in
a restaurant’s electronic reservation book.

Restaurants purchase monthly subscriptions to the OpenTable Electronic Reservation Book (ERB), the company’s
proprietary software, which is installed on a touch-screen computer system and supported by asset-protection and security
tools. The ERB software provides a real-time map of the restaurant floor and enables the restaurant

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to retain meal patterns of all parties, serving as a customer relationship management (CRM) system for restaurants. The
software is upgraded periodically, and the latest version is designed to provide increased ease of use and a more thorough
view of table availability to help turn more tables, enhance guest service, personalize responses to diners, coordinate the
seating process, and maximize guest seating. Guest Center is a cloud-based version of the ERB that runs on iOS and Android
mobile devices and the Web.

OpenTable’s revenue comes primarily from subscriptions. Restaurants used to pay a one-time fee for on-site installation and
training, but OpenTable has eliminated these fees to respond to competitors offering cheaper products. However,
OpenTable’s main subscription model is a $249 monthly charge for the use of its software and hardware in addition to a $1
transaction fee for each restaurant guest seated through online reservations. There is also a more basic version of its software
called OpenTable Connect, which costs nothing per month to use, but increases the transaction fee to $2.50 per guest. The
online reservation service is free to diners. When an individual makes a reservation, the site “suggests” that they send invites
to their dinner companions directly from OpenTable that include a link back to the OpenTable site.

The restaurant industry was slow to leverage the power of the Internet. This was in part because the industry was, and
continues to be, highly fragmented and local. The founders of OpenTable knew that dealing with these restaurants as a single
market would be difficult. They also realized that the Internet would give diners instant access to reviews, menus, and other
information about restaurants. And there was no method for making reservations online—we all know reserving by phone is
time-consuming, inefficient, and prone to errors. To induce diners to start using an online reservation system, OpenTable
would need real-time access to a number of local restaurants, and the ability to instantly book confirmed reservations around
the clock.
When OpenTable was founded, most restaurants did not have computers, let alone systems that would allow online
reservations made through a central website. OpenTable’s initial strategy was to pay online restaurant reviewers for links to
its website and to target national chains in order to quickly expand its reach. This got the company into 50 cities, but it was
spending $1 million a month and bringing in only $100,000 in revenue. Not exactly a formula for success. OpenTable halted
its marketing efforts and narrowed its focus to four cities: Chicago, New York, San Francisco, and Washington, D.C.

The company retooled its hardware and software to create the user-friendly ERB system and deployed a door-to-door sales
force to solicit subscriptions from high- end restaurants. The combination of e-commerce, user-friendly technology, and the
personal touch worked. The four markets OpenTable targeted initially developed into active, local networks of restaurants
and diners that continue to grow. OpenTable has expanded across the country, and the company has now seated over 1.7
billion diners. In 2018, 58% of OpenTable’s reservations were made via a mobile device, and that percentage continues to
grow.

As the company grew, investors began making plans for it to go public. In 2009, the company proceeded with an initial
public offering (IPO) despite poor economic conditions. The gamble paid off. On its first day of trading, OpenTable’s shares
climbed 59% and the share price climbed to over $100 in 2013, more than five times the $20 IPO price. In 2014, Booking
Holdings (formerly known as Priceline) acquired OpenTable for $2.6 billion. OpenTable hoped to leverage Booking
Holding’s global reach in an effort to continue to expand its business beyond the United States.

SOURCES: “Global Fast Facts,” Press.opentable.com, accessed August 20, 2020; “New OpenTable Feature Spotlights Safety Precautions,”
Blog.opentable.com, June 10, 2020; “Restaurant Bookings Have Fully Recovered

in Germany in a Sign That Activity Rebounds Quickly as Lockdowns Ease,” by Steve Goldstein, Marketwatch.com, June 3,

2020; “OpenTable Data Shows Consumers Are Starting to Eat Out Again,” by Pymnts, Pymnts.com, May 27, 2020; “OpenTable Says 25 Pct of US Restaurants
Won’t Survive,” by Pymnts, Pymnts.com, May 14, 2020; “OpenTable Adds Bar and Winery Reservations Amid Coronavirus,” by Syjil Ashraf,
Thedailymeal.com, May 14, 2020; “OpenTable Feature Lets People Reserve Grocery Shopping Appointments,” by Pymts, Pymnts.com, March 31, 2020; “The
Michelin Guide, TripAdvisor and TheFork Launch an International Strategic Partnership,” Ir.tripadvisor.com, December 3, 2019; “OpenTable Releases New
Features to Help Restaurants Maximize Table Availability,” Press.opentable.com, October 30, 2019; “OpenTable Moves into Delivery—Why—and Why
Now?,” by Pymnts, Pymnts.com, August 1, 2019; “OpenTable Deepens Integrations with Point-of-Sale Systems,” Press.opentable.com, June 5, 2019;
“American Express Has Acquired Reservation Platform Resy,” by Cale Weissman, Fastcompany.com, May 15, 2019; “OpenTable Pilots Centralized
Reservations for Hospitality Groups on GuestCenter,” Press.opentable.com, October 17, 2018; “The Power of OpenTable

Is More Accessible Than Ever,” Restaurant.opentable.com, accessed October 2018; “The Quest to Topple OpenTable,”
by Whitney Filloon, Eater.com, September 24, 2018; “OpenTable Now Lets Diners Choose Where They Will Be Seated,” by Nancy Trejos, Usatoday.com,
August 16, 2018; “OpenTable Reorganizes
Its Marketing, Product and
People Teams,” by Kristin Hawley, Table.skift.com, June 4, 2018; “OpenTable Unveils Business Intelligence Suite for GuestCenter,” Press.opentable.com, May
15,

E-commerce Retail and Services

In the past, restaurants that purchased OpenTable’s software package were less likely to switch to a different service and
abandon their investment. Many restaurants report that they and their staff members find the software easy to use and
beneficial to their bottom line. Specifically, it streamlines operations, helps fill additional seats, and improves quality of
service, providing a concrete return on investment. This has led to both high customer satisfaction and high retention rates.
By creating an online network of restaurants and diners that transact with each other through real-time reservations,
OpenTable has figured out how to successfully address the needs of restaurants and diners.

OpenTable’s market also exhibits network effects: the more people use it, the more utility the system delivers. More diners
discover the benefits of using the online reservation system, which in turn delivers value to restaurant customers, and helps
attract more restaurants to the network.

However, after years of dominating the market for online reservations and guest management software, the company has
ceded some ground to newer challengers. In late 2016, Booking Holdings reduced the value of OpenTable on its books by
$941 million, after increased investments in its international offerings failed to produce increased profits. In 2018, Booking
Holdings announced that it would combine the teams behind OpenTable and Kayak, an online booking site that has grown
internationally with much more success. Restaurants have complained about OpenTable’s pricing, arguing that once they
have attracted and retained loyal customers, paying a $1 charge to OpenTable after each repeat booking doesn’t make sense.
Some restaurants also have concerns about the fact that OpenTable inserts itself in the middle of the relationship with the
customer, capturing valuable marketing data.

A number of competitors have sprung up that hope to take advantage of these issues. Resy, a reservation startup that has won
over some high-end restaurants, allows restaurants to ask for a credit card to reserve, which helps reduce the number of no-
shows. Resy now works with over 4,000 restaurants in more than 200 cities around the world, serves more than 2 million
diners per month and was acquired by American Express in 2019. Many restaurants that have switched to Resy report that it
is far cheaper than OpenTable, sometimes reducing their monthly expenses on booking software by hundreds of dollars.
Yelp was formerly a partner of OpenTable’s, but in 2015, it canceled that partnership and announced that it would begin
using its online reviews platform to provide reservation services, directly competing with OpenTable. TripAdvisor has also
developed its own online reservation system, TheFork, and in December 2019, acquired Bookatable, a similar platform from
The Michelin Guide, which, when combined with its own system, gives it over 80,000 bookable restaurants.

Perhaps feeling the pressure from its growing list of competitors, OpenTable has focused on improving its user experience
across all of its platforms. In 2018, OpenTable released a new version of GuestCenter with a full set of analytics to help
restaurant owners improve efficiency and in 2019, it partnered with Upserve, a restaurant management software provider to
leverage OpenTable’s point-of-sale system and enable servers to have diner information and preferences in real-time to help
personalize service during meals. It also added new features to its system to help restaurants maximize table availability.
OpenTable continues to enhance its app. It has simplified its home screen to feature two main tabs, Book and Discover. The
Book tab shows nearby dining options based on the user’s location, while the Discover tab offers recommendations

based on a user’s history and preferences in a wider radius. The app allows users to fully pay for meals with a variety of
popular payment services and integrates with over 600 other services, including Alexa, which allows diners to make
reservations by voice. Recent upgrades include dynamic, data-backed recommendations for each individual user’s home
screen based on the user’s past bookings and the ability to order delivery or pick-up using any one of several on-demand
restaurant delivery services, such as Caviar, Grubhub, and Uber Eats, directly from the app.

However, the Covid-19 pandemic has created a huge additional challenge for the restaurant industry and OpenTable.
OpenTable estimates that 25% of the restaurants in the United States will not survive and the U.S. restaurant industry as a
whole was projected to lose an astounding $240 billion in sales in 2020. OpenTable has attempted to adjust in response,
adding the ability to reserve time at grocery stores, as well as reserve times at bars, wineries, and other drinking
establishments. It also cut prices through 2020. As restaurants began to reopen, it also added a feature to its app to allow
diners to see what safety precautions the restaurant is following. One hopeful sign in June 2020 was data from Germany and
Australia, two countries further along in the reopening process, showing the restaurant bookings in Germany had fully
recovered, with Australia also showing positive signs. And in the United States, as the economy slowly reopens, restaurant
bookings are starting to trend upwards. Booking Holdings still believes in its long-term strategy of linking the OpenTable
platform with the customer base of the Booking Holdings family of travel sites, ultimately creating a single ecosystem for
Booking Holdings customers.

Case Study Questions

1. What characteristics of the restaurant market made it difficult for a reservation system to
work?
2. How did OpenTable change its marketing strategy to succeed?
3. Why would restaurants find the SaaS model very attractive?
4. What challenges does OpenTable face?

9.11 REVIEW KEY CONCEPTS

Understand the environment in which the online retail sector operates today.

Review 697

2018; “OpenTable Caters to the On-the-Go, Last-Minute Diner with App Redesign,” Press.opentable.com, May 1, 2018; “OpenTable Updates App to Make
Booking Faster,” by Robert Williams, Mobilemarketer.com, May 1, 2018 “Inside the Restaurant-Reservations Start-up Race,” by Marissa Conrad,
Grubstreet.com, March 2018; “OpenTable Began a Revolution. Now It’s a Power Under Siege,” by Stephanie Strom, New York Times, August 29, 2017;
“OpenTable Introduces Owners and Managers iPhone App for Guest Center,” Opentable.com, April 26, 2017; “Online Reservation Battle Heats Up for Open
Table,” by Ronald Holden, Forbes.com, March 5, 2017; “Restaurant App Challenges Industry Giant OpenTable,” by Matthew Flamm, Crainsnewyork.com,
May 10, 2016; “Yelp and OpenTable End Partnership, As Allies Become Competitors,” by Riley McDermid, Bizjournals.com, December 18, 2015; “Priceline
Agrees to Buy OpenTable for $2.6 Billion,” by Drew FitzGerald, Wall Street Journal, June 13, 2014.
• The retail industry can be divided into seven major firm types: general merchandise, durable goods, specialty stores, food
and beverage, gasoline and fuel, MOTO, and online retail firms. Each type offers opportunities for online retail. The MOTO
sector is the most similar to the online retail sales sector.

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