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Joni Kat Anderson

The Pros and Cons of OpenTable

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By Kevin Hardy September 2014 Marketing & Promotions

Chicago’s Four Corners Tavern Group prides itself on offering high-quality burgers, pizzas, and craft beers. Both the menu and the service are elevated. But the group’s nine bars are casual neighborhood institutions, so there was never much need for a complex reservation system. That changed with Four Corners’ November 2013 launch of Trellis, a more formal wine bar concept. With Trellis, the company signed up with OpenTable, which matches millions of diners with thousands of restaurants via online and mobile reservations.

The thinking was simple: At a wine bar, people linger over a bottle of wine a little bit longer. Unlike at other neighborhood bars, diners might be less willing to wait for an available table. And an online booking system could help the back of house keep pace with the front. Aside from the logistical advantages, Open-Table was a great way to spread the word about the new concept.

“No one can compete with OpenTable’s reach, and no one can compete with its marketing,” says Four Corners director Ryan Indovina.

When it comes to marketing, OpenTable has a distinctive pitch: It shows exactly how many people a restaurant can seat on any given night, and the system allows restaurants to adjust how many seats it wants to open up. So if Tuesdays are slow, an operator could open up a few extra tables for online reservations. Purchased by Priceline for $2.6 billion in June, OpenTable has a network of 15 million monthly diners that is hard to ignore.

The company has also been busy eating up much of its competition, and the cost of using OpenTable means it’s a no-go for some restaurants. Alongside setup costs and monthly fees, OpenTable charges $1 per customer it seats. That can add up. Plus, Indovina says, there’s an association with being a reservation-heavy restaurant. That concerns him, as Trellis wants to maintain a neighborhood ambiance where customers feel free to drop in without reservations.

Thus, for all its advantages, Indovina says the jury is still out on OpenTable. “It has been a successful marketing tool to expose our brand to the market,” he says. “But we’re still determining the true ROI of it.”

At The Varano Group, which has five full-service restaurants and two cafés in the Boston area, it’s a different story. “I think it’s an invaluable tool,” says Bruno Marini, COO and beverage director for the Varano Group. “There’s no question about it."

The Varano Group uses OpenTable for all five of its full-service restaurants. Marini shopped the competition, but believes OpenTable offers the best product and service. The platform notices spikes and dips in reservations, and helps restaurants adjust how many tables they open. Marini says the cost is well worth the $1-per-customer charge, because no other form of advertising or marketing can post the same results.

“You can put up a billboard and you won’t know how many people came into your restaurant because of that billboard,” Marini says. “But when you use OpenTable, it’s a fact that they came in because of OpenTable.”

For restaurants, other reservation systems exist, but none has near the market share of OpenTable. In addition, the company has aggressively acquired competing reservation systems. In summer 2013, OpenTable acquired Rezbook, UrbanSpoon’s reservation management system. In December, it purchased reservation system Quickcue. And in February, OpenTable bought Ness Computing, the owner of a personalized restaurant recommendation app.

OpenTable vice president of consumer marketing Scott Jampol says the company isn’t buying competitors to monopolize the market. Instead, recent acquisitions have allowed the company to expand its services well beyond just booking tables.

“A lot of the acquisition pieces represent an evolution in our strategy to take OpenTable from a transaction company—which is about how many reservations we produce—to providing great dining experiences,” he says, adding the company is looking at how it can impact customers before, during, and after a dining experience.

Increasingly, reservation-taking restaurants are latching onto the apps and website widgets of OpenTable or one of its smaller competitors. Now, as Jampol attests, such services are expanding beyond just the point of reservation.

OpenTable allows a restaurant to track customer preferences, whether it’s how to cook a steak or which table a diner prefers. Jampol says its new OpenTable Connect, which has lower fees and more technological capabilities, is expanding beyond just high-end restaurants, giving neighborhood concepts the ability to access some of its features. And advances driven by acquisitions open up possibilities such as mobile payment and customized dining recommendations.

But as OpenTable grows in influence, so does criticism.

In March, competitor Eveve announced it had grown to manage 20,000 diners per month in Houston. At the time, Timothy Ryan, CEO of online reservation company Eveve, said the company was gaining market share and that his company offers first-rate technology and local support without OpenTable’s higher price point.

“OpenTable hasn’t been either financially or technologically feasible for many of its Houston clients for some time, but restaurant owners haven’t felt there was a viable alternative,” Ryan explained in a statement.

Similar sentiments exist in San Francisco, where Mike Pastore, owner of Incanto, an upscale Italian eatery, closed his 12-year-old restaurant in March. As early as 2010, Pastore penned an open letter explaining his decision to keep the restaurant and wine bar out of the OpenTable network. After speaking with other restaurant owners, Pastore noted concerns that OpenTable was too expensive to keep, yet operators he’d spoken with feared that letting go could be harmful.

“Anyone wanting access to these customers must now pay this new per-customer tax, or risk failure,” he wrote. “This is the hard-edged reality of the role OpenTable plays within fine dining. By controlling access to a growing population of diners, it’s increasingly rare when an ambitious new restaurant can forgo being a part of the service.”

So, not everyone is jumping on board—at least not yet.

The Cleveland-based Hyde Park Restaurant Group, which includes more than 10 steakhouses and American grills, is among the nation’s shrinking stock of restaurants maintaining reservations in-house. Principal Richard Hauck says the restaurants still use pen and paper to manage the front of the house. “We’re a traditional, classic American steakhouse,” he says, “and there are a lot of things you do old-school.”

But that doesn’t mean they’re eschewing online reservations.

Moving to an online reservation system like OpenTable can be an expensive proposition, Hauck says. But so can the alternative of losing out on reservations. He expects Hyde Park’s restaurants will move to OpenTable or a competitor in the future, because technology’s role in the dining world is the “wave of today.”

Not even the future,” Hauck says. “It’s here.”