OpenTable and the Restaurant Revolution

Has OpenTable maximized its potential in disrupting the restaurant experience?

OpenTable is often referred to as the Uber of the restaurant industry. Customers can use OpenTable to find new restaurants, compare ratings, and make reservations all from their own personal account. OpenTable removes the need to call the restaurant and provide a name and phone number, and also enables the user to collect rewards points toward future meals. Without OpenTable, customers would have to look up the phone numbers of restaurants in their area, call and provide a great deal of information – all with the risk of the restaurant not having any availability. Now, OpenTable does much of the discovery and filtering for the user, saving them time and providing a relatively friction-free experience. OpenTable, which emerged in the Web 1.0 environment of the late 1990’s, has been among the few websites from that era to remain relevant and follow digital trends into mobile and location-based consumerism. The company now claims to seat 18 million restaurant patrons per month at 36,000 restaurants worldwide. (1)

Of course, this model requires two elements of scale – restaurants and customers. While customers have been brought in by the clear value proposition of an online reservation platform, OpenTable has also used digital technologies to improve its operations and increase the efficiency of its restaurant sales force. OpenTable uses Chatter, a workplace social network, to replace traditional e-mail for items such as progress reports – this enables greater sharing of information and best practices among employees. (2) It has also partnered with CRM companies such as SalesForce and Fishbowl (an e-mail marketing provider) to create a value-add for restaurants in terms of customer targeting and loyalty. (3)

Recently, OpenTable has made steps to enter uncharted territory in the restaurant industry: mobile payments. We are all used to the ritual of asking for the check at the end of the meal, paying with either cash or credit card, and leaving tip. OpenTable is attempting to remove this pain point of paying at the end of the meal. As CEO Christa Quarles said, “the whole point of OpenTable Payments is take out the moment at the end of meal, where you are asking, ‘What’s the damage? What’s the bill?'” (1) This is not happening overnight and OpenTable views it as a long term play.

One area in which OpenTable needs to continue to innovate is in the restaurant discovery arena. Despite its location-based and theme-based search, its restaurant recommendations remain overwhelming in terms of the sheer number of restaurant options, the onus on the user to decide what they want for dinner when they want to go out (a perennial challenge), and the lack of internal cohesion among the options (i.e., there are options in many parts of the city, and some options are highly irrelevant while others are relevant).

View of discovery feature in OpenTable app. Accessed http://blog.opentable.com/wp-content/uploads/2016/04/Discover-Stitch-1.jpg, November 2016.
View of discovery feature in OpenTable app. Accessed http://blog.opentable.com/wp-content/uploads/2016/04/Discover-Stitch-1.jpg, November 2016.

OpenTable needs to aim to use big data more effectively in helping crystallize more high quality choices for customers. That is to say, OpenTable needs to crack the question of how to understand a person’s taste through their data. This is a complex problem because it also incorporates the social element of eating, the different considerations that might be important to a user for any given meal such as location and convenience, and then the highly variable and nebulous nature of personal food tastes.

In addition, OpenTable needs to look for new areas in the restaurant consumption process to disrupt. For instance, they could look at the food ordering process as one that could be at least partially transferred to the cloud. Restaurants often have lengthy wine lists which can cause confusion for the customer and a lack of confidence that they are ordering the right wine. OpenTable could come in and create a similar solution using data to match the customer’s tastes with the current wine list offered by the restaurant. Since wine is such a cash cow for restaurants, this could be a way for restaurants to upsell customers who may be reticent to purchase a highly priced wine without being sure they will enjoy it. Another place they could begin to aggregate is in predicting trends in eating before they become in vogue. For instance, if a new type of preparation is becoming popular in New York or another trendy destination, OpenTable can use its data to catch that trend in advance and sell it down to other regions which may be second adopters.

Overall, OpenTable is sitting on a great deal of data that can be of use in maximizing value for restaurants. In the future, it should look at the entire value chain of restaurants and capitalize on this information to reduce pain points along the whole chain and create value for all parties.

(794 words)

(1) Leena Rao, “OpenTable’s New CEO Talks Mobile Payments, Premium Reservations, and More”, Fortune.com, April 1,2016. Accessed at http://fortune.com/2016/04/01/opentable-christa-quarles/, November 2016.

(2) David Carr, “Why Messaging Has the Momentum in Business Collaboration”, Forbes.com, August 18, 2015. http://www.forbes.com/sites/davidcarr/2015/08/18/why-messaging-has-the-momentum-in-business-collaboration/2/#77e0f8ac7096

(3) See, for instance: https://www.fishbowl.com/independent-restaurants/opentable/

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8 thoughts on “OpenTable and the Restaurant Revolution

  1. I use OpenTable for a majority of my restaurant reservations and it makes a once daunting task simple and easy. I agree with your recommendations around leveraging data to predict customers’ taste in restaurants. Building off that idea, it would also be great to see OpenTable incorporate a social aspect into its platform. For example, it would be great to connect with my friends through the application and get recommendations to restaurants based on restaurants my friends like or suggest. I also wonder how OpenTable will get restaurants more on board with sharing their in-house data with OpenTable to help OpenTable better understand its users. OpenTable has an incredible opportunity to make dining a more social and data-driven experience, it’s just a matter of getting access to accurate data.

  2. As is, OpenTable already charges quite a significant amount to restaurants for being part of the service: $1259 in fixed sign-up costs + $199/month fixed fee, $99/month to be featured in dining guide + $0.25-1/reservation [1]. I worry that if they expand into mobile payments and incentivize customers to pay through the OpenTable app, it would open the question on whether OpenTable would raise its fees further as they receive additional transaction data and potentially charge by % of transaction size. This possibility would run the risk of alienating restaurant owners. If enough restaurants start to question this, it might be just the tipping point for restaurants to bail out on OpenTable, ripening the opportunity for another table reservation app that has less fees and power to swoop in and fill the vacuum.

    Source:
    [1] Houston Press, “As fees become problematic, restaurants move away from OpenTable, but do they stay away?” (May 1, 2014), http://www.houstonpress.com/restaurants/updated-as-fees-become-problematic-restaurants-move-away-from-opentable-but-do-they-stay-away-6409337

  3. Ross, thank you for the post! I agree with Jolynn that there is a huge risk for restaurants to depend on the only one player. Do you see any other risks for this model of partnership?

  4. Thank you Ross for a great article – I’m one of loyal users of OpenTable and it is great to know where OpenTable is heading to. Regarding optimizing the data for expanding their services, how much do you think feasible for OpenTable to get the data on the menu the customers ordered? In order to give recommendation on wine, for example, they need to get the actual transaction data of customers in each restaurant they went via OpenTable. This may require efforts on data integration with each restaurant and may take time (as CPG companies don’t have an access to POS data in retaliers).

  5. Great article, Ross! I’ve actually always wondered how OpenTable can remain relevant as other review websites (e.g. Yelp) has aggressively expanded into ancillary businesses such as delivery and reservation services. I agree that OpenTable therefore has to keep on innovating in order to remain competitive, but wonder if the industry is big enough to accommodate all of these businesses. Ultimately I see these sorts of websites converging and buying each other out as one restaurant does not need multiple platforms unless there is specific customer segmentation between the various usage bases.

  6. Thanks for sharing your thoughts on OpenTable, Ross. Having lived in New York where you sometimes have to give up arms, legs, and first borns for reservations at the best restaurants, OpenTable has become a sort of lifeline to finding a great place to eat with friends and family. But, reading this, I agree with your thoughts and am truly struck by how little they have done with the trove of data they must have on restaurants and customers across the world but particularly in major metropolitan areas. When I access their website or app, I always feel like I am starting from scratch – narrowing down the list by area, by times available, by number of seats, etc. I’ve never once received an OpenTable recommendation based on the restaurants I’ve made reservations via their platform and eaten at. I think you’re right – they’re missing out on monetizing a huge amount of invaluable information about how people eat out.

    It’s also surprising given who owns OpenTable — Priceline Group, a leader in online travel and related services, which states that its mission is to change the way people experience the world. I recently made a number of flight bookings via Kayak (also owned by Priceline) and didn’t get targeted for any restaurant recommendations for the places I was traveling to. I would think that the Priceline Group has a lot of work to do on integrating the data collected by their subsidiaries in order to truly fulfill their mission in one single experience.

  7. Great article, Ross. I agree that OpenTable should try to use the data and offer more services to customers. For example, some upscale restaurants have a special person dedicated to advice on wine selection, because it takes special knowledge and taste to understand the difference. Some research shows that most customers are not able to even differentiate between the highest quality and lowest quality wine. On the other hand, if OpenTable provides wine descriptions, it might be a lot of information to digest at once and customers might not extract the full value. One way or another, I fully agree that it is definitely worth exploring.

  8. Great post. The inconvenience of phone reservations and paper systems must have handling reservations before OpenTable a headache for restaurants. However, in class we learned that about 10-20% of reservations are no-shows, and I wonder if that percentage is higher for restaurants on OpenTable, given how easy it is to make a reservation. Perhaps OpenTable has simply created a different type of headache.

    I agree that there is a big opportunity for OpenTable to use big data to provide a personalized premium experience for users. OpenTable also sells software for restaurants to manage tables better — i.e., the programs behind those touch-screen computers the servers operate. In fact, the online reservation software was built on top of the management software. The management software contains information about orders and where patrons are sitting. If OpenTable could use this entire set of data, not only could it inform restaurants about wine preferences, as you suggested, but also place you at your favorite table or with your favorite server (assuming you’ve been there before).

    Your other point, about OpenTable’s expansion into billing and restaurant discovery, is also key because it shows OpenTable’s attempt to own a larger part of the dining experience. I view the management software as the core product it sells to restaurants — the moat that protects its relationship with restaurants from encroachment by competitors. The online reservation system is an additional service that adds value to the OpenTable-restaurant relationship, as will the introduction of a billing system and a restaurant discovery service.

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