OpenTable: The Value and Cost of Online Reservations
|OpenTable has a 90% share of the online reservations market.|
What are the actual economics of listing your restaurant on OpenTable? First and most importantly, the restaurant pays all the fees. Diners not only don't pay any fees directly, they earn rewards for showing loyalty to OpenTable. This is the crux - and brilliance - of OpenTable's business model: OpenTable has convinced restaurants to pay it substantial fees while it takes the customer relationship out of the hands of the restaurant and places control into OpenTable's hands. Then, after having lent their names to the service, enabled OpenTable to attract online diners, and funded the construction of a powerful database of customers loyal to OpenTable, restaurants find that they themselves no longer own the customer relationship. Restaurants that want continued access to those diners now have to pay OpenTable for the privilege. This may be at the core of why many restaurateurs quietly resent OpenTable.
OpenTable went public in 2009 (NASDAQ: OPEN) and as of September 30, 2010 it was priced at more than $1.5 billion. That translates to more than $100,000 for each contract it holds with the approximately 14,000 restaurants listed on OpenTable.com.