Multiple articles today are reporting that Priceline will scale back their investment and expansion for it’s online booking service, OpenTable as the number of OpenTable alternatives increase and limit growth rates out of the United States.
OpenTable is the dominant player in the United States, but has struggled to gain market share outside of it’s home country. Based in California, it was purchased for $2.6 billion in 2014 by Priceline. That investment was written down by $941 million this week a move which overshadowed growth in their core hotel bookings business, wrote The Wall Street Journal.
At the time of the acquisition, OpenTable was getting 80% of it’s bookings from the United States. After the acquisition, global expansion required heavy investments both in Marketing and in website development as multi language support was added. It had 31,000 customers when acquired and now has 38,000, which is significant growth, but a portion has been through acquisition and the question remains as to what the average cost to acquire a new restaurant has been for OpenTable. It is also a question as to how many countries it is now profitable in. With the decision to scale back investments in overseas markets, this may hamstrung further growth and inhibit the development of the economies of scales that are required both to function at a profitable level and to also provide a platform that is attractive for consumers.
Amongst the OpenTable alternatives are the Resdiary system which includes Table Management and the Free OnLine Restaurant Booking System. Both of these OpenTable alternatives have seen increasing numbers. It is not known what the current number of Restaurants is that are using OpenTable in Australia.
OpenTable in Australia
The OpenTable launch in Australia was quite protracted. We believe that there was an attempt to purchase Dimmi, but negotiations may have stalled and OpenTable settled for ASDigital, which had a much smaller foot print in Australia, but a larger share of the market for 5 star hotels. ASDigital did not have a strong consumer following, so the number of users for a new OpenTable application is likely to be low. This will mean that not only is OpenTable limited in the number of new bookings that it can generate, but savvy Restaurant owners will recognise the limted power of OpenTable to drive new customers to their Restaurant and be less likely to join the platform.
What does it mean for your Restaurant?
There are a couple of interesting points to come out of the OpenTable results.
Firstly, the Restaurant Booking space is very competitive. Without the mass of consumers using an app, Restaurant Booking companies struggle and require a strong sales team. This is very expensive and probably not viable in the long term.
OpenTable has struggled with an ordinary experience for Restaurateurs with their table management system. The Resdiary system has gained a reputation as being simple to use and cost effective.
Being charged to take bookings online is very 2010. Many restaurants are now capable of taking their own bookings online, using a Free Online Restaurant Booking System. With customers in Europe, Australasia, and North America, Restaurants are able to take bookings online for free, build their own database, and most importantly, not share their precious customer contact details with other companies. More and more Restaurants are realising the value in their customer database and starting to build and protect it appropriately.
It remains to be seen which countries OpenTable will pull out of.
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Remember, if these customers aren’t finding your Restaurant, they are finding your competitors.
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