How Do You Compete With OpenTable And Win? Who is Open’s real competitor?
How Do You Compete With OpenTable And Win? Who is OpenTable’s real competitor?
How do Livebookings, Rezbook Eveve and all the competition actually gain market dominance? They dont, they are focusing on competing not controlling.
(SEE RELATED ARTICLE – OPENTABLE RESTAURANT RESERVATIONS : The Value & Cost)
OpenTable NASDAQ:OPEN is currently in the dominant position for three key reasons:
(1) It was first to market with an ERB system that solved a fundamental restaurant problem; organization of reservations, management of customers and control of table inventory.
(2) Restaurants then paid OpenTable a fee to take their own customer base away from them and then paid OpenTable a per reservation fee for the leasing back of its own customers for a meal.
(3) With ownership of all restaurant customers Opentable could leverage the restaurants and direct customers through their own portal to fill off peak seats, drive increased traffic and have restaurants pay for the privilege of promoting their own restaurant to the customers it sold to Opentable.
As a restaurant consultant, not as an investment banker or a technologist it seems restaurants built the beast and are now too scared to move away from what in many instances is a money losing value proposition for fear of losing the customers. I am a fan of OpenTable and its technology, I have rolled out OT in hundreds of sites as when implemented correctly can drive revenues and provide additional patrons to fill empty seats, when the ERB is configured well it can be an effective component of a yield management strategy. Its promotions work, but much like Groupon the price of such success is in many instances an unprofitable customer. Unlike Groupon, however, which when converted into a recurring customer can become profitable; OpenTable never releases that customer or modifies its pricing schedule based on number of visits to a particular restaurant.
Used as part of a restaurant yield component strategy with a fight and strong technical expertise it can generate the results needed, it does not however come “out of the box” and requires constant monitoring, tweaking and auditing. However, the monthly bill for such a service is still very high to not constantly be exploring other options and looking to new solutions that can help our restaurant clients keep hold of their already low margins.
The trouble with an OpenTable customer is that aside from the conversions direct from a restaurants website, it is difficult to verify if a customer was seeking your specific restaurant or chose you because you had seats available, a strong promotion or because they wanted to try you out for the first time. For a restaurant owner, it is using the technology to identify the first time diners and convert them specifically into repeat customers. This is not to say more care should be given to a first time diner than a regular, it just means various strategies and internal promotions should be launched based on the customer to keep them loyal. This is more than just great food, great service, great experience – this is all that and then some – to take competition out of the equation.
Much like American Airlines, restaurants must be looking for new ways to bring their customers back into their own control but still take advantage of the traffic generation of the OpenTable portal.
As an “in the field” restaurant consultant, we sit on panels, advisory boards and focus groups asking us what our clients actually want, what are the fears and what would make a restaurant owner actually agree to what has been their reservations pipeline for the last x years. Our opinion is from the ground/customer up versus from the company down.
This piece is not an evaluation of all the differing technologies and their pros/cons – rezbook, livebookings, even RSViP and other technologies are not going to be able to come into a market and dominate with such power as OpenTable. In many instances they are replications of OpenTable with maybe some differing features and slightly different price plan – however certainly not enough to make the switch at this point, perhaps used in conjunction it is a viable value add but not a replacement. The big buzzword of these new offerings is “the restaurant gets to keep their customer” which is without question a great point. BUT, would i give up my 2000 customer database for an opportunity to reach 100,000?
Instead we have to consider which portals can drive the traffic and provide the API’s or other integration to restaurant websites and the various ERB systems. If such a cross platform existed, the restaurant would be paying for the ERB functionality but the lead, conversion, booking could come from any of the platforms on the market rather than one gatekeeper. The restaurant could then pay any lead source technically?
A conversation just a few days ago with Drew Palmer from RSViP discusses the state of the market and even considered that OpenTable in addition to their own reservations and portals could generate another stream of revenues by pushing customers into third party ERB systems. This would allow OpenTable to get into the multi-unit, resort, hotel ERB systems and widen their control of the reservation market.
Therefore the only question that is relevant when debating who can compete with OpenTable is not the ERB or other components; it’s who controls the traffic.
The technical although incorrect answer is that Yelp! is actually in the strongest position to be able to drive restaurant traffic (even though it makes up a fraction of the OpenTable affiliate reservations) because it is still the highest ranking restaurant review site in the US. The trouble is they don’t have the infrastructure or possibly the long term money to invest into this opportunity and therefore we are left with primarily only one real contender. Google. Why? Before people get to Yelp! – What portal are customers using to type in the restaurant name which then links them to Yelp!? Google. So technically Google owns Yelps! Pipeline. 2.5 million people each month search for Yelp! on Google, has the search bar replaced the browser bar!!
If one looks into the keyword ranking reports from Google, the number of searches for restaurant bookings, reservations, fine dining and all the variations Google technically has more combined query traffic than OpenTable. Secondly, it has almost 1 million monthly searches for the word “OpenTable” and variations, therefore it also owns a portion of the Opentable pipeline. Given that Google technically owns (to a certain extent) all the pipelines to all the review, reservations and search traffic they by default have the best opportunity.
If we combine this with Google’s ability to recognize the search traffic and direct customers accordingly (places/hotspots/gmail) Google could technically drive reservation, review or restaurant query searches to its own portal to allow for conversion into a reservation. Moreover and perhaps more importantly it could introduce all this at no cost to the restaurant or consumer because of the advertising revenue that can be integrated through their AdWords system.
Google would offer my restaurant clients their customers back, enhanced visibility through the places and other functions, and drive reservation traffic for free which could integrate into my email, website and every other component of my restaurant operations.
Recently, a great article by Erick Schonfeld on TechCrunch Search Is Google’s Castle, Everything Else Is A Moat talked about the fact that Google is willing to give everything away around its ad business to support its ad business. They have the infrastructure, they have the customers, they have the technology and they have the trust of consumers – and they could provide it free – that’s a value proposition i would buy into.
I might be wrong, but from my clients perspective, they would like their customers back and will get behind the contender that does that.
OnSite Consulting is a nationwide hospitality and consulting company. We provide our clients with the advice they need to create, reposition, reinvigorate or turnaround their businesses and their brands. We pride ourselves on delivering excellent results, leaving stable and improved businesses. We understand the need for results, for success; efficiently and expeditiously. www.onsiteconsulting.com