January 11th, 2012 • Posted by Seth Gardenswartz • Permalink
If your restaurant takes
reservations you must have at least considered online booking. The pitch is
enticing; free-up the staff, dump that 19th Century paper and pencil
and use the application to reach savvy professionals who prefer booking their
restaurant reservations online. So, what's the catch?
For starters, online booking
isn't free. The largest provider of online booking is OpenTable (OT) and their
hefty set-up and monthly fees can significantly cut into your margins. Furthermore, OpenTable loves to tell
restaurants that their application provides you with a competitive advantage
while they're actively trying to sell that same advantage to your competition.
The costly fees of OpenTable
are a problem but that's just the beginning. A stated objective of the company
(from their S-1) is:
"Continuing to attract
diners to our [OT] website by offering the best reservation experience through
enhanced ease of use and restaurant content, thereby increasing market adoption
of our [OT] solutions, building our [OT] brand awareness and driving word-of-mouth
referrals to our [OT] website."
Did you catch the nuanced
objective to drive traffic to the OpenTable site, not your restaurant's
website. Why would OT do that? They do it because OpenTable wants to be the
portal for all consumer reservations. If they own the customer relationship you
will have to pay their fee to access all diners looking for a table. In addition, their points program
builds loyalty for OpenTable, not your local restaurant, and you get to pay for
it.
It's very important to ask
yourself whether it's fair for your restaurant to be required to pay for
online reservations generated from your own website or Facebook page. OpenTable
currently charges a fee for reservations from your own network and we don't
think that's fair at all.
In the next couple of weeks,
we are going to examine alternatives to OpenTable and analyze the economics of
online reservation systems. Please post your questions and comments.
