Restaurant customers love Open Table’s online reservation service. So do restaurant operators—until it’s time to cut the monthly check to pay for it. Will new players that offer the same service for less—or maybe for free—shake up the reservations market, and cut operators’ cost to the bone?
Pioneering online reservation service Open Table has been a success of epic proportions. Starting from nothing, the now-publicly traded company has a market capitalization of $1.4 billion. How’s business? Well, Open Table’s year-over-year revenue grew 52 percent in the most recent quarter, it has $69 million cash in the bank and there’s zero debt on the balance sheet. Its website claims a service network that includes more than 20,000 restaurants and 200 million diners. If you’re opening a restaurant today, there’s no question that Open Table is the default choice for your reservation management system.
Open Table operates in all 50 U.S. states and in 17 foreign countries. But recently, analysts who follow Open Table’s stock have noted that the international component of its business hasn’t produced much. The reason: the existence of competitor services in many countries. Now one of those services is making a move into the U.S., hoping to lure away restaurant operators from Open Table by offering much the same service for a lot less money.
The new player is Eveve. The U.K company, based in Edinburgh, bills itself as Open Table’s largest competitor in Europe. Eveve’s first foray into the U.S. market came this summer, when the company began to sign up restaurants in Minneapolis and St. Paul, MN.
Eveve came out swinging. The company began with just 10 restaurants, but those restaurants constituted 18 percent of Open Table’s total covers per month in the Twin Cities. Eveve then trumpeted these signings in a press release that in part said this:
“Restaurant owners have balked that Open Table’s fees are justified by their ‘marketing opportunities’ but in essence often seem to often work against them” said Eveve director Timothy Ryan. “Open Table’s pricing policy results in larger restaurants facing annual billings in excess of $30,000 and an inability to control how Open Table markets to its customers.
“Open Table’s strongly-skewed revenue model highlights a paradox,” Ryan added. “The restaurants that need Open Table the least are the ones who pay the most.”
By way of contrast, Eveve charges a flat $200 a month for its service. That’s a huge savings for a restaurant like new Eveve signee Hell’s Kitchen, a busy Minneapolis spot whose annual Open Table tab was in the neighborhood of $32,000.
For details, go to www.eveve.com.
Restaurants elsewhere might be even more interested in FreeBookings. Its pitch gets right to the point: “This summer, we’re launching a totally free online reservation service for your restaurant’s website and Facebook page,” the company says. It’s looking for restaurants willing to be involved in beta testing the service. You can find out the details by heading to www.free-bookings.com.
The promise is that Freebookings will do almost everything a service like Open Table or Eveve will do, only without a charge. It’s a web-based service, so operators can use their own computer or mobile device to manage the system, and there are no per-cover fees or other service costs. Freebookings says its product is designed especially for independent restaurants. You can’t beat free, but we’d suggest that before signing up, you ask the Freebookings folks where the revenue to run their company on a continuing basis will come from.
Will these or other new competitors to Open Table (Rezbook from Urban Spoon promises operators they “can forget about extensive training, expensive hardware contracts and exorbitant per-cover fees) catch on? All we can say for sure is that a lot of people think Open Table is vulnerable. The good news for operators is that the cost of this highly useful service, no matter its provider, may about to come down.