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Restaurants

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I’ve been using OpenTable since 1999 and have cumulatively booked somewhere in north of 600 reservations on the site. It’s a great service that makes booking restaurant reservations easy, convenient and instant. As a registered user of the site, on most reservations you accrue 100 Dining Rewards Points, which are valued at $.01 each and can be redeemed in increments of $20 gift checks that can be used at any OpenTable restaurant. Users who have honored 12 or more reservations as designated as “VIP,” however it’s unclear what, if any, benefits this includes. I have been an OpenTable VIP for years, and I have yet to see a restaurant acknowledge this in any way, or offer me special treatment because of this status. In summary, as the loyalty program currently stands, there isn’t actually anything about the program itself that instills loyalty to the platform.

Stop the 100 Point Rewards

There is an argument to be made that OpenTable should stop offering 100 points per reservation. My instinct is that the $1 incentive has minimal impact on a diner’s decision to book through OpenTable. The platform offers a ton of value to the diner through the ability to book online, read diner reviews and see photos of the food and restaurants—all at no cost. In the movie business Fandango provides an online booking service and charges the customer. Why does OpenTable need to offer a standard 100 points for booking, particularly at this point where it has such a dominant market share? If I want to go to one of my favorite restaurants, I strongly prefer to quickly book a reservation online. I don’t need to be incentivized to do so, as it’s already a big benefit to not have to pick up the phone and get access to real-time availability.

Based on a November 2013 investor presentation, OpenTable seated over 37 million guests in each of the first three quarters of 2013. To make the numbers simple, let’s assume an average of 3.7 guests per reservation (which I’m guessing is actually lower), meaning there were 10 million seated reservations. Now some of these reservations may have been 1,000 point tables or no-point reservations, but it’s seems reasonable to estimate that for each quarter that OpenTable assumes somewhere in the neighborhood $10 million in Dining Rewards Points liability. Quarterly revenues are in the $45-46 million range, meaning that if it cut the standard 100 point offering the bottom line would increase substantially.

Won’t this upset customers? Yes, but probably not anywhere enough to justify the $10 million quarterly savings. Given that 12 annual reservations makes  you a VIP, it’s safe to say that most users don’t book that frequently, in which case they are not likely to be too upset about losing out on less than $12/year. The VIPs will certainly be the more vocal among the group as they stand to lose the most, but then again, if they’re eating out that often, even $50 over a year is a small sacrifice for the convenience of online booking.

VIP Benefits

Whenever you have some bad news to deliver, it helps if you can also deliver some good news at the same time. OpenTable could pull this change off and satiate the VIP members by simultaneously enhancing the actual benefits for VIPs. What would power diners value?

  • Access to choice seatings – could OpenTable get restaurants to hold a few prime time tables that would only be available to VIPs? Why would restaurants do this? Because OpenTable would incentivized them with lower seating fees for these tables. I’m sure a case could also be made that VIP diners have higher average checks, which would make this more attractive to restaurants as well.
  • Threshold rewards – take a page from the airline programs where there are different tiers of elite customers, and offer some sort of bonus for attaining 25, 50, etc reservations in a calendar year. OpenTable could partner with food and wine brands and potentially get free or deep discounted product for distribution to targeted frequent diners.
  • Event discounts – there are tons of food and wine related events around the country that are looking for marketing partners. VIP members could opt into receiving access to special discount offers in their area.
  • Restaurant benefits – allow restaurants to opt in to offering VIPs special treatment, which would appear on the booking page. These could be specials such as a free drink with the order of an entrée, waived corkage, free dessert, and more. It would be at the discretion of the restaurant, but with guidelines from OpenTable. Restaurants can already offer 1,000 point specials of which I’ve seen significant uptake. The same higher average check argument could be made here.

Improved Redemption

The points redemption process could also be improved with a tighter integration with the system. The ideal situation would be one in which you could simply apply any $20 increment towards a bill directly. This could be done all online either through the website or the mobile app before even sitting down. This eliminates the ongoing processing fees for the check, and simultaneously eliminates the problem of having to remember to bring the check with you to dinner. OpenTable already has an accounting relationship with restaurants on a monthly basis, so why not just adjust the monthly balance based on redemptions?

The good news is that the platform itself is dominating—most online restaurant reservations are flowing through OpenTable. There are multiple ways that changes in the Diners Rewards program can ultimately drive more bookings (and profit) for OpenTable.

Every city has restaurants where it’s almost impossible to book a reservation for less than two months in advance, or if you’re luck at 5:30pm or after 10:00pm. In San Francisco, that includes restaurants like flour + water, Frances and State Bird Provisions. There’s always the option of slogging it out, showing up, and waiting for a bar table or to actually get regular table, but that typically involves a minimum of an hour or more of wait time.

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There is now an easier way and it’s called Rezhound, a weekend hack project by Reed Kavner (@reedkavner) in San Francisco. When you visit the site, it detects your IP address and automatically sets your region, and to start you enter the restaurant you want to book. You select a date, time and number of guests and finally whether your time is flexible, in which case it will search within two hours of your stated time. Then Rezhound does the rest of the work, regularly checking via OpenTable if that reservation is available, and notifying you by email when your table is available. Sorry OpenTable restaurants only.

While I tip my hat to Reed for pulling together this service in his spare time, I wonder why OpenTable has not developed this feature itself. This feels like it could be a natural addition to the reservation flow. When your initial request comes up empty, OT will spit out next available dates and times where same party size reservations are open. I could imagine a prompt at this point to get an email notification when availability opens up. You could select multiple dates you are interested in and OT would send you an email notification when a table meeting your criteria comes available. You would still have to proactively book your reservation on OT at this point, but if you were to reply immediately, you’re in. I could see an interface similar to Kayak where you could manage all your reservation alerts.

This could be a win for all parties involved. Guests can dine when and where they want. OpenTable will drive return traffic to the website and secure additional bookings. Now the restaurant would probably fill the table either way, but what it could also capture, with help from OpenTable, is effectively a wait list and valuable demand data for reservations on various nights of the week. But perhaps I’m missing possible downsides here? OpenTable has been at it for over a decade and they haven’t implemented this feature. That said, I’d love to see up and running.

opentable-logoLike many other diners, when I’m looking to book a reservation, OpenTable is usually my first stop. It doesn’t get more convenient than booking directly online, and OpenTable has broad coverage of restaurants among those accepting online reservations. The site already has all my profile information saved so I don’t have to repeat my contact info during the process.

Where the process goes awry is a day or two before your resie and you get a call from an unrecognized number, which you send to voicemail and turns out to be the restaurant calling to confirm the reservation. Even worse yet, the host leaves a voicemail message with some number that’s different than the one they called on, so an additional step of jotting down the number has been added. Now it’s just good business for restaurants to do this since a ditched reservation can potentially mean an unutilized table and therefore money lost.

This is where OpenTable needs to intervene. After all, I booked my reservation online, so why not also confirm online through the system? A simple auto-email set for a certain number of hours prior to the reservation that could be set by the restaurant could be generated. Click a link to confirm and you’re done. Or they could also go the text message route, which Complete Seating does. (I’ve used this feature for AQ Restaurant in SF, and it works like a charm.)

There are benefits all around to this approach. On the restaurant side, it saves hours of phone calls to guests, freeing up the host to attend to other things. From the guest perspective, it streamlines the process, and it’s much less intrusive. I’d wager that restaurants would get a higher response rate as compared to phone calls and voicemails. Everyone wins—even OpenTable, which could redirect guests to the site after clicking the link to confirm.