Nearly 20 years ago, OpenTable disrupted the old-school telephone reservation system by pioneering online reservations. In today’s hyper-connected, mobile-friendly, phone-call-adverse world, making an reservation often involves one of the major players: OpenTable, Reserve, Resy, Tock, or Yelp Reservations.
What used to be a process managed by a maitre’d and pen and paper has evolved into high-tech, connected networks and technology that promises any combination of more guests, better targeting, customer relationship management, fewer no-shows, table management, and loyalty tracking. And all of these services started by offering what now feels like a standard product: a seat at the restaurant table.
OpenTable has been the longest player in the game, but in the last few years other consumer-facing reservations options have emerged and thrived, offering new options for both diners and restaurants. “We felt there was an opportunity to provide a better solution than the market had to offer,” says Reserve CEO Greg Hong of his company’s decision to go to market in 2014. “We jumped in, ready to go head-to-head with the legacy players and deliver a better experience to diners and restaurants alike.”
This sentiment is echoed by every other player in the space, new and old. By creating the best possible experience for restaurants, reservations services can tout the best possible experience for customers. “We think it’s about tools that give restaurants important leverage in terms of their success,” says Resy CEO, Ben Leventhal. “We think about building a product that’s oriented around the things that matter to a restaurant’s business. The more tools we can give restaurants to perform better, the better off they’ll be.”
At nearly 20 years old, OpenTable has the distinct advantage of its size, experience, and now position within the Priceline Group. “We’re doing a ton of testing,” says OpenTable SVP of consumer marketing, Scott Jampol. “One of the great things about being a part of the Priceline Group is this mentality of testing and optimizing. We’re running hundreds of tests across our platforms at any given time to help find better diner experiences, make it easier to search and book, and surface restaurants in the most relevant way possible.”
Reservations — the commodity — seem pretty straightforward; reserve a time in a book and the restaurant holds the table and prepares for your arrival. In today’s real-time real world of digital connectivity, the solution is more complex and involves algorithms, machine learning, special offerings and the ability to customize a product for a specific restaurant’s need.
In a numbers game, OpenTable has unquestionable domination in the space with over 43,000 restaurants worldwide. Those who do compete have poked holes in its model, identifying weak spots and targeting specific areas for improved experiences.
Competition Breeds Change… and More Competition
There’s no more vocal critic of the status quo than Nick Kokonas. The CEO didn’t set out to create a business from Tock, the ticketing and reservations software he built for Chicago restaurant, Alinea. “I found problems with the way the old software was working for us,” he says. “It wasn’t giving guests the ability to see, transparently, what’s available from the restaurant. I started bringing up my ideas to companies like OpenTable or theater ticketing companies and no one really had an interest in doing the stuff that I wanted to do.” Instead, he hired a small team to build Tock.
A funny thing happened as upstart competitors to OpenTable started to compete for restaurant and diner loyalty. Most bet on a different approach to reservations. Resy, a reservations service with 1,000 U.S. restaurants on its platform, got its start in 2014 selling reservations during prime times. App users could pay between $5 and $25 to secure prime-time reservations at hard-to-book restaurants. Reserve, also launched in 2014 and now with over 800 U.S. restaurants, began as a digital concierge, prompting app users to request a reservation within certain blocks of time and automating payment, eliminating the check presentation at the end of a meal. Tock, created in 2015, sells tickets to meals the same way a theater sells tickets to shows: prepaid and non-refundable. This worked well for Alinea, and he and his team have since iterated on the model, releasing it as a paid product to restaurants. “Tock is a platform to allow restaurants to actually sell what they have to sell,” he says, whether that’s a prime reservation, a special event, seating at a chef’s table in the kitchen, add-on premium menu items (truffles on everything!), or the restaurant’s cookbook. In this way, the guests know exactly what they’re getting ahead of time, without an awkward upsell, and restaurants can enjoy a relatively non-existent no-show rate of one percent.
Instead of large-scale industry disruption, these companies have, at least in part, returned to the business model that OpenTable pioneered: free online restaurant reservations. That’s not to say that they have completely changed their original product offerings. While Tock has handled straightforward, free reservations for a while, its ticketing functionality is still a huge part of its business, processing $12 million in prepaid reservations per month. Resy still gives restaurants the ability to charge for prime-time reservations, though it’s up to the individual restaurant if they’d like to. (Most don’t.) And at Reserve, according to Hong, emulating the experience you might have with a hotel concierge is his long-term vision for the company, though it’s adjusted the means by which it gets there.
The standard pricing model for these services is a monthly fee, which varies from service to service but are generally comparable. OpenTable charges restaurants an additional 25 cents per seated diner who reserves via the restaurant’s website and $1 per seated diner booked through OpenTable. Tock also debuted a pay-per-guest pricing model available to restaurants instead of a monthly flat fee, but according to Kokonas, that option is intended for restaurants that use Tock occasionally for special events, not those that seat daily service using the platform. (It’s also a great way to get both restaurants and diners onboard with the ticketing system, which is a completely different process than the standard reserve-and-show-up routine we’re all so accustomed to.)
While all services have their own strengths, they compete against each other addressing what they view as weakness in other models. “A dollar per diner for every diner OpenTable puts in the restaurant has positioned them in an adversarial relationship with their restaurant partners,” says Hong. “A restaurant may not want to list all of its prime inventory on a Friday or Saturday night because they know they can capture that demand anyway.” Restaurants don’t have to pay the fee for walk-ins and phone reservations, so those diners get seated for free.
Yelp, which charges restaurants a flat fee per month to handle its reservations, agrees. “There’s an inherent problem in historical models where the restaurants who needed [reservations services] the least ––were paying them the most,” says Yelp senior vice president Chad Richard. He’s referring to OpenTable’s $1 per diner charge incurred by restaurant when a diner books via OpenTable versus, say, a widget on the restaurant’s own website. Yelp Reservations, which began following the purchase of SeatMe four years ago, has grown to include about 5,000 restaurants on its platform. “The restaurants that do well with Yelp Reservations are the restaurants that perform well on Yelp,” he continues. “We have a ton of natural momentum to send people into those restaurants.” So Yelp’s entry into the reservations game came as a result of its already forged relationship with restaurants and the guests that visit them, but carries a serious bias, whether intentional or not, toward those restaurants with dedicated Yelp followings.
Of course, even newer models aren’t without criticism. “It’s not in Yelp’s interest to do anything other than get you in there, and then let you bitch,” says Kokonas of the Yelp Reservations model. “That creates a sounding chamber. Then, what they do is they try to sell advertising so they move you to the top. We don’t have that conflict of interest. I would argue that Yelp has an inherent conflict of interest with restaurants.”
More Than a Seat at the Table
Fees aren’t the only way reservations providers are competing for restaurant clients (and dollars.) As with much hospitality technology, launching a consumer-first service may snag the headlines, but iterating on a product for business customers nets longevity. Guests view reservations as a convenience, the companies that facilitate them offer restaurants as part of a larger service. Every reservations company — at least, all of those interviewed for this piece — says it wants to help restaurants be more successful. To differentiate themselves in the marketplace, each service prioritizes different aspects of its product offering, providing visibility to restaurants looking to adopt the solution that best fits its own needs. Value propositions include features as fundamental as putting more diners in seats, and as complex as using algorithms, data, and machine learning to optimize every moment of service.
What a potential guest sees — the reservation time slot— is only a small part of the operations puzzle. “There are two technology hubs in a restaurant in terms of operations, the front of house system and the point of sale system. You have to run your business around one of those two screens,” says Leventhal. For most services, the logical entry point is the front of house table management system, which displays tables, guests, wait list, upcoming reservations, and a variety of other information. Turns out, everything is connected for good reason.
Table management software, offered in conjunction with reservation functionality, helps front-of-house staff control the flow of customers through their restaurants. Its inherent connectivity to reservations illustrates it’s part of a deep technology stack that affects more than just wait times and slotted reservations. This means that in addition to choosing a reservations system, restaurants are almost always choosing the table management system. (It’s worth noting that while a restaurant can choose to use the reservations service without the table management and vice-versa, most don’t. Why would they?)
This is a big point of differentiation, and one that companies use to compete for restaurant customers. “Helping a restaurant understand how many reservations they can take in a given night is not a simple problem to solve,” says Hong. “Most other platforms don’t do a good job of helping restaurants understand how many reservations they should be listing. What’s the right number so they’re not over-booked or under-booked? Our platform can run that calculation better than any other platform. Turning people away means lost revenue and bad customer service. They could have eaten there, but the books weren’t set up to match against that demand.”
Beyond optimizing the books, services also differentiate between indoor and outdoor seating, main dining room and bar, high-top, or communal tables, offering the ability for a manager to “turn on’ reservations for a certain area, often on the fly. Uncharacteristically warm evening? Time for the patio. Busy Friday night? Offer bar seating via reservation. This trend of total visibility means diners know exactly what they’re getting when the book a table, but also opens up the maximum amount of inventory, which means a diner can actually snag a reservation. This makes the restaurant and the reservations provider look good. Who wants to use a service that only offers impossible-to-book restaurants?
OpenTable has also completely revamped its table management system, updating its Guest Center product last year to better accommodate restaurants’ needs. It runs on an iPad in the restaurant, but also includes an iPhone app for managers to manage their restaurants on the go. “More than half of our Guest Center restaurants are using it every day,” says Jampol of the app. “The ones that are using it are using it 10, 15 times per day. You’re not tethered to the host stand anymore.” Owners and managers can set notifications and see the books for multiple restaurants, view upcoming shifts and staffing, set notifications for VIPs, and more. “Hospitality doesn’t just live in the main Guest Center anymore. Now hospitality can come to the floor,” he says.
Both Resy and OpenTable offer Apple Watch compatibility with its table management apps. This is 1., very buzzy, and 2., a useful tool for a busy manager, who can be alerted when a VIP walks in, a customer orders an expensive bottle of wine, a reservation is cancelled, and more. This technology is reasonably new, and this functionality has an evolving future, but on-the-fly connectivity, especially tied to customer relationship management and data, is the future.
The Network Effect
Does the average diner care where they made their reservation, as long as they get there? OpenTable constantly touts the power of its network, both to diners and to prospective restaurant clients. All of the dedicated reservation apps (and we’ll include Yelp for this purpose) know your location and surface local restaurants after you open it. But with continued fragmentation of the market, opening multiple apps in a major city to find the best restaurant is at the least time-consuming and at most really, really annoying. In that sense, a huge network of restaurants and establishing a diner’s brand loyalty makes a huge difference.
Dedicated apps aren’t the only way a diner finds a reservation, and search and recommendation giants like Google, Facebook, Instagram will make a huge difference here. At Resy, Leventhal estimates between 20 and 25 percent of reservations come through its own channels, like the app, and the remainder come through the restaurant’s channels and third-party partners, like Google, though there’s considerable variation from restaurant to restaurant, he says. Less than ten percent of OpenTable’s reservations come through third-party partners like Google. And, all things considered, as a consumer your experience doesn’t change all that much whether you book in the app or via Google or through Facebook.
Of course, sometimes it does matter how you get there. SevenRooms, another restaurant operating system whose value proposition is largely tied to its ability to serve relevant, actionable data. Instead of a consumer-facing app, SevenRooms offers a reservation widget for restaurants with little to no branding, quietly powering reservations as part of its larger product offering. “Our philosophy is that we want to help the restaurant operator build a direct relationship with their guest,” says SevenRooms co-founder and CEO Joel Montaniel. “We see a world evolving where people are discovering food all over the place. Instead of trying to recreate another consumer booking platform, let’s be the company that plugs into the channels where discovery and booking is happening.”
By working with restaurants directly and plugging into the point-of-sale system, SevenRooms can tell a restaurant customer which of its guests are the most loyal and the highest spenders — and also which discovery platforms are most worth its time and focus. Restaurants can choose to tailor their reservation offerings to guests who come through a certain channel, like Instagram. So, conceivably, if a restaurant notices guests who book through Instagram links are the biggest spenders, for example, they can offer more reservations only to those who come through Instagram in order to maximize profit. Resy, too, allows restaurants to allocate reservations to different subsets of their customer base.
Who Will Win?
San Francisco’s popular and much-lauded restaurant Lazy Bear is a good example of the current state of reservations and the different services they provide, often to different types of diners. The fixed-price, high-end restaurant offers ticketed seating via Tock for most of its reservations, but also uses OpenTable to fill in on Tuesday, Wednesday and Thursday evenings one week in advance, tapping into the power of OpenTable’s reach. Given the complexity and competition in the space, one-size-fits-all and one-size-fits-most models aren’t solutions.
Tock’s Kokonas sees a future with an unexpected champion. “It’s going to be companies that you don’t expect. Ultimately, search and social are going to win the day. I don’t need to create a new network of diners because there already is a huge network of diners. It’s called Facebook. It’s called Google. It’s called Instagram.”
Indeed, when it comes to searching and booking, reservations networks will start to have less relevance over time as search and social become entry points to discovery. Every reservations service works with Google’s knowledge cards, the box that displays on the right hand side of your browser or pops up on mobile during Google search. Instagram has been teasing its reservations capability for months; it’s only a matter of time until it goes mainstream. In these models, simply accumulating the most restaurants or becoming the most recognizable brand in reservations doesn’t matter as much as a recommendation or search.
If this seems like a complicated answer to an easy question, that’s because it is. All of these features, researched, calibrated, tested, and built for restaurants, affect the reservation availability that you, the customer, sees. To a customer, a confirmed reservation is a ticked box, a done deal. To the restaurant, the reservation is just the beginning.
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