OpenTable has terminated an employee it says made fraudulent reservations on Reserve, a competing reservations platform, in an effort to deliberately harm the company with no-show diners.
In an open letter to restaurants, CEO Christa Quarles apologized and made no excuses about the behavior, calling it “disgraceful.” Quarles says OpenTable will reimburse affected restaurants for lost revenue.
According to Eater, the employee made “several hundred” reservations at 45 Chicago restaurants on Reserve using fake accounts. Reserve noticed the suspicious activity and traced it back to OpenTable. According to the story, the employee planned to use the falsely-inflated no-show rates to convince affected restaurants that OpenTable was a superior product.
OpenTable says the employee in question “was not in a sales function and had no managerial duties.”
To the casual observer, a no-show on a reservation may not seem like a huge deal — a restaurant could simply offer the table to someone else. It’s not that simple, though, as restaurants use reservations and bookings to plan for service, structure food orders, arrange the dining room, and predict sales on any given day. No-shows cost restaurants real money, so creating intentionally false reservations, the OpenTable ex-employee was costing real businesses real dollars.
OpenTable, which turns 20 this year, has long been the dominant player in the online reservations space. That space has grown to include table management, customer relationship management, and all of the technology that powers the restaurant-guest interaction.
OpenTable currently serves over 43,000 restaurants worldwide, and continues to expand its international footprint. Last month, Barcelona became the latest addition to OpenTable’s roster. By comparison, the much-newer Reserve launched in 2014 and serves over 800 restaurants in seven major U.S. markets.
But this move, though completely unsanctioned by OpenTable and the work of a rogue employee, underscores the real threat to OpenTable’s business posed by the competition. It’s true that OpenTable represents an undisputed majority of restaurants accepting online reservations, but some of the most recent high-profile openings are served by competitors.
Chicago is more competitive that other major markets such as New York or Los Angeles, and Reserve is the biggest threat to OpenTable. Looking at the Chicago Tribune’s list of top 50 restaurants [see chart, below], OpenTable has 25 on its platform. That’s roughly even with LA and New York, but Chicago’s top spots are nearly all represented by a booking system — only three handle bookings by phone or don’t take them. In other major markets these make up roughly a quarter of the top spots. Interestingly Chicago is one of Reserve’s best cities, representing 13 percent of the Tribune’s list. Hometown player Tock has six while Resy is non-existent among the leaders.
Local giants like Rick Bayless even split up their restaurants, with Frontera Grill on Reserve while others are on OpenTable (Update: Reserve says that the remaining Bayless restaurants are moving to Reserve in the coming week). Short story? There’s little wiggle room in Chicago’s competitive market.
A Critical Voice
Nick Kokonas, co-owner of Chicago’s Alinea and co-founder and CEO of rival restaurant ticketing and reservations service Tock has been a vocal critic of OpenTable for years. Last summer he created a tool for restaurants to check if they are overpaying on OpenTable. Before that, he posted portions of cease and desist letter from OpenTable around a planned marketing stunt. In fact, according to Kokonas, his dislike of OpenTable is what inspired him to create Tock in the first place. He penned a near immediate response to the breaking Eater story, adding additional context including OpenTable training materials he unearthed from internet searches.
Of course, as the CEO of a competing company, Kokonas has a vested interest in highlighting weaknesses in the competition. From its inception, Tock’s value proposition has been its no-show rate, which Kokonas breaks down in his recent post. Prepaid reservations on Tock, the company’s original premise, had a no-show rate of less than one percent in 2017 — though standard reservations, those that require no deposit, pre-payment, or credit card guarantee, reached 8 percent.
For comparison, OpenTable says its no-show rate in the U.S. is 4.6 percent, approximately 20 percent lower than the no-show rate for diners who book via phone, which it pegs at 5.7 percent. Globally, these numbers are slightly lower; 4.5 percent and 5.4 percent, respectively. Resy says its no-show rate is 4.8 percent.
Chicago Tribune Top 50 Restaurants by Reservation System
|Mi Tocaya Antojeria||Chicago||Reserve|
|Band of Bohemia||Chicago||OpenTable|
|Swift & Sons||Chicago||OpenTable|
|Dos Urban Cantina||Chicago||OpenTable|
|El Che Bar||Chicago||OpenTable|
|Girl and the Goat||Chicago||OpenTable|
|Longman & Eagle*||Chicago||No reservations|
|Purple Pig||Chicago||No reservations|
* Longman & Eagle uses Reserve for special events
Source: Skift Table
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