Understanding OpenTable's game plan and how to cut your bill without losing customers

As a restaurant owner, you may be getting tired of how much you pay OpenTable every single month and you have probably noticed that the bill is getting disproportionately higher while the number of reservations is stagnating. In this post, we will explain what is OpenTable's game plan to drive restaurants' OpenTable bills up.

OpenTable pricing model consists of three components: an average of $1K setup\hardware onetime fee, about 200$ monthly subscription fee and from $0.25 to $7.50 per diner per booking reservation fee. Reservation fees vary according to the following rules: $0.25 per diner for reservations that originated from the restaurant's website, $1 per diner for reservations that originated from OpenTable website or mobile app and finally $7.50 per diner for reservations made through OpenTable 1000 point table program. The whole idea of the 1000 point table program is as follow: diner gets 1000 OpenTable reward points for making reservation at certain times of the day and the restaurants have to pay an extra fee for this service. Granted, OpenTable may be helping you to fill tables in slow time but at what cost! To put it another way - restaurants subsidize OpenTable's loyalty program, instead of spending this money to build thier loyal customer's base!

Recently, OpenTable revenues went up compared to same time last year while the number of participating restaurants did not increase proportionally. And the explanation for such dramatic growth is partnerships with companies like Google, Yelp, TripAdvisor and Bing. Here is how OpenTable increases its reservation's revenue at restaurant's expense.1 – Support Your Community

Visit your local schools and contact the PTA, the different athletic associations or the local bands. Chances are they are struggling to raise money. Most restaurants typically offer to host a spirit night and give 20% to 30% back from the guests these groups brought. Be bold, make an offer they can’t refuse, and give 30% back on all checks that night. If your restaurant is seen as a pillar of the community, they will support your business in return.

In occasional instances, diners would go to OpenTable website or mobile app to search for a restaurant and make a reservation. In most cases, however, patrons use Google, Bing, Yelp or TripAdvisor to search for a place and read reviews before making their reservation. When using a third party tool other than OpenTable, patrons land on a search result page more or less like this one:

If a restaurant's website is optimized for search engines, the result page will have two reservation links: one to the restaurant's website reservation page and another to the Open Table website reservation page. One will cost restaurant $0.25 and another $1.0 per dinner. As a diner, you don't really care which one to use as long as you will get to the place where you can make a reservation. But Google, Bing, Yelp, TripAdvisors make it more intuitive for visitors to click on the more costly direct OpenTable link. Because they partnered with OpenTable, they will get a share of the hefty fee paid by the restaurant for each reservation made through their website.

If a restaurant decides not participate in OpenTable program and optimizes their site with Search Engine Optimization, patrons will only see one link to make a reservation and this reservation will be at no cost for the restaurants. Hostme can provide restaurants with a reservation system that can replace OpenTable reservation widget on restaurant's website and start saving thousands of dollars!

Renowned restaurateurs Mark Pastore shares his views about OpenTable in this article. He took an internal survey of other restaurant owners and wrote. "Only one of the dozen or so I spoke with said he felt that OpenTable increased the value of his restaurant and that he wouldn't imagine opening a new project without it. The rest were less than happy... feeling of being trapped in the service, it was too expensive to keep, but letting it go could be harmful." The reason why restaurants' owners are feeling trapped is because of the great marketing job that OpenTable has done positioning themselves as the main source of reservations, when in a reality they are just a middleman that can be replaced unnoticeably.

OpenTable has been around for a long time and while I understand that change is hard, I do recommend restaurant owners to re-evaluate their vendors on a regular basis. While many restaurants are using OpenTable, it is important to understand how market dynamic and increased costs are affecting your business. Let’s try to demystify OpenTable and evaluate the true cost of using their system.

No-shows

‍Granted, OpenTable does reduce the amount of no-shows through their app, guests can only have a total of 4 no-shows before being kicked out of the system. They can, however, turn around, create another login and password and do it all over again. But what I think is more problematic is that for no-show, in order to not pay the OpenTable booking fee, you need to signal in the system that the guests never showed. So, in other words, you have to rely that your host, often the least experienced member of your staff, will dutifully report in the system, the no-shows. It can add up to a decent amount at the end of the month and it’s awfully difficult to track and correct.

It is only $1 per reservation made through OpenTable, right?

This one is a bit more difficult to grasp. Technically, yes, it is but there is more to it than meets the eye. Sure, acquiring a new customer through OpenTable seems to only cost $1. However, you also have to take into account all the regulars who will also book through OpenTable because it’s convenient, they can get points, etc. So, that $1 to acquire a new customer actually goes up exponentially when you take into account all returning customers just going through OpenTable for the convenience of it.

Opportunity cost

At the end of the day, you may just look at your OpenTable invoice like just another cost to do business in this industry. You need a reservation system and OpenTable has been a leader for a while. However, if, instead of spending hundreds of dollars in OpenTable, you found a more affordable reservation and table management system and then applied that budget to social media marketing. For instance, with Facebook, you can target your high value customers. For instance, you are a local high end restaurant and would love to focus on foodies and high income customers. Social media will allow you to reach out to them, OpenTable just reaches for the masses and fills your table, not always with the more profitable customers. Rethink the opportunity cost of doing business with OpenTable and find out if the new media can be a more profitable option for your restaurant.

Guest’s loyalty is towards OpenTable, not your business!

OpenTable works hard at increasing the loyalty of their users. But don’t be fooled, the loyalty is toward their services, not your restaurant. So for every reservation customers make through OpenTable, they get points they can use wherever they want, including your strongest competitor across the street. And guess who is paying for this? Not OpenTable, that’s for sure. So you are indirectly paying for your competitors' marketing, actually, you are all paying for each other and the only winner here is OpenTable.

My Recommendations:

Pick a more affordable reservation and table management system such as Hostme (starting at $39/month). Use the difference to buy ads on Facebook and Instagram, pay a professional photographer to take pictures of your restaurant and your dishes, run contests where you offer free food/drinks. There are lots of social media professionals ready to help you and stop financing OpenTable’s antiquated marketing schemes.

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