Open Table Opens Up

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Little Brazil in Kansas City, Missouri is turning the tables on Open Table (NASDAQ: OPEN). Em Chamas Brazilian Grill, one of Kansas City's busiest restaurants, recently defected from the Open Table platform in favor of EVEVE, the latter of which is a younger company with a smaller footprint. EVEVE only made a splash in the U.S. and Canadian markets a little over a year ago, according to Hospitality Technology. Since that time, EVEVE has been offering restaurants and diners an online reservation alternative, and in the meantime gaining some market share.

If Open Table executives are worried, they aren't showing it. At a recent Credit Suisse technology conference, chief financial officer Duncan Robertson boasted of the company's customer network of some 26,000 restaurants. That compares with 1,000 restaurant clients at EVEVE, based on the Hospitality Technology article.

At the Credit Suisse conference, Robertson also addressed the company's 1% monthly churn rate. Many of those defections, he said, come as a result of restaurants going out of business. In fact, only a fraction leave for the competition. Em Chamas Brazilian Grill must be among that fractional number. Robertson was also quick to note that on a revenue basis, the churn rate was even less tangible because Open Table is adding a greater amount of revenues from new customers than what is lost.

Competitive Landscape

It's not like Open Table doesn't have other competitors. When Google (NASDAQ: GOOG) acquired restaurant rating firm Zagat in 2011, it seemed like a direct competitive hit toward Open Table. Both Google and Zagat were Open Table partners at the time of their deal and to this day that relationship remains intact. Like Open Table, Google's Zagat similarly takes a localized approach to its content, but it also continues to rely on Open Table for real-time data, Robertson explained at the conference. 

Nonetheless, both Open Table and Google's Zagat provide user reviews and ratings, as does Expedia spin off TripAdvisor (NASDAQ: TRIP). For its part, TripAdvisor strives to differentiate itself from its competitors by using features such as a management response option to customer reviews, at least for the hotel businesses that use its product.

In a recent interview with Hotel News Now, TripAdvisor chief executive Stephen Kaufer noted the value that the company offers in providing real-time business reviews versus Google and Zagat's annual Guidebook.

Open Table names TripAdvisor among its partners, as it does for iPhone and iPad maker Apple (NASDAQ: AAPL). The online reservation company is in the process of rolling out a beta version of its electronic reservation book exclusively on Apple's iPad. The project may eventually extend to Android devices, but for now Open Table is testing on the most ubiquitous product among its customers.

As part of the iPad pilot program, Open Table is testing a data analytics feature among its restaurant customers. The new feature allows restaurant owners to examine customer trends in their areas. It creates a centralized database containing information -- such as customer profiles -- that is aggregated and shared. Eventually, Open Table hopes to make the feature an option for its customers via a user dashboard.

It's not surprising that Open Table would choose Apple for the pilot program, with analyst expectations for iPhone and iPad shipments at 46 million and 23 million for the 4Q 2012 and 1Q 2013, respectively, according to Cnet.  Morgan Stanley analyst Katy Huberty considers those estimates modest in light of the enthusiasm surrounding Apple's new iPad mini and the latest generation of its traditional iPad.

Anticipated Apple Shipments

<table> <tbody> <tr> <td> </td> <td><strong>4Q 2012</strong></td> <td><strong>1Q 2013</strong></td> </tr> <tr> <td><strong>iPhone</strong></td> <td>46 million</td> <td>43 million</td> </tr> <tr> <td><strong>iPad</strong></td> <td>23 million</td> <td>19 million</td> </tr> </tbody> </table>

*Source: Cnet

International Reservations

Despite Open Table's leading market position, the company isn't without its challenges, both real and perceived. For instance, they recently completed the relaunch of the Top Table website and mobile applications. Open Table gained access to the United Kingdom's restaurant market via its acquisition of Top Table in 2010, but it was only in recent months that the company made the changes that it expects will optimize the transformation of online visitors into reservation bookers. 

The company also has a presence in Germany and Japan, and has its sights set on other international markets, such as Spain and France, two markets where Open Table left as a privately held company about a decade ago.

No doubt Open Table must be disappointed by the loss of Em Chamas Brazilian Grill, one of Missouri's busiest restaurant, to a new competitor. If you ask company executives, however, their biggest competition remains the old fashioned reservation holder -- a pen and paper.


GerelynT has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple, Google, OpenTable, and TripAdvisor. Motley Fool newsletter services recommend Apple, Google, OpenTable, and TripAdvisor. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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