Earlier this week, Groupon (NASDAQ:GRPN) announced its decision to enter into the premium restaurant reservation business with the launch of Groupon Reserve. The latest offering by the online deals website extends discounts of up to 40% at high-end restaurants and also allows diners to make instant online reservations at these restaurants – essentially making it a rebranded version of the service provided by Savored before it was acquired by Groupon last September.
If you are thinking that Groupon Reserve seems to be encroaching into OpenTable's (NASDAQ:OPEN) turf, then you are right to a certain extent. After all, Groupon's decision to target high-end reservation-taking restaurants as a part of its new initiative would, no doubt, mean some loss of reservation revenues for OpenTable, which boasts of the strongest presence in the online restaurant reservation industry. But as we pointed out in an article immediately after Groupon announced its acquisition of Savored, this won't really be a big source of concern for OpenTable.
Does Restaurant Reservations Mean The Same In Both These Cases?
The idea of a user making reservations via Groupon Reserve is very different from OpenTable. Reserve seeks to attract diners by offering heavy discounts on meals at high-end restaurants by tapping into the unused, and hence, wasted seating capacity at these restaurants during off-peak hours – and sometimes even at peak times due to last-minute cancellations or no-shows.
OpenTable, on the other hand, counts on its no-frills-attached reservation model that allows diners to reserve tables for free at restaurants across the country. Diners enjoy loyalty benefits in the form of dining points that they accrue with each honored reservation they make on OpenTable, and which they can then use later to avail discounts at any restaurant.
Now OpenTable's strength in the industry comes from its huge 20,000+ restaurant customer base across all cities in North America. In its current avatar, Reserve has 600 restaurant customers across 10 major U.S. cities – a number that will no doubt grow over coming months. But the reason we do not see the imminent growth as a threat to OpenTable is because both services could co-exist very easily due to their complementary natures. In fact, we wouldn't be surprised if restaurants feature on both the websites – allowing them to get the best of both offerings.
Our belief is only reinforced by the fact that OpenTable has been providing its own version of Groupon's Reserve to diners for years in the form of the '1000-Point Table' service in which restaurants advertise time slots in which they witness light-traffic under this category on OpenTable's website.
So What Should We Expect From OpenTable Over Coming Months?
While the impact of Groupon Reserve on OpenTable's overall business will be minimal, there are some changes that will be visible in the company's performance figures in the near future. The most pertinent one will be an increase in marketing expenses for OpenTable as it tries to pit its 1000-Point Table offerings against Groupon Reserve to restaurant customers. Besides this, any impact on the primary metrics, namely the number of diners and corresponding reservation revenues, should be negligible.
Disclosure: No positions