By Elyse Andrews
I want to discuss a company in a seemingly mundane industry -- restaurant reservations -- with a revolutionary business model. The company is OpenTable (NASDAQ:OPEN) and it’s made waves with its online tool that allows diners to reserve a table at a restaurant without having to pick up the phone.
The company, which has been around since 1998, currently has 20,000 restaurant customers in the U.S. and collects a $1 fee from diners seated from its website and 25 cents if the reservation comes through the restaurant’s website. The company also gets about 10% of reservations from mobile devices. (I’ve long used OpenTable’s website to book reservations, but only recently used the OpenTable iPhone App. It was a great experience and I’ll definitely use it again.)
The company is staying busy, working to expand outside the U.S. In October, OpenTable bought its U.K. competitor Toptable, providing the company with 5,000 new restaurant customers and more than doubling its U.K. presence. International business accounted for 16% of revenue in the fourth quarter. While OpenTable is doing well overseas, it still has a lot of the international market left to tap.
Not being content with merely accepting and managing advance online restaurant reservations, OpenTable has expanded to include a service called Open Connect that steers walk-ins to restaurants that typically don’t do a lot of reservations (think sushi places). The new product has been out for less than a year, but already over 1,000 restaurants are using it.
OpenTable has three other news products: Spotlight, which highlights weekly discounts at featured restaurants; Private Dining, which aids in booking private rooms for events; and Table Maestro, which allows restaurants to better manage phone reservations.
With the economy getting back on track and people eating out more, OpenTable’s fiscal results are improving fast. The company reported that revenue increased 61% to $30.8 million in the fourth quarter versus a year earlier, and earnings climbed 136% to 33 cents per share. Analysts predict that OpenTable’s earnings will rise in the double-digits for at least the next several years.
Also in Q4, OpenTable saw its restaurant customers grow 62% to 20,049 and the number of seated diners increase 59% to 19.4 million. And there’s still a lot of room for growth. Of the 35,000 reservation-taking restaurants in its North American market, OpenTable estimates that it seated only 9% of all diners in 2010, up from 6.2% in 2009.
Tim Lutts recommended OpenTable in Cabot Stock of the Month in March; since he advised subscribers to buy, the stock is up about 10% -- not bad in a month when the market has seen several large down days.