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OpenTable Reconsidered

Is what's convenient for diners a bad deal for restaurants?



On a chilly late-December night in West Berkeley, the dining room at Riva Cucina was warm with candlelight and dark wood, the smell of tomato sauce hanging heavy in the air like a familiar memory. Only about four tables were filled in the cozy Italian restaurant, which has room for maybe sixty diners. But according to chef-owner Massi Boldrini, business has picked up dramatically after a near-disastrous, recession-ravaged summer of 2009.

The key to that upturn, according to Boldrini, is OpenTable, by far the world's most popular online restaurant reservation site — with more than 15,000 dining establishments listed internationally — whose rapid growth has been a definitive game-changer for restaurants and diners alike. As part of its contract with the San Francisco-based company, Riva Cucina uses a computer terminal, which sits unobtrusively behind the bar area, to keep track of upcoming reservations and monitors the progress of each table's meal — one quick glance and you can see when one table is ready to place dessert orders, or when a party of two hasn't shown up a half hour after the time slot it booked.

It used to be that if you were stuck at the office with no fixed dinner plans, you had little choice but to phone restaurant after restaurant to search for an available table. And a pen-and-paper reservation book was the only way for restaurants to keep track of who was coming in to dine on any given night. With OpenTable, all it takes is a few seconds on your computer or smart phone and you're presented with a dozen or more dining options for your party within a two-mile radius of your present location. A couple more clicks and you can narrow those choices further by price range and type of cuisine, and view them all on a handy Google-powered map. Before you know it — voila! — you've got yourself a table, instantly confirmed and at no additional cost.

It's no wonder, then, that for many diners — especially those in busy metropolitan areas like the San Francisco Bay Area, where there are currently more than 1,000 restaurants listed on — the site has become their first, and often final, destination when deciding where to go out to eat. But it turns out that's not necessarily a good thing for restaurants.

Despite the astronomical number of diners seated through every day — more than 41 million in 2009 in North America alone — it's not clear that restaurants are making money from the service. That's because, while the reservation site is free for users, restaurants are the ones who have to foot the bill for the privilege of being listed in OpenTable's online database. The fees — which can range from several hundred to upwards of one thousand dollars a month — are far from insignificant, especially in an industry that's notorious for its paper-thin margins.

Here in the Bay Area, at least a handful of restaurant owners have begun to cry foul. This past October, Mark Pastore, the owner of San Francisco's Incanto, fired an opening salvo of sorts in his strongly worded editorial, "Is OpenTable Worth It?," which was published in the San Francisco Chronicle. Pastore's piece reverberated through the local restaurant community and beyond — it's been tweeted and retweeted (at least three hundred times as of this printing), and has been linked to and debated on dozens of blogs and online discussion boards.

Pastore's answer to his titular question is, in a word, no — not by a long shot. He argues that OpenTable's near-monopolistic hold over the online reservation market allows the company to charge fees so high that it becomes exceedingly difficult for the restaurant to break even, much less make a profit, on those customers that the site brings in. What's more, he says, by allowing OpenTable to control access to the diner at the point of his or her decision about where to eat, "restaurants find that they themselves no longer own the customer relationship." By this logic, OpenTable's fees become a sort of "toll" that restaurants now must pay to access even return customers. After all, there's an increasing number of diners who now make nearly every restaurant decision and booking through that web site. As one user on the restaurant discussion board recently put it, "Since [a restaurant is] not on OpenTable it simply doesn't exist for me, and I see no reason to seek it out, because OpenTable gives me more options than I can handle as it is."

Clearly, some restaurants are seeing benefits from OpenTable. Riva Cucina's Boldrini explains that his restaurant has always been at a bit of a disadvantage because it isn't part of a shopping plaza or busy downtown area. For his business, joining OpenTable was like moving into a sort of "Internet strip mall," Boldrini said. "People could just show up and look for an Italian restaurant within a radius from where they were with their cell phone, and our restaurant came up. And we've had a lot of new customers through that."

While Boldrini isn't sure exactly how much of the restaurant's improved financial status is directly attributable to OpenTable, he does know that he gets a significant number of bookings from the site each month — including nearly all of the diners eating at the restaurant tonight. At the very least, Boldrini says, he's been seeing a lot of new faces since he signed up for the service this past June.

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