
Priceline to Buy OpenTable in Deal Valued at $2.6 Billion - arch_stanton
http://www.bloomberg.com/news/2014-06-13/priceline-to-buy-opentable-in-deal-valued-at-2-6-billion.html
======
jacquesm
> Priceline is buying a company that seats over 15 million diners per month
> across more than 31,000 restaurants via online bookings.

Nice example of how to scale a business: if you average 450 bookings over a
relatively small number of restaurants (31,000) montly, so that's 15 bookings
per restaurant per day your business is worth billions of dollars.

Lead generation is serious income, and serious exits too.

A 46% premium over their current stock price is a hefty bonus for everybody
that holds stock, top class negotiating skills exhibited by the sellers.

~~~
mistermann
This deal is paying $14 per annualized booking....it's a valuable company, but
that's pretty insane imho.

Although as someone else pointed out, they could move into other industries.

~~~
potatolicious
OpenTable has no effective competitors (for now?) - they'll be making this
many bookings for the foreseeable future. That's $14 per booking... divided by
how many years you think OpenTable will continue to hold the reservation
throne.

Considering that they don't really have a real competitor right now, even if
the OpenTable killer is being worked on _right now_ , it'll be a while yet
before they actually threaten OpenTable's numbers.

~~~
joezydeco
Nick Kokonas of Alinea/Aviary summed up the threat to OpenTable in his recent
post about his restaurant ticketing system[1]:

 _" At one time it was definitely the case that if I were looking for an
Italian restaurant in a certain neighborhood I would consult OpenTable, read
the reviews, and book directly. Now I just use Google or Google Maps. Google
of course knows this and that’s why they bought Zagat. I’d bet Google will
soon begin the reservations game as part of Zagat ratings."_

Could Google deliver a reservation system to restaurants without renting them
hardware and nixing the $14 customer charge? Sure. Could they even _pay for
the hardware out of their own pockets_ to get traction and dump a pile of
Nexus tablets in every store? Absolutely.

Perhaps OpenTable management realizes this and figures this is a good time to
exit.

[1] [http://website.alinearestaurant.com/site/2014/06/tickets-
for...](http://website.alinearestaurant.com/site/2014/06/tickets-for-
restaurants/)

~~~
potatolicious
OpenTable isn't just a reservation system, it's a full-on restaurant
management system. They've seen this possibility coming and they're reasonably
well positioned to deal with it.

OpenTable only does reservations when facing the diner, but when facing the
restaurant they do reservations, CRM, payments, table tracking, and analytics.

Whoever wants to replace OpenTable needs to replace all of this at once. Not
only that, they need to convince a restaurant to ditch practically _their
entire IT stack_ , retrain all of their employees in the new system, and do so
without service or quality interruption.

OpenTable has positioned themselves to be about as sticky as you can imagine a
software business to be. They've locked in their vendors _hard_. Evil?
Probably. Very effective? Hell yeah.

It's not as if no one's challenged OpenTable before - there are in fact a
number of restaurant management startups out there, but none can even dent
OpenTable's dominance due to the lock-in. Google couldn't take out OpenTable
even if they tried, not without burning a pile of cash taller than this
current purchase price.

~~~
wting
> Whoever wants to replace OpenTable needs to replace all of this at once. Not
> only that, they need to convince a restaurant to ditch practically their
> entire IT stack, retrain all of their employees in the new system, and do so
> without service or quality interruption.

Yelp acquired SeatMe[0] (front of house management) last year to expand into
this market, and Yelp Reservations[1] was launched last month. These two
products combined function as an OpenTable replacement.

 _Disclaimer: I work at Yelp._

[0] [https://www.seatme.yelp.com/](https://www.seatme.yelp.com/)

[1] [http://officialblog.yelp.com/2014/05/yelp-reservations-
new-f...](http://officialblog.yelp.com/2014/05/yelp-reservations-new-free-
tool-for-businesses-gives-diners-even-more-options-when-booking-online.html)

~~~
zbowling
I worked at SeatMe right before the acquisition (actually I was the first
employee and engineer and built a major portion of it). I can say that it is
completely designed to be a full OpenTable replacement in every way. I don't
think was a feature after working on it for 18 months that OpenTable had that
we didn't.

------
coreymgilmore
I was wondering when OpenTable would be bought up. They were kind of under the
radar versus other big name companies (Uber, Snapchat, etc...) yet they supply
a widely used and profitable service.

I believe Priceline's global reach will help OpenTable extend past the US
market. The service is great!

~~~
lukeschlather
OpenTable isn't even really a startup, they've been around for over a decade
and have a near-monopoly. No bubble with this acquisition. OpenTable's
investors would be crazy to sell for anything less.

------
sehrope
Besides the usual scaling they'll get from the larger org and cross marketing
( _e.g. I 'm guessing people who book with OpenTable travel more than the
average person_), imagine Priceline combining its "name your own price"
concept with OpenTable's inventory of restaurants to offer prix fixe meals.
Pick an area of town, a type of food, headcount, and a max price and they
match you with a restaurant that can accommodate.

Not sure if it's a workable idea ( _I honestly can 't see myself ever using
it_) but it's an interesting angle to think about.

~~~
fennecfoxen
It's also worth nothing that some ~90% of the Priceline group's revenue (iirc)
is booked through Booking.com, which is one of the top travel sites in the
world (and remarkably unknown in the US). Not everything Priceline does is the
"name your own price" gig.

~~~
smackfu
Interesting. We used booking.com extensively when travelling in Europe because
most of the smaller hotels use it as their booking engine. (And we also heard
lots of complaints that they didn't like using it, because the cut was too
big... but they were still using it.)

~~~
calbear81
Booking.com is the dominant player in Europe with something approaching 50% of
all online hotel bookings going through them. They are unique in that they
have tens of thousands of small hotels that use them exclusively as their
booking engine and don't distribute to other online travel agencies.

Booking.com uses an agency model so the hotels pay them a commission that
tends to be lower than the margin they share with Expedia and others on the
merchant model. However, since Booking.com has so much leverage in the
marketplace, they have started charging more for premium placement, etc. that
hotels have to comply with if they want exposure to their massive audience.

------
nabraham
Future growth must come from international. OT is in 50% of all reservation
taking restaurants in the US but in only 10% of reservation taking restaurants
in international markets. That said, it's not easy to go international -
they've tried a few times in Europe and had to retreat.

~~~
alextgordon
> only 10% of reservation taking restaurants in international markets

Surely 10% of the international market would _far_ exceed 50% of the US
market? The US is only 4.5% of the world's population.

~~~
smackfu
The key missing stat is what percentage of restaurants are reservation-taking
restaurants, in various countries. And what percentage of those restaurants
are using a point-of-sale computer system.

~~~
nabraham
Yes - you need the % that is reservation taking vs walk-in. That said, my 10%
stat is from their 10Ks and relates only to the markets they are in.

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kkhire
Incredible. Priceline is a way more formidable power than I earlier ever
thought

------
mfrommil
Lately there's been talks by high demand restaurants to charge a fee just to
make a reservation. It will be interesting to see if Priceline pursues this as
a revenue stream with OT.

~~~
ghaff
Never seen a fee for a reservation but I have booked at restaurants that took
my credit card and would have charged me a fee if I were a no show.

------
ausjke
Opentable, Uber, Whatsapp...are we witnessing another bubble without noticing
it?

I assume, the more people answer "no" to the question above, the more real
this bubble is.

~~~
Panos
The comparison with Uber and Whatsapp is not the proper one. These are private
companies that were funded and acquired, respectively, purely on growth
potential.

OpenTable has been a public company for almost 5 years now (see
[http://finance.yahoo.com/echarts?s=OPEN](http://finance.yahoo.com/echarts?s=OPEN)).
Revenues, cost, growth, and all other metrics have been publicly examined and
scrutinized for long time. The 46% premium paid by Priceline is based on how
the new management estimates that they can leverage the assets of Opentable
and hardly a "bubble-ish" premium.

If you believe that OpenTable is part of a bubble, then the whole US stock
market is in a bubble, which may be true but again not directly connected to
Uber and Whatsapp valuations.

------
Touche
Feels undeserved. I've really been hoping a competitor would come in and beat
them. OpenTable, until very recently, had a Gingerbread style app on Android.

~~~
potatolicious
I think this is great - and this is coming from someone who loves good design
and UX.

They are successful because they solve a real, substantial problem for
millions upon millions of people, not because they've got the prettiest
website or following the latest design trend du jour. They are in some ways
antithetical to modern startups: that seem to be in a race to solve ever more
inconsequential problems in minor ways using the best UX and design.

Their website is ugly, their mobile app even more so, but yet they solve a
problem and solve it very well, so people including myself keep going back. If
only more companies would put this much quality into executing their core.

~~~
Touche
I agree with the sentiment, but their gingerbread Android app was not just
ugly, it was unusable. I think people suffered through it because there was no
competition.

