OpenTable bought Rezbook, Urbanspoon’s iPad-based online reservation system, limiting the competition in online restaurant reservation. Urbanspoon, which already had a popular review site, challenged OpenTable with the introduction of Rezbook in 2011. Along with Rezbook’s future being not very bright, Urbanspoon will allow users to place OpenTable through their popular review site.

At the time of Rezbook’s launch, Rezbook offered restaurants a more affordable pricing model and an elegant, easy to use iPad interface for restaurant staff. With Rezbook, restaurants could manage tables and log customer information. After an in-depth review of Rezbook, we concluded that the introduction of a technologically formidable competitor as a healthy development for the restaurant industry, even for restaurants using OpenTable.

Background of Rezbook

With their groundbreaking interface and ample financial resources of Urbanspoon’s owner IAC/InterActive Corp, Rezbook seemed to threaten OpenTable’s hold of restaurant reservation. OpenTable, through customers’ familiarity and allegiance to their network, has cornered online restaurant reservation with more than 20,000 restaurants worldwide. Many of the sit-down restaurants (especially those in large American cities) who do not use OpenTable lose business to OpenTable restaurants, as there is no other major player in town. “Or else” comes to mind in some situations. Even though Rezbook was slowly accumulating restaurants, the hundreds of restaurants they signed up never rivaled the thousands using OpenTable.

Pricing Pressure

But by adding new competition, Rezbook’s arrival had many good consequences for restaurant owners. At one point, to use OpenTable, restaurants were obliged to buy expensive OpenTable hardware for almost $1,300, costing much more than an iPad (and with little to no resale value).  Covers stayed low and OpenTable promoted OpenTable Connect which didn’t have hardware setup and no monthly charge. Of course, that became phased out and Rezbook’s prices started to align with OpenTable’s The only difference were that reservations through the restaurant’s own website were free while OpenTable charge $.25 per diner. Regular OpenTable restaurant have expensive setup fees (which have gone down to $700) and covers that are $1 per diner from OpenTable’s website (likewise with Urbanspoon for Rezbook). There are still monthly fees on top of that. Eventually, Rezbook started to charge the same $200 per month subscription fee, the same as OpenTable.

Consolidation and A Less Competitive Future

OpenTable’s acquisition of Rezbook is on the heels of the Yelp purchase of SeatMe, and massive wave of consolidation in online restaurant services. Yelp is an OpenTable partner but since SeatMe is a direct competitor, however small, the future of that partnership is in doubt. OpenTable may even just phase out Rezbook, moving restaurants that use Rezbook over to OpenTable. Hopefully, OpenTable at least integrates the advances on the iPad. At this point, there is still Livebookings and their freemium product Freebookings. The full Livebookings service has cheaper setup costs and monthly fees for its full featured service. Livebookings hasn’t made the same inroads in the United States as overseas (especially the UK).

The worrisome part is restaurants are vulnerable to price hikes. There is really nowhere to go, if a restaurant stepped off the OpenTable network, at least until Yelp has a full system. Yelp’s SeatMe has a way to go still and Yelp still is working with OpenTable. Of course, OpenTable can be a powerful marketing tool, but it could easily become not a financially option for restaurants. Now without Rezbook competing with OpenTable, that is more likely the case.