Opentable finds a competitor?

For as long as anyone can remember, Open Table has been top dog in the online restaurant reservation business. Based on the number of restaurants using Open Table, no one else is even close. But a newcomer, Urban Spoon, has arrived, threatening Open Table’s dominance with the promise of a cheaper, more practical system for restaurant reservation called RezBook. And Rezbook works off an iPad, allowing a restaurant to move beyond pen and paper, and bulky computer systems, onto a tablet computer. So now the hostess does not sit behind a podium but holds a cool, futuristic technological marvel..

In theory, capitalizing on the iPad is a clever improvement over Open Table’s platform. With Open Table it costs $1300 dollars in startup costs (hardware and training). Additionally, the monthly fee Urban Spoon charges is about half of what Open Table charges. Definitely, Open Table has its faults. Along with fee costing several hundred dollars to participating restaurants, Open Table also charges a dollar per reservation through their website and twenty-five cents if the reservation is routed through the restaurant’s website. It has a stranglehold on the industry, allowing it to set prices, and it is by this point required for any restaurant who appeals to the internet-savvy generation. Urban Spoon, however, has raised the stakes. But one is left to wonder if Urban Spoon can deliver a reliable service, much less attract customer usage. This remains an open question.

So what do we know about Urban Spoon? Urban Spoon opened in Seattle merely a year and a half ago. Urban Spoon originally made their name by launching an iPhone app, in which when you shook the phone, the app offered up a list of nearby eateries. But the original app didn’t directly challenge Open Table as it focused on last minute reservations.

For their new RezBook service, Urban Spoon only have somewhere over a hundred restaurants versus Open Table’s 13,000. But by their website you might miss that they have this service, it is so crowded with reviews and food blogs. It gives few details about its relationships with restaurants, probably because it is so small in comparison to the rest of the site. Yet, underneath this assault of reviews and blogs is the ambitious attempt to not only supplant Open Table but to offer an alternative to Yelp. Fittingly, in response, Open Table, in the last month or so, allied itself with Yelp. Their arrangement is that Yelp will now provide direct links to Open Table reservations. Nonetheless, RezBook, their newest launch and direct competitor to Open Table, undeniably has potential. It features what seems to be a straight –forward interface for a restaurant’s reservations. A iPad is significantly cheaper than the hardware system Open Table requires. Lastly, it satisfies our idea of the future.

It will be slow going in the beginning for Urban Spoon. Don’t expect overnight for Urban Spoon to challenge Open Table. The question is will Open Table respond with their own system for the iPad. Will it look too much like conceding? Will it disrupt their business model? Indeed, Open Table’s has tripled their net income over the last year, so there might not be much incentive to change course.

A restaurant should take notice of Urban Spoon but should not necessarily abandon Open Table. Customers know Open Table and use is. Urban Spoon must prove they are able to win over customers before restaurants forgo Open Table. And having both kills the advantages of Urban Spoon as Open Table and Urban Spoon aren’t compatible, and it indeed loses any financial benefit.

The best course seems to give Open Table time to match Urban Spoon. Leaving Open Table to soon might not be wise especially with the chance that Open Table adjusts to their new, albeit miniature, competitor. Hopefully, Open Table will also realize that they need to get more competitive in regards to rates. Restaurants operate on small margins, and Open Table, though popular, only serves a portion of a restaurant’s clientele. It might make sense though for a restaurant who hasn’t invested in Open Table to gamble on Urban Spoon, though they might find themselves promoting their reservation system, since it is without a reputation with the public. But, for most, it’s too early. But if Open Table will not budge and doesn’t reserve their place in the future of restaurant reservation (because Urban Spoon has a marvelous idea), Urban Spoon may one day dethrone Open Table.