The Quest to Topple OpenTable

Earlier this month, superstar restaurateur Danny Meyer’s New York City-based Union Square Hospitality Group (USHG) announced it would move all of its restaurants over to online reservations platform Resy by early 2019. The move wasn’t completely unforeseen: USHG partnered with Resy back in 2016 when it began outfitting staffers at iconic NYC restaurant Union Square Cafe with Apple Watches equipped with front-of-house management software, and it also uses Resy for reservations at its newest restaurant, Manhatta.

But USHG’s perennially popular Gramercy Tavern has long used OpenTable, as has pasta destination Maialino, which opened in 2009. The financial impact of losing those restaurants aside, a high-profile restaurant group like USHG abandoning OpenTable for a younger, flashier startup also seems like a symbolic blow to the company, which has been around since 1998.

So why make the switch to Resy? Currently, USHG’s restaurants are scattered across OpenTable and Resy, while its museum restaurants, Untitled and the Modern, accept reservations via online form or phone — so it’s not a surprise the group would look to streamline. But OpenTable persists in commanding its market. “OpenTable is as ubiquitous as Coca-Cola,” notes Dallas restaurateur Brooks Anderson.

Though neither reservation platform would share growth numbers, USHG’s switch to Resy may reflect a shift in the marketplace. It’s too soon to tell definitively, but it’s no secret that more restaurateurs are getting antsy enough to cancel their OpenTable accounts — or are at least thinking about it.

OpenTable still dominates, big time

As a pioneer of the online reservations landscape now in its 20th year, it’s an understatement to say OpenTable dominates the space. The company services 47,000 restaurants in 20 countries, and seats 26 million diners per month via online reservations. It was acquired in 2014 by Priceline (now Booking Holdings) for a whopping $2.6 billion.

OpenTable charges $249 month plus $1 per seated cover that’s booked via OpenTable; for covers booked via the restaurant’s own website, Facebook page, or marketing emails, the company charges 25 cents per head. (The company used to also charge an initial $1,295 for the initial equipment installation, but it eliminated that fee years ago, likely due to increasing competition.)

Long the dominant player in the online reservations game, for years OpenTable could charge whatever it wanted with little competition. But since 2014, a succession of reservations startups has cropped up. Not only do they provide the ability to make reservations online, in some cases, they also offer point-of-sale and front-of-house management software — for much less.

Founded in 2014 by entrepreneurs Gary Vaynerchuk and (Eater co-founder) Ben Leventhal, Resy services more than 2,000 restaurants in 160 global cities. It seats over 1.5 million diners per week — and while that’s certainly nothing to sneeze at, it’s a small fraction of the 26 million a month that OpenTable does. Resy’s plans all offer flat-fee pricing, ranging from $189 to $899 a month. (Interestingly, some of the most high-profile restaurants that Resy had partnerships with when it launched no longer user the platform: NYC’s Estela now uses OpenTable, and LA’s Otium now utilizes SevenRooms.)

Another bit player is Reserve, which also launched in 2014 and differentiated itself from the other reservation apps like Resy by offering users the ability to get their tab and pay for their meal within the app. It charged a flat $5 fee for that capability, and the demand for such a premium service seemingly faded out along with pay-to-play reservations. (Reserve did not respond to an email inquiry for this story.)

Then there’s Tock: Launched in early 2015 and co-owned by Chicago restaurateur Nick Kokonas (Alinea, Next), it led the charge on selling pre-paid “tickets” for high-end tasting menus at restaurants like Next and the French Laundry. Tock offers two different plans for restaurants: The first is $199 per month plus a three percent fee for prepaid reservations, or a flat $699 per month. Tock has more than 2 million users signed up and says it has been utilized by more than 800 restaurants, wineries, and pop-ups, while its restaurant subscriber base has grown nearly 200 percent over the past year.

The demise of “pay-to-play” reservations

When Resy was founded in 2014, it debuted a “pay-to-play” business model: The platform charged diners a fee to book tables at hot, in-demand restaurants, reasoning that restaurants now fall under the category of entertainment — like, say, a night at the theater. (Though it popularized it, Resy did not in fact pioneer the “pay-to-play” reservations model: That distinction belongs to Table8, an SF-based startup that shut down in 2017.)

OpenTable also briefly experimented with this model, trialing a service called Premium Reservations that charged a “small fee” for prime-time tables (think $200 for an 8 p.m. table for four at NYC’s Cosme). But the practice of “buying” reservations never sat well with diners or restaurateurs, some of whom compared it to bribing a maitre’d with a palmed $100 bill, and the pay-to-play reservations trend died out rather quickly. Resy began shifting away from that model in 2015, and all restaurant reservations on Resy are now free (though a handful charge a small deposit at the time of booking to discourage no-shows).

While diners enjoy being able to secure a reservation from their phone or laptop, they simply don’t want to pay in advance: Kokonas notes that free reservations on the platform now outnumber the pre-paid tickets Tock was originally known for, which he calls an indication “that we are moving to more approachable dining options.”

Making the switch

Chicago hot spot Pacific Standard Time has used Resy as its reservation system of choice since opening its doors in April 2018. Partner Josh Tilden used OpenTable in his previous position as strategic director of operations for Paul Kahan’s One Off restaurant group, which includes acclaimed restaurants Blackbird, Avec, and the Publican. For Tilden, who recently joined Resy’s board of advisors, the decision to use Resy at his new restaurant venture was mostly driven by technology. “OpenTable’s tech was a little bit lagging,” he says.

Tilden also appreciates the user experience of Resy, which he says is so streamlined that “when we bring in our host team, some of which have never used the platform before, they become proficient in one shift,” he says.

Finally, price was also a factor when the team behind PST picked Resy over OT. “I’ve seen some [profit-and-loss reports] for concepts where they’re paying 50 to 60 thousand dollars a year to OpenTable.” Resy, at least for now, is on average far less costly by comparison.

Still, PST is the only member of the One Off group to make the switch. Kahan’s top restaurants, including the award-winning Blackbird and Publican, still use OpenTable, and Avec is on Reserve. Change is hard for some longstanding establishments, but last year chef Eric Ripert made the switch to Resy after years of offering OpenTable to diners wishing to eat at his Michelin-starred Le Bernardin.

In Atlanta, acclaimed restaurant Bacchanalia now uses Resy after using OpenTable for 17 years. “The economics are a no-brainer,” Anne Qatrano told Atlanta Magazine last year. “We spent about $1,000 per month on OpenTable (a flat rate plus a charge per reservation) compared to an $89 flat fee per month with Resy. The floor management is not quite as efficient, but we have learned to work around it.”

Obstacles to switching

It’s rare that a restaurant deciding to switch reservations systems makes headlines, like USHG’s move to Resy did: For most businesses, it’s simply a behind-the-scenes operational decision that can have a significant impact on the bottom line. Switching to Resy or Tock has the potential to save many restaurants thousands of dollars a year — so why aren’t more of them abandoning OpenTable for cheaper pastures?

While Resy has a notable presence in markets like NYC and SF, it’s much lesser known in a smaller market such as Dallas, and that presents a major barrier for restaurateurs who want to switch to save money. Anderson, who co-owns the wine bar Veritas and restaurants Boulevardier and Rapscallion in Dallas, is thinking of switching from OpenTable to Resy, but knows that a lot of his customers find his restaurants when they use the original restaurant reservations app as a discovery platform. “When only 10 other restaurants [in Dallas] are on Resy, you don’t want to be the one to take the plunge and possibly lose revenue,” Anderson says. “People are afraid to make the switch.”

While OpenTable’s vast selection of restaurant partners includes everything from independently-owned fine-dining spots to Benihana, Resy has focused on presenting a more “curated” selection of restaurants to its users. “When you open the Resy app you should see 20 or 30 or 40 restaurants and you should have confidence in knowing that they’re all great,” Leventhal said in a 2016 interview with the Austin American-Statesman. “There’s only good choices among them. As a consumer, that is a profound shift from other services that are discovery portals.”

Diners who habitually use OpenTable are probably just not ever seeing the restaurants on Resy or other platforms — and many restaurants can’t afford to take that chance.

For Anderson, the technology behind the various platforms isn’t a concern: “Anybody that uses a smartphone is going to be able to use [the OpenTable terminal] just fine. Their customer service has been certainly passable if not good,” he says. Rather, it’s about cost. “It’s just incredibly expensive. Our restaurants are small, and we’re spending $30,000 a year at Boulevardier and Rapscallion on OpenTable. When people ask ‘Why is your burger $16?’ I want to show them my monthly bill from OpenTable.”

Anderson believes the reigning reservations king will at some point have to reconsider its pricing: “I’m no economics forecaster, but it seems like eventually OpenTable will have to change their business model or they’re going to lose a significant amount of market share to Resy and other similar platforms,” he says. “At some point, $1,500 a month for a tiny restaurant to get reservations is just outrageous.”

Whether more restaurants will start jumping ship from OpenTable remains to be seen, but restaurants undoubtedly have more choices than ever when it comes to picking a reservation platform: “It’s incredibly exciting to see that restaurants now have real choice when it comes to picking technology and picking the technology partners,” Resy co-founder Leventhal told Skift Table earlier this month.

In the meantime, OpenTable can clearly feel competitors nipping at its heels: As CEO Christa Quarles told Skift Table in her own recent interview, “We’ve got to keep pace with the challenges that our restaurants feel so that we can be a preferred partner.”