Boom Times for OpenTable?

OpenTable, the secretive eight-year-old restaurant reservation service, was slow to take off, with some of its local media and directory affiliates reporting little traffic in its early days (and a competing service, Foodline, basically dropping off the map). But in the past nine to 12 months, OpenTable has seen a real upsurge in traffic, according to third parties who have seen a presentation from the company (not me). The company itself reports on its Web site that 1.8 million reservations are now made through the system every month.

Started by Citysearch cofounder Thomas Layton, with Amex as a minority partner, OpenTable has landed 6,500 mostly high-end restaurants, mostly in the U.S. and Canada, but with some also in Hong Kong, Japan, Mexico and the Caribbean. There is a one-time $1,200 fee for hardware and software, a maintenance fee which runs $200 to $300 per month and $1 per reservation. In addition to the logistical help for seating diners, participating restaurants take advantage of the system to build up its customer base and develop customized promotions for new diners, repeat diners, diners who haven’t come for a while, etc.

I initially thought the service would see a “MovieFone effect,” where online movie ticket reservations did very well in New York, L.A. and San Francisco. But as MovieFone branched out, it found that moviegoers in other markets didn’t need to reserve tickets in advance. With OpenTable, however, that hasn’t necessarily been the case. A frequent diner awards system where users get discount coupons and even free meals appears to have contributed to user retention. It takes 20 reservations to receive a $20 certificate, which can be used across the OpenTable network  probably at little or no cost to OpenTable.

At this point, OpenTable’s imprint on the popular culture has gotten to the point where The Wall Street Journal even commissioned a massive study to figure out how to game the system. Reported in the March 31 edition, WSJ hired Dapper Research to search OpenTable for 7 p.m. reservations on a Saturday night at 120 hard-to-get-into places. It checked for tables every half hour for six weeks, ultimately making 400,000 attempts.

For these uber-popular restaurants, Dapper found that the “sweet spot” for advance bookings is four weeks ahead, with a 40 percent success rate. That dropped to 35 percent when booking 40 days ahead. It also found that reservations open up on Thursdays, the likely result of restaurants confirming reservations two or three days out, then putting them back in the system.