OpenTable Inc (OPEN): Should You Reserve a Place in Your Portfolio for This Stock?

Page 1 of 2

OpenTable Inc (NASDAQ:OPEN), a provider of online and computerized restaurant reservation services, helps restaurants and diners transition from traditional phone reservation methods to online and mobile alternatives.

OpenTable Inc (NASDAQ:OPEN)OpenTable’s solutions solve real problems

Traditional restaurant reservations, a combination of phone and voicemail reservations and manual record keeping on paper, are inefficient for a few reasons.

Firstly, although searching for restaurant information on the Internet through company websites, blogs and message boards is pretty common, customers are typically unable to complete the restaurant booking process online for most restaurants. Furthermore, phone operators do not work for 24 hours a day and voicemails are one-directional exchanges with no value-add.

Secondly, bookings and individual guest preferences are either recorded in hard-copy reservation books or stored in the brains of individual staff. The loss of the handwritten records and the departure of employees typically create problems for restaurant operators.

Last but not least, there is nothing that is as desired as choice in the minds of consumers. Having to call all the targeted restaurants individually to check for the availability of tables puts a damper on customers’ plans even before the first dish is served. Similar to travel plans, consumers are looking for a destination website to meet all of their restaurant-booking needs.

OpenTable Inc (NASDAQ:OPEN) solved restaurant operators’ problems by providing services such as websites and mobile apps offering customers access to table availability data and its proprietary Electronic Reservation Book (“ERB”) solution, comprising software which is installed on a touchscreen computer system. According to the 2010 edition of the Deloitte & Touche Restaurant Industry Operations report, only 35% of restaurant operators’ costs are variable, suggesting that additional customers delivered through OpenTable’s platform and services add significantly to the bottom line through operating leverage.

Network effect beneficiary with strong recurring revenue

The market leader or first mover whose brand is synonymous with the products or services in question usually leverages its market position to grow even more rapidly, effectively keeping new entrants out of the market. As OpenTable expands its network, an increasing number of diners will be attracted to the wider variety of dining options through its websites and mobile apps; while more restaurants will be happy to join OpenTable’s network to reach out to a larger base of customers.

Using North America as an example, OpenTable’s customers are paying an one-time ERB installation fee that averages from $200 to $700, with a monthly subscription fee of $199. OpenTable Inc (NASDAQ:OPEN) also enjoys additional upside through a variable performance fee charged per diner seated through its online and mobile reservation platform. The results speak for themselves: OpenTable grew its revenue in every year since 2006.

Growth drivers

OpenTable still has significant growth prospects, both domestically and internationally. Management guided for U.S. and international revenue to grow by 21% and 58%, respectively, based on the lower end of its estimates for full-year fiscal 2013.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

The 10 Most Common Genetically Modified Foods

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

Top 6 Cities For The Ultra Rich to Live in Comfort

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!