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 10 Countries with the Highest Suicide Rates

The 10 Most Technologically Advanced Countries in the World

The 10 Safest Countries in the World to Live in Peace

The 10 Top Selling Smartphones in the World 2014

The 12 Biggest Shopping Centers in the World

The 10 Friendliest Countries in the World

Qihoo 360 Technology Co Ltd (QIHU), Actavis plc (ACT), Yahoo! Inc. (YHOO) Among 20 Long Ideas from Sohn Canada

The 10 Laziest Countries in the World

The 10 Most Polluted Countries in the World

The 10 Most Dangerous Cities in America 2014

The Top 10 Gold Producing Countries in the World

The 10 Tallest Buildings in the World

The 10 Richest Stand Up Comedians in the World

The 10 Fattest Countries in the World

The 5 Best Summer Jobs for Teens

The 10 Most Religious Countries in the World Keeping the Faith

The 10 Most Educated Countries in the World

The 10 Most Popular Cell Phones in the World

The 10 Drunkest Countries in the World

The 10 Most Expensive Private Schools in the World

The 10 Smallest Countries in the World

Walking Dead Season 5 Spoilers You’ll Wish You Didn’t Know

The 10 Poorest Countries in the World

The 10 Greenest Countries in the World

The Top 10 Countries with the Highest Population in the World

The 10 Most Visited Countries in the World

The Top 10 Star Wars Characters in the Iconic Series

The 10 Most Expensive Android Phones in the World

5 Reasons Why The Illuminati Is Real and a Threat to Society

The 6 Scariest Halloween Costumes Ever Screamed At

The 4 Biggest Hedge Fund Managers in the World Today

The 15 Most Densely Populated Countries in the World

The 10 Biggest Tea Drinking Countries in the World

Top 6 Ways to Improve Your Checkout Process and Close Sales

The 5 Most Profitable Online Businesses You Can Start Today

The 20 Most Profitable Hospitals in the US

The 5 Most Profitable Home Businesses to Start

The 7 Teams that Will Win the Stanley Cup in 2015

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

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!