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Revisiting Online Restaurant Reservation Systems

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October 01, 2001
Restaurant | Technology
Mark Hamilton - mhamilton@evans-chastain.com

© 2001 Hospitality Upgrade. No reproduction or transmission without written permission.

It is one year later and this little hospitality technology arena has seen considerable action. Last year I looked at six companies in the space. Today, there are three.

In the fall of 2000, I wrote an article for Hospitality Upgrade titled “Online Restaurant Reservation Systems.” The Upgrade issue was distributed at FS/TEC in Long Beach. This turned out to be an interesting show for me, as the article met with some critical commentary from the vendors in the space; just what I would have hoped for. Well, it is one year later and this little hospitality technology arena has seen considerable action. Last year I looked at six companies in the space. Today, (very close to the article deadline) there are three.

In December of 2001, Foodline.com filed for bankruptcy. The press release that I saw suggested that all staff was terminated and business ceased. Well, the site is still up, but the product is dead. iReserve.com also went out of business in 2001. In February of this year, OpenTable purchased RSViP and ProHost from ez2get, further narrowing the field. So, the three companies left in the restaurant reservations space are iSeatz, OpenTable and ReservationSource.

How has the space changed over the last 12 months or so? Most would say that the market has matured considerably. Although the concept of Web-based restaurant bookings is by no means a mainstream activity, the idea is catching on. Additionally, as stated by everyone that I spoke with from the companies mentioned here, the restaurant community is becoming more educated about the marketing advantages of being on the Web and accessible to a wider audience of potential guests. The concept of building the relationship with customers is alive and well and restaurateurs are beginning to take advantage of the capabilities offered through these reservations and table management products.
Kenneth Purcell, iSeatz president and CEO, announced at HITEC 2001 that iSeatz formed a partnership with Aloha Technologies to offer Internet-based reservation service to Aloha’s customers, eventually integrating with the Aloha table service product. This interface will allow restaurateurs using Aloha to be notified through the Aloha back office that a reservation has been placed through the iSeatz notification service. This basically gives iSeatz, through Aloha, the ability to offer some of the management tools that products like OpenTable and ReservationSource have available, thrusting them into the full-service table management and reservations arena.

Currently, according to Wendy Bullard, iSeatz VP of operations, the Aloha partnership additionally expands iSeatz ability to reach restaurant operators through the Aloha reseller network. Bullard said, “We are building a super advertising medium for our restaurant partners. With one signature, one contract, through one company, we are giving restaurants the ability to have a Web presence that they could not otherwise access or afford.” Bullard continued, “Our partnerships are a powerful network for small businesses like restaurants.” She referenced the ability for a restaurant to have exposure to the thousands of travelers booking arrangements through a site like Travelocity. These partnerships have added considerable strength to the iSeatz offering. Since the last discussion, this time last year, iSeatz has added Travelocity.com, CitySearch.com and NewYork.com, providing a great deal of exposure for restaurant partners using the iSeatz service. Bullard explains that the biggest challenge in the restaurant reservations space is to “build the largest inventory of bookable restaurants.”

Bullard said without inventory partnerships like the one with Travelocity that feat would not materialize. It is these partnerships that are of tremendous value to restaurants that employ the service, providing additional and qualified business to each restaurant through these new distribution channels.

OpenTable, on the other hand, made a bold move early this year with the purchase of Wayne Rock’s famed RSViP and ProHost applications from ez2get.com. Jeff Edwards, OpenTable CEO, explained the rationale of the purchase. “OpenTable primarily serves high-end independent restaurants, so the acquisition of ProHost and RSViP provides the company with a better foothold in the casino, resort and casual dining markets, where the two products serve a combined 250 installations,” he said. This may be true, but one certain benefit to owning ProHost is the value associated with the well-designed user interface and strong management tools incorporated in the product. The eventual goal for OpenTable is to create some marriage of products through the streamlining of the company’s product line, incorporating the best components of the original OpenTable products with those acquired like RSViP and ProHost. According to Edwards, the next version of OpenTable, due out before the end of 2001, will incorporate the ProHost user interface and table management tools.
ReservationSource.com has dropped the dot-com and changed ownership since last year, continuing to operate in the restaurant and golf spaces. The original COO and colorful spokesperson for the company, Stephanie Gusmeri, recently resigned to pursue other interests and the company now operates under the leadership of President/CEO Louis Schrock. Schrock said, “The focus over the past 12 months has been product enhancement and expansion of the installation base. Recognizing that there is a substantial need for yield management in the restaurant and golf spaces, we will continue to develop our product with the needs of the restaurateur and golf professional in mind. We believe that the real opportunity is to help restaurants maximize revenue by improving yield and customer service; we want to build the solutions that help them do just that.”

These statements are further substantiated by ReservationSource’s adjustment in their business model to reflect that of a straight license agreement. The current model includes an annual product license fee, rather than a transaction-based or month-to-month subscription-based model.

Schrock brings up a refreshing thought in that one of the changes that has taken place in this space over the past year is the realization that Web-based reservations are not the cash cow for vendors in this arena. The focus has changed in some respects to providing additional management tools to the restaurateur. Edwards agrees, adding that OpenTable strives to offer operational excellence to its restaurant partners through strong table management and marketing tools.

There are a number of interesting ideas that emerged through this updated look at the restaurant reservation players. First, was what Bullard from iSeatz termed as “qualified” new business. This is an interesting concept that might be ripe for a research project (listen-up academics). The question is: Is there a correlation between online restaurant reservations and check average? Perhaps there is to some degree. Another point, raised by Jeff Edwards of OpenTable, relates to his company’s view of the reservation space. He said, “We see an opportunity to outsource the reservations process on behalf of restaurants,” much like the CRO concept in the hotel world. “We have the capability to become the reservations office for a restaurant operation, taking reservations on their behalf and electronically passing the information to the appropriate property.” This should stave-off any question about a “hotel guy” being able to add value to a restaurant technology company. The recurring theme here is that all of the vendors in this arena are equally ecstatic to be in the game, given the state of the capital markets and the numerous sign-offs of competitors. These are the survivors thus far, each having defined a niche and each with a desire to break-even (the ultimate proof of concept).

With a look toward the next year, it would seem that we will see more interesting developments in the form of product development, strategic partnerships and, yes, perhaps consolidation. One important point to remember is that this market did not exist three years ago, so what happens now is a function of what those in the market can come up with. The value proposition is in the ability for these vendors to supply the industry with a product that will enhance an operator’s ability to profit from increased volume and management of their table inventory. As these capabilities develop, so will marketing and customer relationship management functions. Look for continued excitement in this new area for restaurant technology, as the next 12 months will be just as interesting as the last.

Mark Hamilton is the director of hospitality technology for Evans & Chastain, L.L.P., in Houston, Texas. He may be reached via e-mail at mhamilton@evans-chastain.com.

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