Encouraging Outlook for Number of Diners Using TopTable

OpenTable (NASDAQ:OPEN) is a free online restaurant reservation service, competing with companies like liveRES, Livebookings, Foodline.com and Urbanspoon (owned by IAC/InterActiveCorp (NASDAQ:IACI)), as well as Groupon and DinnerBroker.com that offer daily deals. The OpenTable online reservation service is free for diners, but restaurants are charged a reservation fee for each diner who reserves a table using the OpenTable system.

OpenTable acquired a competitor service called TopTable in October 2010 for $55 million. TopTable has a major presence in the U.K., which should boost OpenTable’s international reservation revenues given the trend of diners increasingly using online reservation services. We expect the number of diners seated through toptable.com will rise steadily in the years ahead. While we anticipate that the number of diners will reach 10 million by the end of our forecast period, Trefis members predict more substantial growth towards 12 million.

We currently have a price estimate of $94.90 for OpenTable stock, roughly 10% ahead of market price.

TopTable’s Growing Presence in U.K. Online Reservation Market

Toptable.com was launched in 2000, and already helps seat 3 million diners annually at restaurants spread across the U.K. It attracts restaurants with its pay per diner model that does not include any initial installation charges or monthly subscription charges. Currently only 10% of U.K. restaurants allow reservations online, representing a huge growth opportunity for toptable.com.

As per OpenTable’s Q4 2010 results, toptable’s contribution to OpenTable’s revenue was more than £1.5 million, or almost $2.3 million. This is just about two-thirds the revenue generated in the entire year by OpenTable through reservations at international restaurants (see our article OpenTable’s International Growth Driven by Toptable).

More Diners Making Reservations Online

The number of diners in the U.K. making restaurant reservations online has drastically increased over the past few years, with the number of diners booking tables online reportedly doubling in 2009. This growth is expected to continue in the years to come with the increased adoption of the internet as a convenient means of reserving tables at restaurants.

See our full analysis and $94.90 price estimate for OpenTable

Trefis Community Forecast

Trefis members forecast that the number of diners seated through toptable.com will increase from below 1 million in 2010 to nearly 12 million by the end of our forecast period, compared to the baseline Trefis estimate of an increase to about 10 million during the same period. The member estimates imply a slight upside to our price estimate of $94.90 for OpenTable stock.