Earlier this week, Groupon (NASDAQ:GRPN) announced its decision to acquire Savored and, over the following two days, shares of OpenTable (NASDAQ:OPEN) lost more than 7% of their value.  Groupon’s move into the online restaurant reservation industry with this acquisition is clearly a cause for concern because the deal-of-the-week site’s backing makes the nascent Savored business a potentially big competitor to OpenTable. The statement by Philadelphia Fed President Charles Plosser that the proposed QE3 will not boost growth or hiring in the country only accelerated the decline in OpenTable’s price. ((Plosser Says QE3 Risks Fed Credibility, Won’t Boost Jobs, Bloomberg, Sept 25 2012))
We maintain a $52 price estimate for OpenTable’s stock, about 25% above the current market price as we continue to believe that there are several untapped potential revenue sources that OpenTable would realize in the years to come.
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- Why OpenTable’s 7% Decline Was Unwarranted
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Savored vs. OpenTable: Understanding The Business Models
Founded in 2009 as VillageVines, Savored allows diners to make free online reservations at select full-service restaurants. The website attracts diners by offering heavy discounts on meals at these restaurants. Tapping into the unused and, hence, wasted seating capacity at these restaurants during off-peak hours – and sometimes even at peak times due to last-minute cancellations or no-shows – Savored offers discounts of up to 40% on reservations at around 1,000 restaurants in 10 of the country’s largest cities. 
OpenTable, in contrast, relies on its 25,000+ restaurant-customer base to attract diners to make free reservations at these restaurants spread out in the major cities across North America. OpenTable also has a sizable presence in the U.K., Germany and Japan. The perks it offers diners comes in the form of dining points that diners accrue with each honored reservation they make on OpenTable. They can then use these points later to avail discounts at any restaurant.
The Overlap In Businesses Is Minimal
Considering Savored’s current business model, the only part of OpenTable’s business it actually competes with is the ‘1000-Point Table’ service on opentable.com. The 1000-point offering from OpenTable is essentially the same as the discounted reservations offered by Savored as restaurants advertise time slots in which they witness light-traffic under this category on OpenTable’s website.
So do we think Savored presents a threat to OpenTable’s profitability? Not in its current offerings. As it is, OpenTable earns a very small part of its income from advertising on a whole (see the breakup below for more details), and revenues from the 1000-point offering is but a fraction of its ‘advertising & other’ revenues. You can also see how much value OpenTable’s stands to lose if Savored eats into its share of discounted restaurant reservations by making changes to the chart above.