Extending its reach into restaurant reservations, online travel giant Priceline Group is buying OpenTable for $2.6 billion.
The deal comes on the heels of new competition to OpenTable. Nowhere is the competition for tables more cutthroat than in New York City, where a black market in restaurant reservations already exists online. But since February, several new apps have taken the fight to the streets: Zurvu, Shout, Killer Rezzy and Resy are all striving to become the favored portal for people willing to pay a premium to get into the best restaurants, at the last minute, via a few taps on their mobile devices.
TripAdvisor already jumped into the restaurant-reservations business last month with its purchase of LaFourchette, a European booking platform known as the OpenTable of France. Amazon (AMZN) is also creeping into the business, allowing customers to publish reviews for local restaurants and companies. That's Yelp's (YELP) territory, but one could easily imagine both companies moving into online reservations next.
OpenTable charges restaurants monthly fees to seat diners who book their reservations online. It has an inventory of more than 31,000 restaurants, and seats more than 15 million diners a month.
“Travelers are diners,” Priceline CEO and President Darren Huston said. It's the same customers. There's opportunity to cross-promote brands.”
“We spent a long time looking at OpenTable. It's been on our radar for a long time. We felt now was a good time,” Darren said.
Huston said: “Priceline's first goal is to expand OpenTable internationally. Users can already book restaurants through OpenTable in London, Berlin, Hong Kong and other cities, but Huston said he wanted to bring it to more cities. Since Priceline already has ‘offices in every major city in the world,’ doing so should be seamless,” he said.
OpenTable will still be based in San Francisco and will operate as an independent business led by its current management team.
Since its start in 1998 as Priceline.com — a “name your price” site for airline seats, hotel rooms and rented cars — Priceline Group has grown into a colossus on which consumers can shop for U.S. and international accommodations, as well as cruises and vacation packages.
In addition to Priceline.com, the group also includes Booking.com, Agoda.com, Rentalcars.com and the travel price-comparison site Kayak. The company calls Booking.com the world's largest online accommodation service, with operations worldwide, while Agoda.com is an online lodging service that operates primarily in Asia.
An average of more than 1 million guests stay in accommodations booked through one of Priceline's brands each night. It has more than 480,000 properties in more than 200 countries and territories worldwide.
OpenTable, which also started in 1998, gets its revenue from restaurants, which pay fees for the software and hardware needed to join its reservation network, and additional fees for customers seated through OpenTable reservations. Diners do not pay to use the service.
In 2013, the company earned $33.4 million on $190.1 million in revenue. Priceline's profit last year was $1.9 billion on revenue of $6.8 billion.
Priceline will pay $103 per share in cash, which is a 46% premium over OpenTable's recent closing price of $70.43. Both companies' boards unanimously approved the transaction, which is targeted to close in the third quarter.