Priceline Announces Massive Scale Back on OpenTable Service

In terms of restaurant reservation platforms, OpenTable was the first to dominate the market. The online reservation service company, based in California which was formerly partnered with Yelp, was purchased by the Priceline Group in 2014 for $2.6 billion.

But, Priceline has decided to scale back its expansion plan with the dining service, “prompting a $941 million write-down that overshadowed strong bookings in the online travel company's core business,” writes “The Wall Street Journal.”

"While OpenTable will continue to pursue these growth opportunities, they will do so on a more measured and deliberate basis," said Priceline in a statement.

However, the Priceline Group shares spiked by 5.5 % after reporting better-than-expected earnings for this quarter.

“OpenTable, which got 80% of its revenue from the U.S. when Priceline Group acquired it, has struggled to gain a foothold outside North America and required heavy investments in marketing and website development tailored for local languages,” writes “The Wall Street Journal.”

OpenTable was founded in 1998 and it went public in 2009. But following its initial public offering, the company struggled to add new restaurants causing its stock to waver on the market.

When acquired by Priceline, it had 31,000 restaurants in its system and now it has 38,000. This is still a significant increase, but it came at too high of a cost.

Although the company is scaling down on funds for OpenTable, Priceline remains optimistic about the future of the online reservation company.

"We will continue to invest in smartly marketing our brands and in the tools and technology that benefit both our customers and partners in the online travel marketplace," said Jeffery Boyd, chairman and interim CEO of The Priceline Group in a statement. "We also look forward to pushing ahead with OpenTable to build on their strong brand with a strategy that supports both building the core business and international expansion at a more measured pace."

So does this mean massive layoffs? A Priceline Group spokeswoman said that isn’t the plan and the CEO Jeff Boyd still backs the business.

“It’s something that’s taken a little bit longer to scale up than we thought it would,” said Boyd in an interview. “If we can execute, I think we’ve got a fabulous opportunity to build a global business.”

While the company’s OpenTable seems to be struggling with expansion, the hotel booking industry is growing. Room bookings saw a 29% increase in the third quarter from the year prior, with 150 million room nights booked.

So can OpenTable work smarter with a smaller marketing budget and gain momentum in the market? Or are too many restaurants developing their own reservation systems, instead of investing in third-party systems