The US Restaurant Reservation Market Heats Up: Fewer Restaurants, More Competition

View this article on LinkedIn, July 2024

With Tock’s acquisition by Amex, Toast offering reservations, and Yelp finally partnering with Google, there is much more competition on the US restaurants reservations market, but

• Are there more restaurants to serve?

• Will providers have to fight for less restaurants with more features and lower prices?

• And will the big players manage to increase stickiness of their products and hold on to their restaurant partners?

Decline of sit-down restaurants across the whole US. Who was hit the most?

As of July 2024 there are nearly 700K of restaurants in the US, with 323,924 offering table service (according to Yelp, Google, and TripAdvisor's data combined). Due to economic hardships and post-pandemic struggles, the number of sit-down restaurants declined by -11% compared to July 2022. The decline is seen across states and major cities. Hawaii and the District of Columbia saw the biggest drop with -16% and 15% decline respectively.

• DC as so many other cities are struggling with rising costs, higher crime rates, and lower foot traffic. Higher cost made the most impact on restaurants with small average bill size (one $ restaurants according to Yelp), their number has declined by 23%. More expensive restaurants saw less decline, only -4%.

• Hawaii is facing similar challenges. But in addition, deadly fire in Lahaina, Maui in August 2023 resulted in the closure of 53% of restaurants in town (51 restaurants to be exact).

Looking at the biggest cities in the US, we can see a decline in the total number of sit-down restaurants as well. Cities with a decline of over -10% can be seen below.

• New York City has lost the biggest share, -14% of restaurants compared to 2 years ago.

• It is not a surprise to see 4 out of 9 cities listed below are in California. Strict covid measures had its costs.

Despite the overall decline of restaurants in the US, the number of restaurants using online reservation solutions (such as OpenTable, Resy, Yelp, or others) has increased by +37% since 2022. What has changed the online reservations business?

With the overall hardships of running a restaurant in the ambiguity of the current economy, restaurants have no choice but to increase operational efficiency. It means more technologies and more optimization. Managing and attracting more guests using reservation providers is a must for many. Thus, in July 2024 61,739 restaurants in the US used one or more online reservation / wait list solutions (versus 45,029 restaurants 2 years ago). It means that only 13% of all sit-down restaurants used an online reservation provider in 2022, and 19% offer online reservations / wait list now.

Currently there are over 200 restaurant reservation platforms worldwide serving 200K+ restaurants. The US has 16 platforms that serve over 100 restaurants each. OpenTable, Yelp, Resy, Tock, Wisely, Toast Tables, and Sevenrooms saturated over 95% of the US reservations / waitlist market (see the chart below). There is a long tail of smaller apps/widgets offering reservation / waitlist solutions that serve the other 5% of the US market.

While OpenTable is still a leader on the US reservation / waitlist market, its market share dropped from 51% to 46% over the last 2 years. Wisely, Resy, and Tock lost -5%, -4%, and -3% of the market share respectively. On the other hand, Yelp grew by +11%, and Toast Tables has entered the market and taken 5% of restaurants’ share.

In April 2023 Point-of-Sale company Toast started to offer reservations. It changed the competition landscape for OpenTable, Resy, Tock, and others. With over 60K of restaurants in the US already using Toast as POS, it was ideal to start offering reservations and waitlists. Toast increased stickiness of its product, and rapidly gained 3,035 restaurants on their network by July 2024. 68% of Toast Tables customers have not used any reservation provider at the beginning of 2023, but 409 (or 14%) of current Toast Tables customers switched from OpenTable, and 238 from Resy and Tock combined (8% of Toast Tables customer base).

Since Toast had a different market entry strategy being a restaurant provider already, their coverage differs from typical online reservation provider in the US. They have 29 restaurants in Seattle, 29 in Chicago, 28 in Atlanta, 27 in Houston, 26 in Phoenix, 25 in Denver, 22 in Washington DC, and 20 in San Diego. There is a long tail of cities with less than 20 restaurants on Toast Tables.  It looks like Toast Tables is not trying to capture the biggest metros first, and it seems they are converting customers on demand. It means they can be more unpredictable for competition in terms of where they would strike next.

Yelp saw huge growth over the last 2 years. Ever since Yelp’s acquisition by Google failed in 2010, Yelp was hesitant to partner with Google , but on May 15th 2023 Yelp has finally announced that they entered partnership with Google reserve to display the reserve button directly in google search and google maps. As a result, Yelp’s restaurants reservation business in the US grew 553%. Restaurants really saw the value of being promoted not only on Yelp, but on Google. And now 8,823 restaurants use Yelp Guest Manager for reservations and online wait list (with 4,399 for reservations and 7,463 using online waitlist). 11% (or 497 restaurants) identify themselves as $$$ and $$$$ signs on Yelp, and 76% are $$ signs. It looks like more expensive restaurants are now choosing Yelp as their reservation provider. Nearly half of these restaurants are in big metros with 39 in New York City, 20 in San Francisco, 19 in Los Angeles, and 13 in San Diego, and 8 in Brooklyn.

Did Yelp Guest Manager and Toast Tables change online reservations’ market share in the top 15 cities in the US?

Below you can see the top 15 US cities (based on the total number of sit-down restaurants). Knowing the number of restaurants each platform serves, we were able to calculate the market share of each (%-ge column with appropriate provider name), and see how it changed over the past 2 years (+/- column).

OpenTable is still maintaining the highest market share in 13 out of 15 top cities, sharing the leading position with Resy in New York and losing to Resy in Brooklyn. Here Resy has the majority, 53% of the market. OpenTable has lost some market share in the last 2 years in 8 major cities with San Diego having the most significant loss of -12% of the market. Yelp has seen one of the biggest growths here and went from 7% to 25% market. Also Toast Tables entered the market chipping away from competition.

Yelp has seen growth across all top 15 major cities. The biggest market for Yelp (by absolute count of restaurants) is New York (with 272 restaurants using reservations and wait list from Yelp). Next we can see its dominance on the West Coast with 235 restaurants in San Francisco, 186 in Los Angeles, 163 in San Diego, and 122 in Las Vegas. It also has strong presence in Texas with 96 restaurants in Houston, 69 in San Antonio, and 43 in Dallas.

Looking at Resy and Tock, they have not grown in any top 15 cities in the last 1.5 years which can explain Amex’s acquisition of Tock to increase market share altogether. The loss of market share in many cases were not the result of loss of restaurants from the network, it just meant that competitors gained more restaurants. For example, in New York and Brooklyn combined Resy grew by 11% to 1,637 restaurants, but since Yelp increased its presence significantly, the market share for Resy has dropped by -5%. Resy saw the biggest growth in Miami (+39% growth from 2024 to 2022) to 78 restaurants, Los Angeles (+20% to 172 restaurants), and Santa Monica (+15% to 38 restaurants).

The biggest number of restaurants on Tock can be found in Chicago (311), however the number of restaurants using Tock declined by -17% since 2 years ago, OpenTable was able to regain some of its market back from Tock here. It seems that Tock has decided to focus more on their other part of the business  - wineries and wine countries. We can see Tock grew in Napa Valley, CA and Paso Robles, CA by +12 and +10% respectively (to 110 and 101 restaurants and wineries). Looking at overall number of entities on Tock, we can see that restaurants are only 52% of all Tock’s customers in the US, 24% are wineries, the rest are pop ups, events, bars, hotels, distilleries, cafes etc. It is possible that diversification helps Tock to stay competitive.

Toast Tables as mentioned above has just entered the reservations business a little over a year ago. It has some restaurants across the US, and since Toast already has over 60K of customers, we should expect more and more restaurants to start using Toast Tables as their reservation provider of choice.

Sevenrooms is a niche platform, unlike others presented above, they do not display their network to the public. They focus more on the guest management functionality, and use google for marketing. Sevenrooms has a big presence in Las Vegas with 218 restaurants, 155 restaurants in New York (+12% compared to 2 years ago), and Miami (95 restaurants and +3% growth over the last 2 years). Sevenrooms has grown by 30% over the last 2 years in the US, but the biggest of Sevenrooms’ presence has been seen outside the US. The US customers make up only 21% of all Sevenrooms customers. They focus strongly on Australia (with 2,108 restaurants), the UK (1,966 restaurants), and other countries. Overall growth of Sevenrooms is 94% over the last 2 years. It seems that unlike others presented in the US, Sevenrooms really focuses more on the global coverage.

‘Others’ include the long tail of online solutions. The bigger ones are SpotOn (763 customers), QSR Automation (1,114 customers),  Waitlist me (446 customers), Touch Bistro Dine (225), and GuestManager (207). Everyone else has less than 200 customers in the US.

Not everybody is exclusive… 3,434 restaurants in the US use more than one reservation/waitlist provider

Reservation providers cannot expect exclusivity from their restaurant partners. Many restaurants are using more than one reservation provider. Some are just testing a new provider in preparation for a switch, others divide their restaurant availability between multiple reservation providers to maximize the chance of filling up more seats.

Overall 5% of all restaurants with online reservation solutions use more than one provider to help with guest management. 5% translates into 3,434 restaurants including 148 using 3 or more platforms.

Below you can see the summary of major reservation providers with the number of restaurants in each platform using 2+ platforms for reservations/waitlist (as of July 2024). %-ges represent the number of non-exclusive customers from the total number of the provider's customer base.

Thus, OpenTable has the highest absolute number of non-exclusive customers, however, since OpenTable holds 46% of all US market, these 2,532 restaurants are only 9% of the total number of restaurants on OpenTable. On the other hand, there were 1,786 non-exclusive customers on OpenTable just 1.5 years ago. So more OpenTable’s customers are exploring additional options.

SevenRooms, QSR Automation, and Yelp have the highest number of non-exclusive customers from their total number of restaurants.

22% of Sevenrooms customers use somebody else. It may be due to lack of network on Sevenrooms, customers are seeking additional options to get diners.

19% of Yelp’s customers are non-exclusive. It can be due to rapid growth of Yelp’s customer base, some restaurants are still testing Yelp, and not ready to give up their steady relationships with other platforms.

Being non-exclusive, is it good or bad? It depends. For the restaurants, it adds complexity to table management, it may increase the number of diners, but it may come down to lost opportunity when they are limiting availability on a high-traffic platform and miss out on potential diners. For reservation providers, it keeps them on their toes, so that they try to increase stickiness of their product, make sure there is functionality parity with the competition. Everything to keep customers exclusively.

To summarize, let us go back to the questions at the beginning of this article

With Tock’s acquisition by Amex, Toast offering reservations, and Yelp finally partnering with Google, there is much more competition on the US restaurants reservations market, but are there more restaurants to serve?

There are -11% less sit-down restaurants in the US versus 2 years ago. More and more restaurants see the value of online presence and technologies to manage the books. There are 61,739 restaurants in the US using online reservations or wait list which is +37% compared to 2022. And these are only 19% of all sit-down restaurants in the US. Of course, not all of the remaining 81% need a reservation, but there is still a big pool. So yes, there are some more restaurants to serve even with the overall decline of restaurants.

Will providers have to fight for less restaurants with more features and lower prices?

With Toast Tables entering the market and Yelp strengthening its position, restaurateurs have more choices. So it may be that the lever is in restaurants’ hands, there is more negotiation power on the restaurants side. We see more and more providers offer flat rates, waived fees in return for longer contracts etc. Online waitlists, events and ticketing are now widely offered. Thus, while more restaurants choose to use technologies, there are still top restaurants that everyone wants to have on their network. So the competition is on.

And will the big players manage to increase stickiness of their products and hold on to their restaurant partners?

Those who adapt to the customers’ needs faster will get to grow, others may stagnate. From the data we can clearly see that Toast Tables grew from 0 to 3K in just a little over a year by offering more features (reservations, waitlist), and Yelp has finally displayed reserve button on google search and google maps, which allowed  them to grow to 8K+ restaurants in one year.

As for OpenTable, they are still the leader and the pioneer of the reservation business in the US. They continue to grow and offer the biggest network of restaurants for their diners. They constantly offer new features, announce new partnerships and integrations. So they are definitely adapting to the new competitive world.

Since Amex bought Tock, we may expect a slow merger of Resy and Tock making them the second biggest reservation platform in the US. It strengthens their position on the market.

Both Booking Holdings and Amex are big holdings with their own advantages and disadvantages. However Booking Holding is a hospitality company with focus on hospitality while Amex is a finance company with focus on credit cards. Each holds its own niche.

The competition landscape is changing. New competitors enter the market. Google Reserve is changing the reservation business for diner’s convenience, ease of new reservation companies to enter the market, but also stronger competition among providers. Every online reservation platform has unique competitive advantages and a specific niche. But it's the topic for another article.

Article is prepared using public data from Google, Yelp, TripAdvisor, Resy, Tock, Sevenrooms, Wisely, Toast Tables, OpenTable collected in July 2024, January 2023, July 2022 by Analytics.restaurant