Travelers generally like to dine as part of their trips—an inescapable fact that Priceline Group (PCLN) sees as a sizable opportunity and justification for adding OpenTable (OPEN) to its travel-booking ecosystem. Priceline is buying the online restaurant-booking company for $2.6 billion cash, a nearly 50 percent premium to its closing price on Thursday.
“It’s the same customers,” Priceline President and Chief Executive Darren Huston said on a conference call. “Travelers are diners. And in fact they’re some of the most valuable diners, because they’re transient diners. And we believe that there’s opportunity to cross-promote the OpenTable and the rest of the groups’ brands to the same customer base.” It’s certainly no stretch to equate the phrase “transient diners” to the concepts of “upsell” and “higher-margin” in the context of a Priceline customer.
A few analysts raised eyebrows over the steep acquisition price and the question of why Priceline didn’t use any of its sky-high shares in the purchase. But the deal seems poised to deliver a heavy dose of international growth and new opportunities to expand mobile bookings and Priceline’s future moves into other travel-related e-commerce offshoots. ”It isn’t like going from Venus to Mars,” Huston says of the leap from booking hotels to tables. “It’s actually a fairly strong adjacent space.”
OpenTable says it books more than 15 million reservations each month at 31,000 restaurants, mostly in the U.S. It has expanded overseas so far to London, Canada, Germany, Japan, and Mexico without gaining much traction in those markets to date. Becoming part of Priceline, which touts its local language and currency skills in major markets worldwide, is expected to help the reservation service expand quickly. Huston also hinted that OpenTable could, over time, begin serving more casual restaurants that don’t take reservations but may still seek to manage their table inventories to improve business.
Priceline executives dismissed the notion that OpenTable is just a way to keep up the pace of torrid growth over the past decade. Priceline has acquired reservation sites such as booking.com, Agoda, and Kayak in that span, and its stock has surged to more than $1,200 per share. Investors value its deep reach in Europe and Asia and the company’s expertise in adding new lodgings—regardless of how remote and technically rudimentary they may be—into a digital platform to connect with global travelers.
The OpenTable deal was the second acquisition of the week for Priceline. On Tuesday, the company bought Buuteeq, a Seattle digital-marketing company that builds software tools for hotels.
Shares of San Francisco’s OpenTable jumped 48 percent to reach the purchase price, $103. Its current management will continue to run the business within Priceline.