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Priceline and OpenTable: Branding Benefits Behind the Acquisition for the Traveling Foodie

Priceline and OpenTable: Branding Benefits Behind the Acquisition for the Traveling Foodie Priceline and OpenTable: Branding Benefits Behind the Acquisition for the Traveling Foodie
09/15/14
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by Eunjin Koh
A few years ago, making dinner reservations meant calling the restaurant directly. However, recently I find myself redirected to OpenTable to easily make reservations without the burden of making a phone call. To me, OpenTable does not ring a bell as having a particularly strong business model. It is a simple Internet tool that allows me to make online reservations. It’s convenient but not powerful.

So this past June, 2014, when Priceline announced acquiring OpenTable for $2.6 billion, I was intrigued by an unlikely decision and its staggeringly high valuation. What kind of added value could result for either company? Would this strategy be mutually beneficial in the long term? Acquisitions are not new – we are familiar with established companies acquiring smaller, unique businesses to stay relevant. However, the deal between Priceline and OpenTable struck me as unprecedented because the two are not in the same online industry. One is related to travel services, while the other strictly provides restaurant reservation services.

Many business analysts have stated that this acquisition allows Priceline to expand its business and enter into the online restaurant reservation category, of which OpenTable is currently a leader in the United States (Source: Forbes, 2014). Many travelers are most likely interested in trying new cuisines and eating the best food each destination has to offer. Priceline can integrate OpenTable’s services with its existing products to make more convenient, more comprehensive travel experiences for its users. For OpenTable, the parent brand can help the restaurant reservation business grow internationally. There are clear financial benefits for both brands with this deal.

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Other than the aforementioned business benefits, Priceline can refresh its brand’s image with OpenTable. It is fair to say that Priceline is a more established brand. The brand was founded in 1997 and went online in 1998. As a result, Priceline is more well-known than OpenTable which was founded a year later but only premiered a limited selection of restaurants in the Bay Area at its inception (Source: Wikipedia/OpenTable). However, the online travel industry is crowded with many competitors, making it harder for Priceline to stay differentiated.

Using our BAV Data, we can see that Priceline has remained in the “Commodity” or “Eroded” market –meaning its brand stature is greater than its brand strength. This demonstrates that the brand is well-known and established but its future growth momentum – as indicated by differentiation – is low. Also, when we examine Priceline with our BAV Brand Pillars, we can see that knowledge is higher than esteem – meaning the brand is more known than it is liked. In other words, Priceline is established but may not resonate strongly with the public. This is a major risk for brands trying to stay relevant.

BAVModelPOT

On the other hand, OpenTable which was founded in 1998 has been able to maintain its uniqueness over time. Our BAV Data shows OpenTable in the “Niche” or “Unrealized Potential” market, whereby its brand strength greater than stature. This means OpenTable has great momentum to expand. The brand is firmly differentiated from others and resonates strongly with consumers. This perpetuates peoples’ curiosity towards the brand.

In sum, it seems that both companies can reap the benefits of this acquisition. Priceline can stand to benefit from OpenTable by keeping its brand relevant in the crowded online travel agency industry. It’s interesting to delineate how the merging of two companies can not only yield clear business benefits such as higher profits, market expansion, and reduced costs, to name a few, but also can lead to significant effects on brand perception. The longevity and future impact on brand health of the fusion of these online travel and food services remains to be seen. But hopefully Priceline can expand OpenTable’s potential further and leverage its uniqueness without eroding the restaurant reservation service brand. Cheers and happy travels!

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