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Did Priceline Spend Too Much Buying OpenTable?

NEW YORK (TheStreet) -- I was very intrigued by the news Friday that online travel pricing site (PCLN - Get Report) is spending $2.6 billion to buy online restaurant reservation site OpenTable (OPEN).

When you have a deal like this there is always the issue of the impact on shares of the companies themselves and the impact on competitors, plus the question of whether Priceline spent too much buying OpenTable.

So I'm asking myself these two questions:

  • Why did Priceline buy OpenTable? 
  • What impact does the Priceline purchase of OpenTable have on their own stock prices, as well as the stock prices of their competitors?

Why Did Priceline buy OpenTable? With strong competitors such as TripAdvisor (TRIP), the trek to become the number one global online travel booking company can be made easier by automatically adding local dining to already established local lodging and transportation offerings.

OpenTable does local dining well and almost inconspicuously to the hungry diner. Last weekend, my party of four and I decided to dine at Katsuya on Vine in Los Angeles. (If you haven't been, go. You'll likely run into an actor, musician, or otherwise artistic notable person, and you'll see Rita Hayworth's star right out front.)

OpenTable popped up from the Katsuya Web site and with a few, quick keystrokes, we were set for an 8:30 p.m. reservation and happily on our way. In the meantime, OpenTable gathered my personal information for future use -- to upsell future restaurant events and more. 

This from the OpenTable Web site: OpenTable empowers your staff by collecting useful information on each guest: a favorite wine, a food allergy, a special table or occasion.

OpenTable has a no-show rate of 5%, which is much better than industry standard. OpenTable says that only four of nine callers/emailers complete their reservation if they are delayed or put on hold. And OpenTable notes that one-third of their reservations are booked between 10 pm and 10 am. That's huge because that is a time period when restaurants are not likely answering their phones. Imagine any restaurant not getting one-third of its intended reservations.

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