When New Orleans native and entrepreneur Kenneth Purcell founded iSeatz in 1999 with $2.8 million from local investors, it was one of the first online restaurant reservation systems on the market.
A few years after launching, however, Purcell realized the startup needed to generate more revenue than just a dollar or two per reservation.
So, he pivoted to a commission-based model and built a platform to sell hospitality-related products like fixed-price meals, car rentals and hotel reservations. The timing was ideal. A growing number of consumers were turning to the internet to plan and book their travel.
In the two decades since, the New Orleans-based tech company has continued to grow and evolve.
Today, its bread and butter is connecting brands that offer membership or loyalty programs — think frequent flyer miles or credit card points — with a global network of suppliers of travel and hospitality products, including airlines, hotel groups and car rental companies.
In recent years, those programs have become big business, shadow currencies worth more than $100 billion, according to some estimates. Marriott alone owes its customers nearly $4 billion in unredeemed points.
iSeatz’s platform allows these membership programs to build out custom marketplaces of offers and integrate them with suppliers around the world. It works with a global network of suppliers to identify potential deals that they can then pair with point issuers like big airlines, hotel groups or credit card companies. It also manages the complex systems that keep track of billions of membership points that flow through its system and how they’re “earned and burned.”
This year, the company expects to process $12 billion worth of transactions for global brands like American Express, Delta Air Lines, Hertz and Wyndham Hotels. It has nearly 120 full-time employees, including a couple dozen in New Orleans, and approximately $100 million in annual revenue.
In this week’s Talking Business, Purcell shares how he has built a “platform-as-a-service” to offer customized software for travel companies and collect a cut of all transactions on them.
Interview has been edited for length and clarity.
What prompted the business’s pivot from online restaurant reservations to loyalty points?
When you’re on the bleeding edge of something, well, you typically bleed. We bled all the capital that we had raised, and we had to pivot the business model because restaurant reservation economics are pretty paltry. So, we followed the market, and the market in the travel industry is all about taking a commission on everything you sell. We said, “Maybe we can take a commission on pre-selling prix fixe menus at restaurants,” so we started making 20% there.
Then we said, “What else can we presell?” We listened to our prospects and our existing clients for what lines of business we should offer.
Delta came to us and asked if we could start offering rental cars through our platform and hotel reservations, and we said yes. American Express came to us and asked if we could start offering airline reservations? We said yeah. “Can you enable people to pay with their credit card and with points?” We said sure.
What’s been the result of the growth in the use of airline miles and other forms of loyalty points in recent years?
There’s this whole ecosystem that’s developed — a cottage industry of analysts to help maximize the value of this loyalty currency. You’re seeing the importance of loyalty currency bubble up even to the federal level. The thing the government’s concerned about is that airlines in particular have been known to devalue that currency by changing the rules and the terms and conditions and effectively gutting the value of some of these things.
The Federal Trade Commission is coming in and saying, “Wait a minute, you can’t do that anymore, because people really do view this as a quasi-savings account.”
There’s an ecosystem of point analysts, and there’s this glut of points on the balance sheets of these companies. And we’re in the business helping people either earn more or use those.
In terms of starting and running a business based in New Orleans, how has that ecosystem changed since you began?
I love New Orleans for what she should be, not for what she is.
The challenge in running a business here is a tremendous lack of progressive thinking. If you try to get something done as simple as construction on your home, you have to go in front of so many commissions and preservationists — even if you’re not in a historic home — it’s almost not worth investing. It’s almost as though the administrations of the past have designed the system to prevent investment and growth and progressiveness.
You don’t have to just believe me: We went from a 21,000-square-foot office to a few-hundred-square-foot office. We’ve got 119 full-time employees and less than 20% of them work in New Orleans.
For me, New Orleans is where I choose to live, and it just so happens that I run my business from there because I run my business from my house, effectively. Honestly, I have been, and I continue to be, woefully disappointed with the way the city operates from a business perspective. There are great business leaders in the city, but there’s this parochial colonialism that’s stifling to progress. We’d rather leave a dilapidated building than see someone invest in it and create something with maybe a little bit more concrete and glass than everybody likes.
What advice would you give to someone who is launching a business now? What lessons have you learned they could benefit from?
The No. 1 lesson: It’s almost impossible to know at the onset and hindsight, probably, to figure this out — make sure when you’re getting into business with people and you’re starting your company that you really know who those people are.
When money starts flowing and a business becomes successful, you see a side of people that you don’t see when you’re excited about starting something and there’s no money involved. You really see the worst of family and friends when money starts to flow, and you need to make sure as a founder that you’re getting in business with people who share your mentality.
