iSeatz sits pretty in N.Y., but misses N.O.

Revenue mushrooms after Katrina move

By Pam Radtke Russell, Business writer

Before Hurricane Katrina hit, New Orleans-based iSeatz was relatively content booking restaurant tables online for $2 an honored reservation.

But when the city flooded, and the company was forced to relocate to high-cost New York, $2 a table didn't seem like much.

"Being kicked out of home was really a jarring experience," said Kenneth Purcell, founder and president of iSeatz.

The astronomical costs of Manhattan forced Purcell to take risks he wouldn't have taken in New Orleans.

"Honestly, before Katrina we would have said we don't do hotels or rental cars," he said of his company.

While relocated, Purcell accelerated the company's foray into other travel booking. Compared with $2 a reservation for restaurants, online travel agencies earn as much as a 30 percent commission for booking travel, Purcell said.

The company had started working with Expedia and Orbitz by 2003. But after Katrina, the company started tailoring their offerings to different vendors such MasterCard.

Most recently, the company started providing travel-related services to Delta.com customers.

Through Delta's Web page, iSeatz technology allows people who book their airline tickets to also reserve everything from hotels and ground transportation to tours of Hollywood stars' homes and and carbon offsets -- or purchasing reductions in greenhouse gases.

Purcell, who won't reveal his company's exact earnings, says that before Katrina, iSeatz's revenue was in the "lower digit millions." But since then, iSeatz's gross revenues have increased by more than 1,000 percent, he said. He's also increased his staff from five before the storm to more than 50, including contract workers.

Its success in New York aside, Purcell said his startup technology firm is considering returning to New Orleans in the near future.

"The real advantage (of New Orleans) is quality of life and cost of living," Purcell said. "No matter how much money you make in New York, you can't drive down St. Charles Avenue. You can't have a slow-paced walking day."

The company currently is talking to the city of New Orleans and GNO Inc., the local economic development group, about the possibility of its headquarters returning.

Pam Meyer, director of business development for GNO, said iSeatz has been told of all of the incentives that would be available to it if it relocated to New Orleans.

Meyer said she's excited about the prospect of iSeatz returning to the city.

"I think it's a great sign," she said.

"If we're going to have a more progressive economy, we need this sort of creative entrepreneurial technology," she said.

But even if its headquarters don't return, the company will continue to expand in New Orleans, with more iSeatz employees in the city than there were before storm. Ten people work in the company's office in CanalPlace, and Purcell plans to add four more in the New Orleans office by the end of the year.

Custom site offerings

What iSeatz does is difficult to explain. The company not only provides the technology to various companies to be able to sell hotel, plane and restaurant reservations on one site, it also puts together customized offerings for Web sites and notifies everyone about upcoming reservations.

All of that is done without ever leaving the site a person is viewing, Purcell said. All of the reservation requests made on Delta.com or MasterCard's priceless.com, for instance, are sent by encoded message to iSeatz, which then processes them.

"You never really know you're using iSeatz," he said.

Henry H. Harteveldt, vice president and principal analyst of travel research for Forrester Research in San Francisco, likened using iSeatz to shopping in a department store and picking up a shirt, shoes and socks in different parts of the store, then paying for them at one counter.

"It gives the customer a chance to say 'yes' " to booking something other than airline reservations without ever leaving the Web site, he said.

"People who make reservations on Delta.com often want to book ancillary services, and they look to other ways online to find those," said Joel Weiss, managing director of Delta.com. Weiss said the company wanted to offer their customers those services without having to leave the Delta site.

Harteveldt doesn't expect people will visit Delta.com simply because of the added features. But he said the added features should keep customers on Delta's Web site instead of going elsewhere.

Weiss said there's a big upside for Delta too. The company can make money by booking hotels and other services through the site.

On its own, booking airline tickets is not usually a profit maker, Harteveldt said. But by cross-selling other products, airlines can make "tens of millions of dollars," Harteveldt said.

Only about 1 percent to 3 percent of customers who book on airline sites currently take advantage of cross-sell offers, he said.

If Delta, through its additional offerings, can increase that to 5 percent or more, it "will stand to make a nice bit of incremental revenue, and iSeatz will make revenue," Harteveldt said.

That increase wouldn't be a stretch. About 29 percent of all leisure travelers book online, up from 11 percent in 2002, he said. By 2009, online booking will account for one-third of all leisure traveling, according to Forrester Research. Harteveldt said 55 percent of leisure travelers research their trips online, and about $86 billion worth of online travel was booked last year, he said.

'A lot of vision'

Weiss said Delta chose iSeatz because it was fast and flexible, and could give the company what it needed quickly.

"iSeatz came to the table with a lot of vision and energy," he said. "They really had a long-term view of what this thing could be."

Without iSeatz, Delta could have worked with Expedia or Orbitz, but those companies would not have provided what iSeatz offered and would have cost more, Harteveldt said. Though it's too early to tell how well Delta's enhanced site is doing, Weiss said the company has definitely seen a positive reaction.

"Customers seem to be really reacting," he said.

Purcell said his company is in discussions with other airlines to provide them with similar services.

Harteveldt expects it won't take long for other airlines to follow Delta's lead.

"This is the direction that airlines should go in," he said.

And iSeatz is continuing talks with those in New Orleans about where it will be permanently located.

Purcell said one of his concerns is being able to hire the type of employee his company would need.

Meyer said other technology companies are successfully hiring new employees, and with more creative people coming to the city, "wanting to make a difference, I think you're going to see more of this here," she said of the prospects for iSeatz and for more creative technology companies to relocate to the area.

Purcell also is trying to convince some of his top executives, many of whom he recruited while in New York, that New Orleans is the best place for the business.

"It was never my intention to leave New Orleans," he said.