Internet sets new route for travel industry

TORONTO — Though the fundamental issues of booking travel remain, the Internet’s arrival has radically altered the industry’s landscape, empowering consumers and subverting incumbents in favour technology-based players, an audience at Travel Technology 2002 heard Wednesday.

In the conference’s

opening keynote, Philip Wolf, president and CEO of Sherman, Conn.-based online travel research firm PhoCusWright Inc., acknowledged the travel business is still governed by economic cycles, load capacity and occupancy factors, regulation and price competition.

But he said the introduction of e-commerce has forced travel companies to adjust their businesses, and has brought changes to the travel’s industry’s pecking order. At the same time, the Internet has ushered in new levels of convenience and control for consumers, who can receive a summary of nearly all available price choices in seconds, and can be e-mailed and paged with the latest price updates

“”That summary of price choices is not humanly possible,”” Wolf said, saying even the world’s fastest travel agent could not come close to offering the same amount of information in such a limited time. “”Capitalism thrives on friction reduction, and there hasn’t been a lubricant in our industry like the Internet since oil itself was discovered.””

This lubricant has made giants out of companies like Sabre Inc., Cendant Corp. and USA Networks Inc., while the industry’s former rulers — American Express Co., Liberty Travel Inc. — have seen their control wither, Wolf said.

Sabre is one of four global distribution systems that dominate online travel e-commerce and services, the others being Worldspan LP, Galileo International and Amadeus Global Travel Distribution SA. Sabre runs the ticketing systems of more than 50 airlines, including American Airlines and US Airways, and also owns B2B reservation system GetThere and, one of the more popular consumer portals for booking flights, hotels, cruises and rental cars. “”In the last 10 years, we’ve moved from beyond a system that sells tickets to marketing the entire experience the traveler has,”” said Sabre vice-president of technology Jim Menge.

Cendant is one of the world’s largest accommodation companies, owning a slew of hotel chains including Days Inn and Howard Johnson, real estate franchises like Century 21 Corp. and Coldwell Banker Real Estate Corp., and relocation and resort properties. It also owns Galileo.

USA Networks has Ticketmaster, the Home Shopping Network and Hotel Reservation Network Inc. “”Watch these constellations,”” Wolf said. “”They’re making history.””

If companies like Sabre and Cendant and USA Networks do end up rewriting the record of the travel industry, it will be because both consumers and businesses continue to gravitate towards the Internet to meet their travel needs. Wolf said US$40 billion will be spent on online travel in the United States this year, up from US$14 billion in 2000. For 2003, Wolf is predicting more than US$70 billion will be spent on online travel worldwide. He added 20 per cent of all travel purchased in the U.S. next year will be bought online, while one third of all online spending in the U.S. is in the travel category. “”Travel is the new economy’s killer app,”” Wolf said.

John James, Worldspan director of e-commerce and worldwide marketing, said he expects U.S. corporations to book 13 per cent of their travel online in 2002, with that figure rising to 18.6 per cent next year. Corporate Canada, he estimates, lags the U.S. by 18-24 months and currently books about 5 per cent of its travel online.

Recent Canadian converts include Burnaby, B.C.-based Telus Corp., which in 2001 spent $60 million on travel. Cathy Pavelich, Telus’ travel manager, said the online booking tool (OBT) provided by Atlanta-based travel agency TRX Inc. is saving Telus an average of $100 per ticket booked. Pavelich had predicted savings of $2 million from the OBT, but suggested that figure could be tripled if early results continue.

“”Once Canadians get the flavour of it, I think there’s tremendous opportunity here,”” said Robert Kokonis, Canadian general manger for Worldspan, which owns the Expedia and Priceline portals.

Most agencies, be they independent or larger like TRX, get their OBT’s from companies like Sabre and Worldspan, while some, like American Express, develop their own systems.

The result, in both cases, has been a massive shift in the plight of the travel agent. As airlines continue to cut commissions, agents are looking to alternative revenues from booking tours, hotels and car rentals. Tracy Cooper, vice-president and general manager of Sabre in Canada, said agents are also increasingly attempting to provide a value add, such as notification of gate or flight changes sent to customers’ wireless devices.

Though he admitted there are more options for hotels than airlines, Wolf argued every sector of travel will eventually be overcome by the global distribution system model.

“”It’s now crystal clear,”” he said. “”If you want to paid for order taking, you must now look to the buy side to get paid.””

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