Putting A Keener Edge On SabreWendy Zellner
You might expect AMR Corp., parent of American Airlines Inc., to be giddy over the Internet. After all, some industry experts predict that this vast, public computer network could save airlines billions of dollars in commissions by helping them sell tickets directly to individuals and corporations instead of through travel agencies.
The Net may indeed mean good things for American, but it could spell trouble for another AMR unit, the $1.5 billion SABRE Group and its SABRE Travel Information Network, a computerized reservation system (CRS) that processes 44% of travel agents' airline bookings in the U.S. With operating margins of 24% last year, SABRE helped cushion AMR through the downturn in the airline business, where margins were just 4%. Besides serving airlines, SABRE also collects lucrative fees from car-rental companies, hotel chains, and other travel-service providers that use its system.
FURIOUS POSITIONING. The rise of new sales channels such as the Internet and commercial online services threatens to make SABRE's lock on the travel-agency business increasingly irrelevant. Analyst Julius Maldutis of Salomon Brothers Inc. says the Internet could cut the proportion of major airline tickets sold through agents from 90% to 40% in the next three years. "Travel agents are in a very unpleasant place in the food chain," agrees Andrew O. McKee, president of Adventure Media Inc., which helps tour operators sell via computer networks.
So SABRE is spending millions to better reach consumers directly--even as it continues investing in its traditional travel-agency business. It's revamping easySABRE, a decade-old system that reaches consumers via online services, and it plans to start selling tickets over the Internet next year. It's also trying to forge alliances with key players such as Microsoft Corp. and Time Warner Inc. "We think we understand better than most how consumers buy travel," says Michael J. Durham, chief executive of the SABRE Group since last March. "Thus we think we can do a better job of providing an electronic medium for them to do it." Once SABRE figures that out, it also must figure out how much it can charge consumers and dream up other revenue sources to make up for the drop in agent fees.
No matter what, players old and new are furiously positioning themselves for a world of direct, electronic travel sales. With commissions and CRS fees eating up about 15 cents and 3 cents, respectively, of every travel dollar, some airlines and hotels are seeking alternatives. By early 1996, Southwest Airlines Co. and The Hotel Industry Switch Co. (THISCO), owned by a consortium of 12 hotels, each plan to start booking reservations themselves via the Internet. Meanwhile Electronic Data Systems Corp., a computer-services giant, has taken a stake in System One Co., the U.S. marketing arm for Amadeus, a European CRS. And United Airlines Inc. has a deal to put a link to its Apollo CRS on the Microsoft Network.
To stay competitive, SABRE must make its system easier to use by average consumers, not just agents trained in its arcane codes. "The [CRSes] are technological dinosaurs," says Charles Zug, vice-president for interactive services at THISCO. Nicholas A. Athanasiou, a consultant at Arthur D. Little Inc., estimates SABRE will spend about $120 million this year on new systems, far more than rival CRS companies. Yet, most of that will go to helping travel agencies.
There's still the question of just when masses of consumers will book their own seats. After a decade, easySABRE generates only 1% of SABRE's volume. That's a comfort for travel agents. But they see that a computer-savvy public won't rely on them forever for simple reservations and ticketing. Those who help companies control their travel spending and offer personalized consulting services will always have a role, insists Robert J. Funk, chief information officer at Rosenbluth International in Philadelphia, a big agency. That is, until somebody figures out how to do that on the World Wide Web, too.
New Options in the Air
New ways for travelers to tap into SABRE's reservation system:
Twelve online networks, including America Online and Prodigy, offer access to SABRE's reservation system. Microsoft Network may be next.
BUSINESS TRAVEL SOLUTIONS
New software for PC networks may help corporations bypass travel agents and manage travel expenses better.
Access to SABRE over the World Wide Web will be offered by early 1996 for information and ticketing.
DATA: AMR CORP.
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