Travel Industry Gears Up For Changes

Web services and modern IT systems play leading roles in drive to cut costs

Tony Kontzer, Contributor

May 7, 2004

3 Min Read

Big changes in the travel industry are expected to accelerate free-marketplace dynamics and lower costs for airlines and travelers. They include an evolving landscape for how airfares and hotel rates are distributed, updated IT systems, and adoption of industry technology standards based on the XML Web-services language.

One reason for these changes is the government's decision earlier this year to deregulate companies that aggregate and distribute pricing and inventory information for the travel industry, which include Amadeus Global Travel Distribution, Cendant's Galileo International, Sabre Holdings, and Worldspan. This ends 20 years of regulation that was put in place to prevent distributors from favoring specific airlines, which at one time held majority ownership of those companies.

Deregulation removes federal rules, such as standard pricing, and eliminates costs associated with compliance. It's expected to allow for wider dissemination of Web fares and create more competition, resulting in cuts in the booking fees airlines pay distributors. The travel industry contends deregulation will ultimately mean lower costs for consumers.

The combination of deregulation and increased competition from Web sites that also distribute fares and inventory data, such as Expedia and Orbitz, has prompted Sabre to revamp its distribution system. It's phasing out older IBM mainframe technology in exchange for a services-oriented architecture that delivers information and applications to travel agents and other business partners as modular, customizable Web services, says Sabre chief technology officer Craig Murphy. "My goal is to provide my business with the best possible platforms; I don't think that's the legacy environment," he says.

Murphy shared details of Sabre's new environment--which bets heavily on XML and Linux and is in limited operation--last week at research firm PhoCusWright's TravDex conference. Meanwhile, Cendant said it would migrate its distribution system to IBM eServers running Linux, a move the company said will cut IT expenditures on the system by 90% over the next three years.

Jeff Pogemiller, VP of information systems for Choice Hotels International, operator of the Clarion, Comfort Inn, and EconoLodge brands, anticipates that the revamped Sabre system will mean speedier updates of rate information it supplies to Sabre. That will help ensure that the rates Choice offers through its Web sites and other sources are consistent, Pogemiller says.

With its new system, Sabre is one of the first companies to commit to the use of an industry-specific version of XML being developed by the Open Travel Alliance consortium. Marriott International Inc. and Cendant Car Rental Group Inc. said they will use that XML version to varying degrees for direct links with distribution channels. The technology is ready for use as a standard for moving data among suppliers, intermediaries, and distributors, said John Turato, VP of technology at Cendant.

Spirit Airlines Inc. CIO David Anderson applauds the changes and expects lower transaction costs and more control over sales of Spirit's airline seats. "We want to be on as many shelves as we can so long as the economics make sense," he says. "The current economics of the global distribution systems make sense some of the time."

Meanwhile, Sabre is aligning itself with the new Web distribution systems. It owns one site, Travelocity, and last week signed a five-year deal to process bookings for Expedia. Says Norm Rose, principal of Travel Tech Consulting: "Sabre is trying to make sure it stays relevant."

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