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Sabre Holdings Corp. Trying to Translate its
 Expertise in Travel Technology into Retailing
By Suzanne Marta, The Dallas Morning News
Knight Ridder/Tribune Business News

Mar. 28, 2005 - Sabre Holdings Corp. is trying to translate its expertise in travel technology into retailing.

The Southlake-based company "has moved into a new stage of life," chief executive Sam Gilliland told Dallas Morning News reporters and editors last week.

"We have a lot of travel shopping and travel buying data, and we're trying to marry that with customer data," he said.

That means pitching travel directly to customers who are likely to go somewhere, rather than just waiting for orders to come in.

The heart of the company is the Sabre Travel Network, accounting for more than 67 percent of revenue, and serving 60,000 travel agencies worldwide.

Mr. Gilliland said Sabre wants to sell packages -- including plane tickets, hotel reservations and car rentals -- through its network of travel agencies.

It's a practice the company has been honing at Travelocity, Sabre's best-known consumer brand. The No. 2 player in online travel is "clearly the growth vehicle" for the company, Mr. Gilliland said.

Sabre's smallest business is the Sabre Airline Solutions unit, which sells operations technology to airlines.

Mr. Gilliland said business has been under pressure as airline customers continue to scour their operations for any way they can find to cut costs.

Sabre employs a workforce of about 6,700.

Here are some excerpts from Mr. Gilliland's conversation with The News.

QUESTION: Sabre was able to keep its airline booking business in place after its global distribution system was deregulated through three-year agreements. What happens this fall, when the first of those agreements expire?

ANSWER: We have been in discussions with many of the airlines about new pricing structures. One of the concepts is a value-based pricing structure.

In the past, we had to charge the same thing to every airline, whether it was an itinerary between Austin and Dallas or Dallas to London. It's expensive for an airline to pay $8 on a ticket that is $80. With value-priced pricing, we could offer less for short-haul trips and more for long-haul trips, but our overall average would stay around $10 a trip.

There's also an opportunity to bundle booking fees with other products, like using Travelocity's hotels or powering their Web site.

We never had that flexibility before deregulation.

Q: Do you think you attract more low-cost carriers with different pricing?

A: I think we can attract them. They're going through the same network problems as the major carriers. Independence Air came to us because they needed more distribution to corporate customers. You can generate a lot of leisure business on the Internet, but it's very difficult to distribute the product to corporate travelers without a system that distributes to corporations.

Q: Why wouldn't airlines just focus more on having people buy tickets from their Web sites, where their distribution costs are lower?

A: Airlines typically get two times the ticket price sold by an agent than they do if it's bought online. When you call an agent, usually the first choices you get are nonstop. Online, you have visual guilt, so you can see that's $500 for nonstop; $350 for a one-connect, or $250 for a two-connect. The yields for the airline are higher through an agent.

If you sell a $400 ticket through an agent, rather than selling a $200 ticket online, there's a lot of room in that $200 difference to pay our $10 [booking fee].

Q: Could you give us a sense of the future for travel agencies?

A: Five to 10 years ago, when airlines were taking commissions down, and eventually eliminating them, we were getting a lot of questions from Wall Street about when the lights were going to turn off at the last brick-and-mortar agency. The number of travel agencies did go down, but it's surprising how resilient they've been. They've changed their business model.

It's not just about answering the phone anymore, it's how do you market travel? By phone? By e-mail?

The mom-and-pop agencies will now charge a fee to provide their service. The do-it-yourself bookers will sometimes look for several hours to pick their itinerary. But there are some people who are saying, I'll just pay the $20 instead.

Q: Do you think you'll get to the point where you're selling food as part of a travel package?

A: We haven't been as aggressive about that. It's harder because restaurants aren't as automated as hotels or car rentals. In Las Vegas, we're selling show tickets. We'll sell you music for your iPod that's about Las Vegas. If you want to see Hoover Dam, we'll sell you a tour. We're trying to surround the traveler with the whole travel experience.

Q: The three types of businesses you've talked about are focused on different sets of customers who have different expectations. How do you foster a culture where that works?

A: We do have businesses with different objectives, and in some cases you could say there are some conflicts behind the objectives. In Travelocity Business, we're saying, go out and sell like crazy to corporations. And with our travel network business, we're saying, go out and sell tools to corporate travel agencies to help them compete.

We need to allow the business units to focus on their business and their objectives, almost unencumbered. We will often times bring the three groups together and say, there's probably a bundled opportunity here.

But sometimes we simply say, go off and do it on your own -- if that's the best thing for that business and it isn't harmful to the other business. We don't want to be burdened by a corporate structure.

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To see more of The Dallas Morning News, or to subscribe to the newspaper, go to http://www.dallasnews.com.

Copyright (c) 2005, The Dallas Morning News

Distributed by Knight Ridder/Tribune Business News. For information on republishing this content, contact us at (800) 661-2511 (U.S.), (213) 237-4914 (worldwide), fax (213) 237-6515, or e-mail reprints@krtinfo.com. TSG,

 
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