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Sunday, June 24, 2012

Flashback 1995 - This is not a drill. This is not a drill.

Retrospective - Part 3 of a 4 part series
(for Part 2 click HERE)



In my last blog, we talked about how mini-computers impacted the travel ecosystem and how they helped travel agencies consolidate booking information from multiple sources for reporting and accounting purposes.

They vastly improved productivity, accuracy and timeliness and were especially useful for those agencies and TMCs that had multiple GDS systems and multiple offices.

At the end of the last part of my tale, I talked about Terry Jones and his band of innovators known as Sabre Interactive.  As early as the late 80's, they had already experimented with consumer direct and corporate direct and just 557 miles north, Timothy O'Neil-Dunne and his team at TWA PARS in Kansas City had already released Commercial PARS, reportedly months ahead of Sabre.  Both used the new networks, Compuserve and Prodigy, precursors to the Internet that would soon become ubiquitous.

The travel agencies watched with amusement and some modicum of concern about the new technology.  Most of them still were using what we called "dumb terminals" with monochromatic green screen displays and cryptic (but fast) entries to accomplish availability entries, PNR building, pricing and ticketing and were not equipped to "dial into" these new networks.  Most had little desire to do so, even if they could.   They saw these tools as slow and clunky and didn't sense any impending danger.  They certainly didn't know that they were in harm's way.


As certain a threat as was the Japanese submarine that had John Wayne's cruiser in its sights in the 1965 classic "In Harm's Way",  this new technology would threaten the very existence of the traditional travel industry.  It was not a drill or a passing fad.

In 1997, there were more travel agents than there had ever been, but it wouldn't be sustainable.  In the US the number was 47,286.

As Travelocity and Expedia were launched in the mid-90s, Jones and O'Neil-Dunne were on those respective teams, bringing their GDS expertise to bear on this new channel.

The early iterations of these systems were very focused on function and information, versus their marketing and advertising focus of today.



Meanwhile, suppliers quickly responded to the Internet craze and moved toward launching their own booking sites online for consumers, competing with Travelocity and Expedia.  These new tools had been so successful commercially, that a group of airlines in the US decided to launch a competing effort, codename Travelocity Terminator or T2).  Orbitz was born.  The site launched in 2000.

To read about the pedigree of each of these sites, click on the links provided.

The first bomb had hit the bow of the agency "boat".

The real culprit wasn't the Internet itself, or even the new Online Travel Agencies (OTAs).  Commissions had been capped and then cut on domestic air tickets.  Some airlines had even cut them on international tickets.  This severely cut into the revenue stream of travel agencies.  Those who refused to charge service fees or who did not shift their sales away from air to leisure travel products, such as tour and cruise, were soon out of business.

By 2000, the number of travel agencies had already declined by nearly 25% to 38,861.  Wait.  Was that 25% in just 5 years?  

The Internet forever changed our industry.  But as they say, "you ain't seen nothin' yet!".

Mobile and social were still to come, as was the revolution by the airline industry against the GDS for their "high" booking fees" and the ensuing war, dragging in the Department of Justice and multiple courts around the country to solve dispute between (former) parents and their disowned children.

Never mind that the agency community was bringing in a higher average ticket price on both domestic and international tickets than Orbitz or their own airline sites.  I won't get into that here, but for details and stats from the Airlines Reporting Corporation (ARC), see the latest blog series on Making Sense of Airline Distribution, beginning with the blog on Anti-disintermediation.
Tomorrow the last blog in this series will talk about the current state of the travel distribution ecosystem and give you a peek into what may happen when Apple perfects Siri for the travel industry.  

I think I will entitle it The Travel Industry Odyssey.

Stay tuned.









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