Key Travel Technology Trends

1
Key Travel Technology Trends

• Cold Trends
• Webfares
• True Direct Connects
• Hot Developments
• GDS Deregulation
• Business Process Outsourcing
• Growth of the Online Market
• Agencies as Merchants
• Movement Offshore

2
Cold Trends

• Webfares
• Airlines successfully leveraged these to lower
  GDS costs
• All major airlines now publish webfares in the
  GDSs
• GDSs have reduced costs, improving efficiency of
  the channel
• Webfares still of value for hotel and car
  inventory
• True Direct Connects
• One of the most misunderstood terms in the
  industry
• No real financial benefit today (increases costs
  for agencies)
• Value potential post GDS deregulation
• Industry really needs GDS switching and cross GDS
  reservations
• Good chance your major suppliers will be in at
  least one GDS

3
Hot Developments GDS Deregulation

• New regulations in effect August 2004
• No longer mandatory to participate
• Pricing based upon the market and no longer fixed
• GDSs can bias screen displays
• Major airlines will stop participating in all
  GDSs
• Low cost carriers have been doing it for years
• Schedules only
• Agencies will change the way to access inventory
• Cross-GDS shopping and booking
• Merchant model pricing
• Desktop no longer owned or controlled by the GDS
• GDS incentives will disappear

4
Hot Developments Business Process Outsourcing

• Traditional agencies need to reduce their costs
  significantly to compete against new entrants
• Process reengineering and investment in
  technology
• Advantages of scale and focus
• Moving from fixed expense to variable
• Process outsourcing has become main stream
• Payroll, hiring, security, technology are
  commonly outsourced
• All online agencies have outsourced all, or
  components of, processing and customer care
• Companies are outsourcing critical services to
  create more value and to focus on revenue
  generation and business strategy
• As agencies outsource
• Reduces costs to their corporate customers (5 vs
  20)
• Improves service levels
• Provides better products and services

5
Hot Developments Growth of the Online Market

• Expedia, Travelocity, and Orbitz
• Small and mid-market companies are the new
  frontier
• Well capitalized and focused
• 23 of corporate travel purchases are online
• Compelling proposition
• Lower cost for fulfillment (5 25)
• Increased access to better rates and fares
• Higher adoption levels
• Solid and proven technology
• Requirements
• Standardization
• Loss of negotiated programs
• Limited policy enforcement
• Acceptance of a different type of service

6
Hot Developments Agencies as Merchants

• Race to 20B
• Traditional and online agency consolidation is
  inevitable
• Expedia, American Express, SABRE, Cendant, BTI,
  Orbitz leading the way
• Growth through acquisition is hard and expensive
• Need for identifying additional sources of
  revenue
• GDS incentives are going away
• Airline rebates are getting smaller
• Transaction fee price pressure continues to build
• Merchant model is part of the answer
• Leverage buying power to negotiate rates and
  access to inventory
• Rates and fares are marked up at the point of
  sale
• Agency negotiated discounts
• Packages
• Requires new retailing competencies

7
Hot Developments Movement Offshore

• Cost advantages are incredible
• Salary levels 10 of US
• Huge available labor pool
• High degree of education and willingness to work
• Any labor intensive process is under
  consideration
• Technology and programming
• Accounting and manual processes
• Call centers and customer care
• Traditional agencies have been slow to adopt
• Dependency upon the native GDS requires high
  level of expertise
• Several have tried and failed (Carlson, Amex) due
  to this reason
• Huge investment and high level of risk
• Needs the right combination of technology,
  partnership, and processes management