The first part basically introduced a traditional distribution system with the relationship and related components of network as well as the key historic development in each period of reservation network, including ARS- Airline Reservation System, CRS – Computer Reservation System and GDS – Global Distribution System. The next paragraphs organized to analyze how these distribution channel changes to adapt the new environment along with the advancement of the Internet.
Introduction Nowadays, airline industry become is one of the most integral parts worldwide, not only the major economic force based on its own operations, but also its contribution to relate commercial sectors such as: aircraft manufacturing, tourism sectors This paper has been divided into two main parts The first part basically introduced a traditional distribution system with the relationship and related components of network as well as the key historic development in each period of reservation network, including ARS- Airline Reservation System, CRS – Computer Reservation System and GDS – Global Distribution System The next paragraphs organized to analyze how these distribution channel changes to adapt the new environment along with the advancement of the Internet Computer information and distribution systems in the travel and tourism industry and the diversification of business model to new environment Computer information’s function and key historical development of traditional distribution system In general, there are three main stakeholders are influenced on the distribution within the tourism and travel industry The first of these is suppliers or service providers, including the tangible products (airlines, accommodation providers, transportation companies and attraction & activity providers) and the second is the service beneficiary or customers who have a partnership with the first one To some extent, intermediaries are the last components, aimed “to bring buyers and sellers together, either to create markets where they previously did not exist or to make existing markets work more efficiently and thereby to expand market size” (Wanhill, 1993, p 189) Along with travel agents or tour operators, the Internet has an important function in linking two sides of stakeholder The participant of the Internet and high technology system has given the consumer greater opportunities in which they are able to freely pick and choose reasonable suppliers During much of development, the global airline industry deals with major technological innovations In 1946, American Airlines was a pioneer established the first electrical booking system for managing seat inventory, named Availability Reservisor It actually worked fine and airline staff could make reservation easier However, in spite of a huge innovation, which change the history of airline reservation, it still brought some inconvenient in booking reservation, it was not connected to any network “Throughout the mid-1940s, reservation were recorded manually using pencil to mark up different colored index card know as Tiffany cards” (Gary Inkpen, 1994, p 102), a clerk would complete a card or PNR (Passenger Name Record) and it would be slotted into the board for that particular flight Once all the slots were filled, the flight was full All bookings were relied on telegram as well able to communicate with city of departure so it's very slow and labor intensive, for instance “… to complete a booking for a round trip reservation from New York City to Buffalo required 12 different people performing more than a dozen separate steps over a three hours period – longer than the flight itself took!” (Gary Inkpen, 1994, p 102) As a consequence of the inefficacy of manual systems for the control of seat availability, in the late 1950s, the period of technological advance significantly started with the goal of creating an automated system for the capacity administration American Airlines worked with IBM to develop “Semi-Automated Business Research” (SABRE) launched in 1959 and it is also known as ARS – Airline Reservation System ARS contains information for one airline, separated from other intermediaries as well as usable by a fixed number of staffs in the network Until 1964, SABRE was expanding and telecommunications network set up completed; create the largest real-time data processing system in the world at that time Furthermore, it is highly appealing aim in the industry using a system to track information and enhanced productivity among a consortium of US carriers, therefore; ten year later SABRE joint in an improvement program in 1974 and creating a CRS Air travel information is linked, stored, and retrieved from a network of CRS, used to manage inventory within a network of airline, hotel or hospitality enterprise The most noticeable feature of CRS is accessible by multiple airlines; travel agents and it demonstrate more of a “global” focus In 1975, UA pulled out the consortium and they initiated sought to develop their own machine reservation system At that time, IBM launched PARS (Programmed Airline Reservation System) with airlines such as Continental, Delta & Eastern, TWA & United also signing up to use PARS as a base system following the failure of their own systems In Jan 1976, United installs CRS called Apollo into travel agencies Then, American Airline placed SABRE into retail travel agencies free of charge This service helped travel agents automatically generate their own airline reservations for their clients and gave the major airlines significantly increased sales exposure According to phase in the following table, CRS was co-hosting another airline within the system and it consequently creates the competitiveness “Recognizing the cost reduction and efficiency benefits of these automated systems, smaller carriers without the resources to finance such developments began to contract out their seat inventory and reservation functions to the CRS-owning airlines.” (George H Stonehouse, Jonathan D Pemberton, Claire E Barber, para.3) Table Phases of CRS/GDS development (based on Stonehouse et al., 2001) As a result, CRS was used as a tool for competition that derived “Halo effects”, for example, owned system was biased towards owning airline, allowed rivals to display their flight on SABRE CRS for free but it came with a catch Besides issuing with bias of CRS and in order to increase product range as well as established an automated system to meet the higher demand of storage and manage of all the information related to not only flight, lodging availability but also other types of international tourism products, CRS changed into a worldwide distribution system A new and enlarged concept Global Distribution System (GDS) was constituted in 1987 In 1998, Dr Dimitrios Buhalis found that: “By gradually expanding their geographical coverage, as well as by integrating both horizontally (with other airline systems) and vertically (by incorporating the entire range of tourism products and services, such as accommodation, car rentals, train and ferry ticketing, entertainment and other provisions) … This enabled the display and purchasing of the majority of tourism products online As GDSs connect most tourism organizations with intermediaries around the world, they lead the standardization processes and control a considerable market share.” (p 5) The diversification of business model to new environment There are four main popular GDSs: SABRE, APOLLO (also known as GALILEO), WORLDSPAN and AMADEUS In 1990, SABRE and APOLLO offered terminal access to the European travel agent Then, 11 European airlines brought into APOLLO GDS and improved the first fully operational European GDS named GALILEO GDS function is creating PNR and Back Office integration, controlled the majority of airline distribution, therefore the airlines had little other choice “The structure of the tourism industry distribution system not only affects the choices available to the consumer, but also the business models & marketing strategies of the channel participants.” (John Kracht, Youcheng Wang, 1994) Under that circumstance, many problems appear and strongly affect to GDS Companies, the issue will be discussed in the next paragraph Along with the development of GDSs, the launch of the Internet and its rapid growth in distribution cannot be denied as well as the advert of the Internet created golden opportunities for the tourism industry In more detail, phase of table indicated the general function of GDS which manages all reservation activity and customers need to access the GDS to booking via Internet The first aspect to be discussed is that of good service and the advantages it brings to the industry “The GDSs have served airlines well for many decades GDS’s security, reliability, speed, and accuracy are among the best in any transactions-based industry.” (Henry H Harteveldt, 2012, p 24) Currently, the Internet is an interactive tool for selling tourism products compare to traditional system which often allows only one-way communication from suppliers to consumers It brings more flexible control authorization to distribution channels and dynamic options for travelers; hence, tourism product is sold worldwide over the Internet is higher than any other consumer product A further aspect to be considered is the competitiveness of GDS providers and the way they solve their problem in response to new market As of 1990s:Ownership change, airline divest their GDS, rise of direct sales through Internet GDS facing new entrants, airline reclaim their ownership of the channel, LCC, new business model, GDS lose their market share On the other hand, “The GDSs generated more than $9.6 billion in revenue and more than 1.1 billion transactions in 2008 That equates to just over 2,100 transactions per minute The GDSs are most often thought of as a distributed environment for airlines; more than 550 airlines and the overwhelming majority of commercial airline fares and inventory are accessible via the GDSs.” (TRAVDEX, 2010) Respectively, revenue of GDS came from booking fees charged to airline and subscription fees paid by agencies which mainly earned from the commission paid by the airlines Regarding to this issue, GDSs companies found that they are in the competition with the very same airlines that created them So GDSs intend to set up their own websites in an attempt to distribute their product direct to the consumer and to avoid paying GDS fees The very first steps are selling their shares, following by many brightness improvements To some extent, in1996, Sabre made an initial public offering of 18 percent of its stock as well listed on the New York stock exchange Then, SABRE founded the web-based vendor Travelocity.com - the industry’s leading online consumer travel web site, generate more than $300million in revenues in 2001 Saber makes Travelocity a wholly owned subsidiary and continually introduced many key products such as “Travelocity Business™” to serve corporate travel agencies and business travelers, “MySabre™” - web-based agent booking platform that provides agents and suppliers with new marketing opportunities at the point of sale In 2006, Sabre Holding shows that: “Sabre Travel Network launched the Efficient Access Solution as a foundation for the company's new portfolio of customizable end-to-end solutions for travel agents serving the corporate and leisure travel segments, provides a balanced approach for addressing travel agents' requirements for full content and airlines' desire to reduce costs.” SABRE continuously got a significant feature, in 2010 Sabre launches industry’s first ecocertified hotel program, the Sabre air pricing, application is migrated to a new platform taking airfare pricing, schedules and availability from a proprietary mainframe system to an open system Moreover, a lot of website leading the market was acquired: lastminute.com - Europe’s leading online travel site, IgoUgo.com - travel community website, and launched the industry's first keyword-based travel search engine Following the success, Galileo International became a publicly traded company listing on the Chicago & New York stock exchanges in 1997 “Four years later, in October 2001, Galileo became a subsidiary of Cendant Corporation in $1.8billion common stock and cash, forming the cornerstone of Cendant's Travel Distribution Division.” (Galileo website) Worldspan was looking for ways bypass GDS by creating own internet channels, named Orbits “In 2001, Orbitz LLC was launched on the Internet, using Worldspan as its Internet Booking Engine, and in 2002, the launch of Worldspan ePricingSM made Worldspan the first GDS to introduce a revolutionary new multi-server-based technology, offering an unprecedented selection of pricing options to all of Worldspan’s customers.” (Samipatra Das, 2002) Amadeus also became a public company, held shares by European airlines: Iberia, Air France, Lufthansa and SAS in 1999 “In 2006, Amadeus Ticketless Access was set up, enable low cost carriers to participate in the GDS, reducing the cost and complexity associated with travel agency sales (Emma Kelly, 2009, p 35) Ten years later, “Amadeus becomes the largest GDS provider serving the worldwide travel and tourism industry, with an estimated market share of 37% in 2009.” (Videcom) As of December 2010, over 90,000 travel agencies worldwide use the Amadeus system which gives access to book content from 435 airlines (including 60 low cost carriers), 200 tour operators… In order to give travel agents, the ability to provide options and become more efficient, be price competitive, increase their profit, GDS companies run their portals where customers can view their reservation held in GDS’s database by travel agents: www.viewtrip.com (Galileo), www.virtuallythere.com (Sabre), www.checkmytrip.com (Amadeus) Conclusion In terms of diversification, these GDS companies change their ownership and pay more attention on technological advancement It has been said that the Internet and computer information bring a lot of betterment to the non-smoke industry In relation to the evolution of the Internet and distribution channel network, travel agents are experts at selling airline products to their customers, and they have keen insight into how to overcome obstacles Over the past year, many airlines have evolved their business model in an effort to raise profits However, throughout the innovation of distribution system in a long period, no longer own their traditional markets of the travel agency & airline sectors, GDSs have experienced many challenges to cope with a world of rapid changes ... into a worldwide distribution system A new and enlarged concept Global Distribution System (GDS) was constituted in 1987 In 1998, Dr Dimitrios Buhalis found that: “By gradually expanding their geographical... enabled the display and purchasing of the majority of tourism products online As GDSs connect most tourism organizations with intermediaries around the world, they lead the standardization processes... October 2001, Galileo became a subsidiary of Cendant Corporation in $1.8billion common stock and cash, forming the cornerstone of Cendant's Travel Distribution Division.” (Galileo website) Worldspan