<H1> Online Fee For All?</H1>By Cheryl Rosen
<I>Fort Worth, Texas </I>- Sabre Travel Information Network last month sent a ripple of concern through the budding travel technology industry when it announced a new $3 fee on reservations made through any online booking system other than its own.
Meanwhile, American Express and Carlson Wagonlit already have negotiated discounts from Sabre.
The letter announcing the fee, which Sabre mailed to third-party developers in September, reminded them that "Sabre data may not be redisplayed or republished without permission," and notified them that agencies seeking permission will be charged an additional $3 per PNR.
The fee made Sabre the second travel industry vendor to raise the cost of online bookings to travel agencies-and indirectly, to corporate customers-in just two months. In July, Northwest Airlines cut the commission it pays on automated bookings to 5 percent, less than half the standard commission; in many cases, that commission shortfall is being passed on directly from travel agencies to corporate customers' bottom line (<I>BTN</I>, July 29).
Sabre said that the cost of developing and installing online services, guiding agencies through the adoption process and handling the increased CRS activity generated by new legions of technically inexperienced shoppers warrant a minimal increase for the CRS. And the value of receiving ready-to-go, commissionable PNRs will more than justify the slight additional cost to agencies, Sabre said.
While the Northwest online commission cap was unpopular, the Sabre follow-up-coming as it did from a leader in the development of online booking products for the corporate market-generated some immediate protest. Said travel management consultant Ralph Brown, president of R.D. Brown Co. in South Elgin, Ill., "This is a very big deal, and everybody should be concerned about it."
Indeed, they are. Sabre's competitors in the online market sniffed that the fee is a blatant attempt to slow the pace of online bookings until Sabre's Business Travel Solutions is ready for general release, and to minimize the competition from non-CRS players-who will have to cut into their expected profits by swallowing the fee whole or price themselves out of the market by passing the charge on to customers.
At the same time, some said, the levying of a second online booking fee so early in the technology's development cycle will emphasize the inexact nature of the pricing models, and make it more difficult for corporate customers to cost-justify an investment.
"Sabre's thinking is way off on this," Brown said. "It is putting up an obstacle to the industry moving in this direction, when this is the direction travel providers say they want us to take. When you are comparing systems, three bucks per reservation on 100,000 reservations adds up. It restrains agencies' ability to choose a system-and it will be challenged in court."
But before the month was out, some players were already at the negotiating table.
Megas Won't Pay
At last week's Travel Technology Association meeting in Chicago-where many in the audience acknowledged a certain sympathy for the concept of technology developers getting paid for their products-American Express' Mike Milligan told <I>BTN</I> that his company's financial arrangement with Sabre stipulates that Amex customers will not pay the incremental fee when the Amex-Microsoft booking system hits the market. Insiders at the TTA conference suggested that Carlson, too, has negotiated a deal for users of the system it is developing with TravelNet.
Sabre product marketing vice president Tom Hala said the fee "is not about inhibiting third-party developers, but supporting them. This letter and policy enable our developers to work with travel agencies to republish data out to the traveler; that's a different role than they have been playing, and drives a lot of cost change. We wanted to share with them the correct way to use and brand the data, and what the pricing will be as we move into this channel."
Hala noted that the $3 fee is necessary to cover Sabre's additional costs in the online environment-and consitutes a small fraction of the potential savings online booking systems will offer agencies. The change to the online environment, in which untrained travelers use the CRS, "has increased our cost of providing support," Hala said. "Travelers generate a lot of shopping messages in order to get to a reservation."
And the charge is minimal given the savings agencies will reap from having travelers do most of the work themselves, he said. "The travel agency is reducing its cost from between $25 and $35 to $3 to have a commissionable PNR dropped on their ticketing queue, so there is a significant value in the data we are providing and the manner in which we are providing it."
Still, some developers and travel managers seemed unappreciative of Sabre's "support."
"We are seeing a much stronger migration toward the largest distributors making agreements that small ones cannot match," acknowledged Dan Whaley, co-founder of Palo Alto, Calif.-based Internet Travel Network, which has taken a leading position among upstart Internet booking providers in the corporate market. "When their systems come out, the big guys will have both the economies of scale and the negotiated discounts to keep them growing."
"This is a shot across the bow to third-party developers and those who use them," said another technology vendor. "It may be true that online users tax the system more in the beginning, but if the software works, Sabre will get more productivity in the long run-and it will save a bundle by not having to invest in so much hardware and workstations."
Several people noted that an easy way to avoid the Sabre fee is simply to direct bookings to another CRS. "The majority of our customer base is using Apollo, but we have some big accounts that use Sabre," said Whaley's partner at ITN, Bruce Yoxsimer. "All we would have to do is direct their online bookings to Apollo-and they say that's definitely something they're looking at."
"If the other CRSs don't go along, and Sabre does not negotiate the fee, I can just switch my online bookings from Sabre to Apollo-and get a big check from Apollo for doing that," said TRW travel services manager Harry Pierson, who has been looking at both Sabre's BTS and TravelNet's Voyager systems for his company's $90 million global air-volume account. "If all the CRSs hold, Sabre will have to cave in."
Pierson said that Sabre's fee "is a way for them to get BTS out there and eliminate the non-CRS competition. The CRSs earn fees for every booking, whether it is made electronically by the traveler or through the agency. But the independent developers don't have that, so the only way they can make up for the $3 fee is by passing it on to customers."
But BTS vice president and general manager Sam Gilliland said that discouraging competitors is "absolutely not" the point. "This is not a short-term approach of inhibiting the market while we are getting BTS ready. This is a long-term process for us, and short-term initiatives aren't going to insure long-term success.
Former TTA president Philip Wolf of PhoCusWright noted that "the reason companies do things is to grow their business, not to reduce distribution costs in the industry. A million companies are developing booking systems, and Sabre has a core competency. And it wants to get paid."
For the time being, at least, no other CRS has followed Sabre's lead. Apollo has "absolutely no plans" for an online booking fee, said spokeswoman Kate Koziol. And if techno-savvy customers want to switch to Apollo to avoid the new Sabre fee, "we're certainly not going to discourage them," she said.
System One Amadeus also "has no intention" of following Sabre's lead, said online services product marketing manager David Cerino. "I don't think the market can bear these fees," he said. "While in the short term, online systems will increase our hits to the CRS, we are expecting our productivity per set to go up in the online environment-and in the long term, these systems are going to decrease our costs."
Direct Links
United Technologies Corp. travel manager Mike Prado, who is adding an automated booking system to his company's $85 million air-volume travel program this month, said that "if both Sabre and Apollo hold firm in their positions, people will come to Apollo."
But for UTC, which already uses Apollo, the Sabre fee is not a concern-and Prado suggested that CRS fees in general will be a lesser concern in the future.
"We are using Apollo for the majority of our agency sites, and we are looking to strengthening that relationship," he said. "The future of all our efforts is to work with our agency, our Internet provider and our air provider to come up with the most convenient and fastest service for our travelers-and a lot of those links will be direct.