Andersen Study: Distribution Changes? Not So Fast

<B> Andersen Study: Distribution Changes? Not So Fast</B>

By Mary Ann McNulty



Mirroring the distribution changes affecting other industries, travel will be distributed in the future through multiple parallel channels, requiring suppliers to carefully manage what may appear to be conflicting distribution strategies. Such is the prediction of a new study on "The Future of Travel Distribution," published by Andersen Consulting, Chicago.

The study indicated that travel agencies will continue as a distribution channel, but coexist with technology-led, direct-buy options offering greater choice. Customers will select the channel depending on the type of booking they need to make. Consequently, it is imperative that suppliers have the ability to "capture a coherent picture of who the customer is and use the information to create differentiation" in their product. Even more critically, they must understand the profitability of each channel and "develop levers to divert traffic through one channel or another."

While "existing players must initiate change now if they are to survive and prosper in the new industry structure," it will be well into the next century before dominant players are established in the new order, the study acknowledged.

Andersen believes that the pace of change will be much slower than some are predicting. "There remains a number of barriers to the widespread adoption of electronic commerce in the travel industry, including the limited penetration of personal computers and online access; the lack of easy-to-use functionality; the speed of response time; the perceived lack of security; and the lack of consumer confidence in finding the 'lowest available fare,' " the study stated.

The Andersen study sees a role for global distribution systems in the future, but cautions that these vendors need to "develop a more sophisticated mechanism for managing price quotations as the industry moves towards one-to-one yield marketing. GDSs must also use technology to lower the cost of their transactions."

This year, the GDSs began introducing new offerings that allow suppliers to practice one-to-one yield management. However, all four major systems recently announced their latest round of annual price hikes (see Tech Talk, page 14), and several contended that with computing and storage costs rising dramatically, they simply must pass along some of these costs.

The study also noted that "more companies are appointing travel managers, indicating the growing importance being attached to the control of travel and enter- tainment expenses. Whether internally or externally based, the travel manager's aim is to remove all unnecessary costs associated with travel planning which do not lead to a tangible benefit for the company or the traveler."

The complexity of managing travel data is creating the need for information brokers who can compile and analyze the data for corporations, the study said, and this is a role that many travel management companies are positioned to fulfill.