Continental Looks To Agents To Bypass CRS

<B> Continental Looks To Agents To Bypass CRS</B>
<I>Carrier Cuts Res Ties</I>

By Cheryl Rosen

If every season seems to bring a new fashion to the evolving travel distribution channel, Continental Airlines is about to introduce what may be the hottest haute couture for Summer '98: The travel agency as CRS.

While Continental is not using those precise words, it already has begun promoting the vision by seeking travel agency partners that will build direct links, bypassing the traditional computer reservation and settlement systems. "By June or July," it plans to begin testing direct links with "two or three agencies, including the small market, the mid-market and the national account market," distribution planning vice president Steve Cossette told BTN last week. The goal is "to have the system defined in the next couple of months, to have pilot systems in place this year and to have it take off in the year 2000."

And are travel agencies interested? "Are you kidding? My phone's been ringing off the hook," said Cossette.

Continental has perhaps more incentive than most to seek out alternative distribution channels. Last month it sold its share of System One back to its parent GDS, Amadeus (<I>BTN</I>, April 13), in what is widely considered a step toward Amadeus' first public stock offering. At the same time, rumors of a merger between Amadeus and Worldspan, the CRS of Continental's alliance partner, Northwest Airlines, grew ever louder. Such a combination of events will leave Continental with an ever-smaller ownership share in a CRS. As its share falls, and fees of all the CRSs rise, the CRS line on Continental's balance sheet will show more and more cost, offset by less and less income.

Many in the industry, hearing the concept for the first time last week, had a cautious first reaction to yet another change in the travel distribution system. Said one mega agency insider, "Continental has created a situation where it needs to solve its distribution problem, and it is working very hard to convince downstream entities to assist it in creating a new channel. We're evaluating whether this new channel has the potential to offer long-term savings--but the jury's still out."

Others maintained that the costly investment the carriers have made in building CRS systems that quickly allow customers access to all data from all suppliers cannot easily be sidestepped. And, some noted, attempts to bypass them in some areas will only result in higher prices elsewhere. Said one insider, "I don't happen to believe that it's essential for Continental to own part of a CRS, and divesting themselves will free them up to do whatever is reasonable as distribution becomes more electronic. But no action exists in a vaccuum, and there are always consequences. If you take profits out of the CRSs in one place, they will have to find more money somewhere else in order to remain profitable."

Former System One president Bill Diffenderffer, now CEO at Dallas-based online booking provider Xtra Online, speculated that Continental is taking a step that the industry will see replicated with many different formulas in the coming months.

"Certainly all the carriers and suppliers are exploring ways to lower distribution cost, and a key element to doing that is to use technology to manage distribution directly to the end user," he said. "That will be done through a variety of interfaces, each jumping over some of the channels some of the time."

At Rosenbluth International, chief travel scientist Danamichele O'Brien said the mega agency is "looking for ways to improve our corporate customers' access to airline products, and any newfangled way to do that has to be evaluated. Technologies to make the process more effective keep popping up, but the question is how much do they cost, and what do we have to gain versus what do we lose? Without sitting down with the numbers and doing the math, we're not ready to speculate."

Still, insiders noted, as the airline industry consolidates into fewer alliances, the possibility of direct links becomes more and more feasible, and a new model begins to emerge of a distribution network that more closely resembles that of the car industry, where the middleman is a dealer of only one or two models, rather than them all.

That, said one agency president, would be perhaps the greatest shift yet in the role of the travel agency. "No new idea lasts for more than a month in this business without someone copying it. If this works, soon everyone will have it, and we will become like car dealers, who distribute Fords or Cadillacs, but not necessarily both," he said.

At Arthur D. Little in Cambridge, Mass., director Nick Athanasiou cautioned against too quickly dismissing such a model. "Being a selective distributor of only some vendors is actually a plausible model for the travel agency community, particularly as airlines consolidate to where you need only three or four links to cover 80 percent of destinations, along the lines of the 80-20 rule," he said. "It's a model we predicted as a potential evolutionary path for the travel industry four years ago--and I would still say it could very well occur."

While the travel agencies consider the airline's proposal, Cossette meanwhile also is looking at establishing direct links to corporations--especially those where "50 or 60 percent of their trips are in eight or 10 markets," or those with ARC Corporate Travel Department accreditation (see story, page 1), he said.