Sabre Holdings today said 2005 booking fees in its global distribution system would increase on average 2.3 percent as the company begins offering suppliers new and more flexible pricing options. Sabre also said it expected growth in travel agency incentive payments to decelerate further and predicted a 2 percent to 4 percent increase in global transactions.
The company said it would not disclose additional pricing details until after the new policies take effect Jan. 1. CFO Jeff Jackson in a presentation this morning told analysts the specified average increase would be a product of existing airline agreements, a price increase for certain airlines and new initiatives planned for 2005. Airlines currently covered by Sabre Direct Connect Availability Three-Year agreements-including six of the seven largest U.S. carriers-won't be charged higher booking fees for U.S. point-of-sale bookings.
"We have talked a lot about flexibility in airline pricing models that we have and will be introducing and implementing over the next several years in a cycle that goes well beyond the deals set forth with the DCA3 carriers," said chairman and CEO Sam Gilliland. "We'll review our agreements with DCA carriers before the current agreements come due." The deal with US Airways would be the first to expire, in Oct. 2005.
Like its competitors Cendant
(BTN, Dec. 6) and Amadeus
(BTNonline, Nov. 30), Sabre is leveraging its full portfolio of products and services in building relationships with airlines. "We clearly want to offer airlines more options and services across our portfolio, but that flexibility should in no way be confused with weakness," Gilliland said. "We've got hotel capabilities we offer on airline Web sites and on Travelocity, we have a breadth of distribution we offer through travel agents, we've got reservations capabilities for airlines and we have airline products and services. We intend to offer all those as a menu of options."
Gilliland also said Sabre would "gear the value we are delivering to the characteristic of the airline-whether it is a long-haul carrier or short-haul carrier," a direction conceptually similar to value-based pricing formalized last year by Amadeus
(BTN, Dec. 8, 2003).
Sabre apparently is leaning away from biased airline displays within the GDS, however. "We think there is value in being an unbiased provider of airline information," said Thomas Klein, group president for Sabre Travel Network and Sabre Airline Solutions. "We are looking to help airlines market themselves more aggressively, but not necessarily offering display bias."
Meanwhile, Sabre said it expects incentives paid to travel agents to again grow more slowly next year. Gilliland mentioned "wholesale" models now in testing with larger travel agencies "where they are paying us for services and negotiating relationships with airlines. It is an entirely different model and incentives are not part of it."
On the hotel side, Sabre's GDS bookings grew 10 percent since 2003 as the company increased merchandizing and packaging emphasis. "We have become incredibly focused lately on delivering sustainable value for hotels across Sabre," Gilliland said, referencing its announced acquisition this morning of hotel reservations and distribution technology company SynXis.
Sabre next year expects 10 percent growth in overall revenue and 5 percent growth in earnings per share. The forecast includes "low single-digit growth" in the Sabre Travel Network, due in part to "the initial implementation of new pricing models" and the overall rate hike. The forecast also includes a 25 percent to 30 percent revenue increase at Travelocity, in part a result of integrating Travelocity's European business, and continued growth in airline hosting as such new customers as Frontier Airlines come onboard
(BTN, Aug. 16).
Sabre, which is predicting growth of 2 percent to 4 percent in global transactions for next year, said 2005 would be a year of significant investment. It has earmarked roughly $30 million for "international expansion, merchandizing initiatives and emerging businesses."
"We will continue to be opportunistic, thoughtful and disciplined in our M&A activities," Gilliland said.