Sabre To Test Pricing For Direct Booking Options

<B> Sabre To Test Pricing For Direct Booking Options</B>

By Mary Ann McNulty

Sabre by year-end plans to begin pilot testing a new pricing model for managed travel designed to compete with the lower prices direct booking pioneers are touting. In short, that means the global distribution company will offer a direct booking plan through its central reservation system.

Sabre has been analyzing the growing interest in direct bookings--meaning those that bypass the airline-dominated CRSs and go direct to vendors--for the past ten months, said Scott Smith, sales and marketing vice president for Sabre Business Travel Solutions. It found that "it's a fairly easy technical model," he said. "The harder part is economic. I'm convinced there is money to be made; I'm not sure there is money to be saved," in the direct-booking concepts being proposed by E-Travel, via World Network, The Eastman Group and several other developers.

Smith noted that the typical booking process can be broken into four parts: shopping, comparison pricing, purchase and fulfillment. Currently, the CRSs are charging airlines, hotel and rental car companies only for the purchase mode, he said.

"If you look at the value the bypass proponents are providing, it's in the purchasing piece," Smith said. These companies are developing technology to allow corporate travelers to book their travel by tapping directly into each vendor's respective reservation system, rather than going through a central reservation system. The point is to save the booking fees that each global distribution system charges vendors for airline segments, hotel rooms and car rentals. Air segment fees typically average about $3.50, while hotel costs can reach $7 for boutique hotels.

In booking direct, the question is how much of the savings corporations will have to spend to track bookings, ensure the same level of customer support and incorporate data into management reports.

The purchasing or booking component also is where the Sabre analysts believe they might be able to pass along some savings to vendors on the select bookings that come through automated systems from companies that mandate travel policy. These companies would likely negotiate net prices with travel vendors, and their bookings typically would involve straight transactions, with little shopping or price comparisons.

Smith said he and other Sabre executives have considered changing the current pricing model. However, experience has proven that vendors hate complex pricing schemes in which they are nickeled and dimed to death. "Simple is best," Smith said.

Sabre "wants to offer suppliers something that's indicative of what they need," he said. "We want to give them things they value from the central reservation system and take out things that they don't value."

For Sabre, the point is to retain all the bookings in the central reservation system--even if it must lose some revenue on a small percentage of bookings.

At most, Smith guesstimated, direct bookings will represent 15 percent of Sabre's total.

In trying to retain as much of its current base as possible, Sabre plans to talk to those developing technology to bypass the CRS about negotiating some pricing that makes sense for all involved.

"For the corporation, the value proposition is how much comes off the fare," he said. "So far, the direct model is very supplier-centric." Vendors have to begin sitting down with corporations and saying, if you forego things like paper tickets and book through channels that cost me less money, I can give you a better rate.

Consultant Rolfe Shellenberger of Runzheimer International said vendors must do even more. They need to bring the CRS, the buyer and maybe even the travel agency to the bargaining table to agree on ways to cut costs to the bone. The CRS should be able to develop a template for booking trip models, for example, he said--and perhaps even develop a flat rate for each trip, say $5 for a trip to a company's plant that includes roundtrip air, car and hotel.

While all this sounds good, Alexander Houston, manager of corporate travel and administrative services for Cooper Industries, asked, "What's the gain?" Although his company purchases 34,000 tickets a year, he said, no vendor has ever come into his office and said, "we're paying Sabre $X per segment," and suggested ways that Cooper could help the carrier lower its costs.

"It's never come through the wash to me," Houston said.

Fred Swaffer, manager of Hewlett- Packard's Asia/Pacific travel program, questioned how Sabre will quantify and qualify such bookings. "If they really want this to fly, somebody is going to market an advantage," Swaffer said.

But, Paul Hoffman, vice president of sales and marketing for software developer Automated Travel Systems, New York, contended that "everybody on the planet is looking at how they can reduce their distribution costs. Travel managers think that as they take steps to reduce these costs it will result in lower airfares--but so far, the reverse has occurred," he said.

Since the commission caps began, airfares have risen more than 34 percent.

Still, Tom Wilkinson, president of the Travel Management Group of Alexandria, Va., said "direct connects are definitely the wave of the future."

"The CRSs need to look at ways to remain in business, and the way they're going to do that is by managing the information they have today," Shellenberger said. "The central reservation system is nothing more than a catalog--and the catalog today is pretty lousy. It doesn't make it easy to buy--especially a hotel."

Shellenberger suggested that batch pricing could be established at the same time a template is established, with the CRS charging a flat rate to book the entire trip. "It becomes more of a processing fee, not an information catalog fee anymore," he said. "However, the vendor has to convince the central reservation system that there is a value to them in managing this kind of transaction, that the efficiency factor itself has a value to the CRS.