You can have the greatest product or service in the marketplace, but if it can not be distributed to the target audience in a timely, cost-effective manner, and easy to access it will make it extremely difficult to compete. Below are a series of personal lessons learned over time.

How the Travel Industry Has Changed

In the early 1980’s begin my career in the travel business working in Sales & Marketing for Northwest Airlines. The travel business generated about 80% of the airline business from the travel agency community. For years they used very large books called OAG’s to look up the schedule of flights on the airlines departing from one city and arriving at another. Then the next step would be they would have to call the individual airlines to check on availability and fares. Share this information with their customers and get them to decide. This process was manual and very time-consuming. Once the customer decided the travel agent would confirm the flights with the airline. If confirmed, the travel agent would handwrite a ticket for their customer, collect the payment, and process the transaction. They were paid a 10% commission on each domestic ticket. They would in turn submit the net payment through a collection process every 7 days.

Each airline had a “Call Center” where hundreds of reservation agents would sit in cubicles to handle the calls. The calls were monitored and the agents were expected to process the transactions in a timely manner. The agents were using a computer system that kept track of each transaction. American Airlines decided to build a computer system called Sabre. Their objective was to have the Travel Agent put these computers on their travel agents desk and allow them to access the flight information, pricing, and actually generate a booking without calling the call center.

The Challenge for American Airlines

The challenge was for American Airlines to convince the other competing airlines to have their flight and fare information in the Sabre system too. The competing airlines were required to pay to be included. At this moment in history, American Airlines was one of the most powerful airlines in the United States and controlled many markets. The travel agents in the markets that American Airlines controlled were anxious to have the Sabre System.

American Airlines negotiated with each Travel Agency for the cost of the agency using Sabre. They had monthly fees based on how many CRTS they needed and printers. Volume played a key role in the agencies costs. In addition, the agencies would often get financial incentives for generating target volumes and even down to specific flights. American Airlines set out to control the market place by installing the Sabre System in all the travel agencies. They were very aggressive as they knew it was all about the distribution of content, making it easy to get access to the content, and establishing powerful relationships.

At the same time, American Airlines controlled the display of the flight content on the computer screen. If a travel agent did a search for a flight say from Boston to Chicago at 7:00 am the American Airlines flights would display over the competition flights. Each screen page could only display 6 lines of flights. A non-stop or direct flight was one line, but a connecting flight used two lines. American Airlines knew that the people are basically lazy and in a hurry and will not continue scrolling up to additional pages. It was later determined that 80% of all flights were booked from the first screen and 50% from the first line.

United and TWA Join the Fight

Additional airlines such as United and TWA also made the financial investment of building reservation systems to compete with Sabre. Travel Agencies could at least start the negotiation process with each carrier to establish their costs and incentives for these systems. All other airlines soon discovered they were at an extreme disadvantage by not having a system of their own. By the time Delta caught on and developed their own system, it was far too late. American Airlines, United Airlines, and TWA had signed up the vast majority of travel agents to their reservation contracts that were established for 5 years including liquidating fees if the travel agent broke the contract. This was a very costly clause that prevented travel agencies from converting.

The remaining airlines could not compete at any level. American Airlines for example could tell from the data in Sabre the amount of revenue each travel agency was generating on which airlines as well as which flight. This is very powerful data. What other industry did one company have direct access to the competition’s sales and content? The end result was American Airlines was making more revenue from their reservation system than the flights. The bottom line is American Airlines made it easy for distribution channels to access and process a transaction.

As a Sales & Marketing Manager for Northwest Airlines, I felt the direct pain of the teeth of the Sabre System as it totally effective the productivity and revenue of our entire network of flights. Sabre went on to establish automatic seat assignments and their extremely popular frequent flyer program. At Northwest Airlines we could only assign seat assignments at the gates and our frequent flyer program involved submitting coupons with each flight. It was horrific by comparison.

Northwest Airlines Fails

The Executive Team of Northwest Airlines and all other airlines fell asleep at the wheel. They got stuck in the old ways of doing things and failed to have a vision as to how could they blow up the traditional process and make it easier for both the travel agent and customer. TWA was struggling at the time and eventually sold their automation reservation system to Northwest Airlines, but it was too little too late.

Hard to believe that two airlines basically controlled the distribution of all other airlines’ content. Charged them to display and process each transaction. The bonus being they knew from the data every transaction generated through their system. The average consumer and government representative believed the airline industry was deregulated. The government continued to control the departure and arrival times of all flights and the airport terminals determined the gate availability. If an airline wanted to add a flight it required an open gate and approval for the flight time not just to take off, but also land at the arrival airport. This translates that these elements are not deregulated and American Airlines was controlling the distribution content.

It was a harsh learning experience that the revenue results and future planning of added flights and/or destinations were not in the companies real control.

The Internet Changed The Travel Game

In the following years with the internet coming into play, the distribution channels started to evolve. Booking tools such as Travelocity was built (also by Sabre), where the direct consumer could access the airline, hotel, and car rental content directly. The consumer could see the display of information and make a reservation using a credit card. This bypassed the travel agency. Other booking platforms were established such as Expedia, Orbitz, and Priceline. The goal was to remove the middle man and not pay the commission and make it easy for the consumer to complete the entire transaction.

The common theme is to provide accurate content that is easy to search for that is relevant to the consumer and make the transaction as simple as possible. These same principles were designed into the Goggle and Amazon platform …ease of use and painless. This is why they’re so successful today.

Short Term Villa Rental Industry

The short term villa rental industry was overlooked as a travel product. It was established as part of the European and Caribbean vacation options. As consumers started traveling to resorts or cruises, they discovered it would be nice to have second homes in these areas. However, after reviewing the initial purchase price as well as the operating costs, it often got out of the price range. The Real Estate Agents did not want to lose the sales so they convinced many potential buyers to look at short term rental opportunities to help generate revenue to help offset some or all operating expenses.

In the Caribbean there were and still are key real estate offices that dominate the real estate market on their particular island. These real estate agencies did not have the resources or manpower to throw a “net” out to generate enough villa rentals for these new owners. Therefore, some travel agents located around the globe began specializing in the villa rental product. The real estate offices agreed to provide these villa rental distributors the content (photographs, descriptions, rates, and commissions) for generating short term villa rentals. However, they did not provide direct access to availability calendar of the villas.

The result of this is the villa rental content could not be included in the airline booking systems. The core value of the airline booking system was accurate content and the ability to book and pay immediately. Therefore the travel agent community rarely, if ever, offered a short-term villa as an option for their clients. It was also a travel product that had no quality controls or branding like cruise ships, resorts, and hotels. Every villa was controlled by the individual owner in terms of what was included, pricing, and terms/conditions.

The original short term travel agents that specialized in villa rentals did their marketing programs through print and consumer travel shows. They would publish expensive catalogs to display each villa and mail them out to clients or distribute them at various relevant promotional events. This process was extremely manual, expensive, and not very effective. However, it is the only process that they knew.

The Internet Changes the Travel Game…again.

When the internet came out new distributors came into play. They began developing seductive websites and displaying the villa inventory. Providing sorting tools so the consumer could see what inventory was available in certain destinations, pricing, and amenities. This made it far easier. Where thes new players caught the old traditional villa rental distribution channels off guard was they knew how to write their websites so theirs was search engine optimized and their websites would get higher page ranking. This is no different than what American Airlines was doing using their Sabre designed system to provide higher ranking on the display of their flights.

It took years and years for many of the traditional villa rental distributors to get out of their own way and blow up their old way of doing business by printing catalogs. Just like the airlines that failed to develop a distribution channel to display their flights and fares, these villa rental companies were behind the eight ball.

Along comes new platforms such as VRBO (villa rental by owner), Airbnb, and Booking.com. These are just like the platforms of Travelocity and Expedia. Skipping the middle man and going right at the direct consumer. Making the process easier and far more cost-effective. The challenge continues to be quality control and accurate and up-to-date descriptions, photographs, pricing, and availability.

Real Estate Industry is Under Similar Surge

The traditional way of providing real estate content for sellers and buyers has been for the real estate companies to publish brochures, advertising in various media print publications. The next step was to include the real estate listings on their customized websites.

As in the previous examples, this is costly and far from effective in real terms. It is not an easy process for a consumer to be able to discover what is available in the market place by city, town, price, and features.

Zillow and Realtor.com have been developing platforms that are far easier and effective for property owners and potential buyers. As each of these platforms continues to develop and added additional features to make the buying and selling of homes easier and a lot less painful they will begin to capture more and more of the overall market share. It will be challenging for many of the current real estate offices to survive.

Interested in learning more? Contact Robert Brown at Generating Media