HSMAI Marketing Review, Vol. 12, No. 3 Winter 1995/1996

In an industry not renowned for the prompt embrace of technology, electronic marketing and product distribution have enjoyed uncharacteristically speedy acceptance by the hotel, car rental, cruise line, and other hospitality companies.

This article describes the development of the primary electronic distribution channel — the airline-developed computerized reservation systems (once termed CRS), now generally referred to as Global Distribution Systems or GDSs, and its role as a non-air hospitality services marketing channel.

THE EVOLUTION OF GDS

As recently as the early 1960s, most travelers and travel agents made their reservations directly with their chosen airline, hotel, or car rental office via letter, telex, or telephone.  The growing popularity of air travel in the mid-60s forced airlines to establish huge reservation centers to handle telephone calls and also to develop computerized systems (GDS) to accept and store flight reservations.

When a traveler (or a travel agent) telephone an airline, the reservation agent would use a GDS terminal to book the flight.  The traveler or travel agent would then make additional telephone calls to book hotel accommodations, a rental car, and the other travel services required.

As air travel continued to grow, calls to the airline reservation centers increased dramatically.  To reduce costs and further increase their bookings, airlines began installing computer terminals in the offices of their most productive travel agencies.  Airline managers understood it would be less expensive to have travel agents book the reservations directly into the airline systems than it would be to hire additional staff at airline reservation centers.  They also knew that travel agents were more likely to book reservations on the airline that supplied the GDS terminals.

Then the first in a series of GDS system content expansions were implemented to meet travelers’ interests in comparative flight information and price quotes from a variety of airlines.  This first enhancement was the addition of inventory and fare information for other major air carriers.  Travel agents quickly realized that their computer terminals, with which they had grown comfortable booking airline reservations, could be a convenient tool for booking other travel services as well.  Their requests for additional options prompted the airlines to add booking capabilities for rental cars and, later, for hotels, and other travel products.

Suppliers also were enthusiastic about the opportunity to present and sell their services to the thousands of travel agents using airline reservation systems.  It became clear, however, that those systems, designed to list and sell airline flights, were not structured for easy listing and selling of other travel services.  When the capability to sell non-air travel services were introduced, GDSs functioned only as electronic lists of availability and rates, with a booking capability.  Product and service descriptions in plain, understandable English, were not available.

Hotels, in particular, require display formats that can present a wide variety of room types, complex rate structures and detailed text descriptions that effectively portray a property.  Car rental companies face similar challenges in adequately portraying their fleets, rules, and booking opportunities.  Nonetheless, the potential of the distribution opportunity was immediately apparent and non-air supplier companies became major participants in airline reservation systems.

SUPPLIER CENTRAL RESERVATION OFFICES

The growth of travel in the 1960s that prompted airlines to develop computerized reservation systems put similar pressures on hotel chains and other travel service vendors.  Hotels and car rental offices were receiving growing numbers of telephone calls, letters, and telexes from their customers wanting to book their services.  Hotel chains and other travel service suppliers determined that the best way to serve the consumer, and provide a valuable service to the hotels within the chain, was to develop their own central reservation offices (CROs).

Facilitating this growth in CROs was the introduction of toll-free telephone services in the United States in the mid-60s.  Hotel chain and hotel representation company executives, with those at Holiday Inn in the lead, recognized the new telephone technology as an opportunity to gain a competitive advantage by offering greater service to the traveling public as well as their hotel properties.

Before the development of their own computer reservation systems, telephone calls to the first hotel company central reservation offices were answered by agents who responded to room requests by looking at walls covered with “Availability Blackboards” or at massive books, which were updated by hand.  As call volumes steadily grew, these operating methods were quickly overwhelmed.

The same factors, that had prompted airlines to develop computerized reservation systems, led executives of car rental, hotel, and other travel companies to build similar systems.  In the early 1970s, Westin Hotels and Resorts (then Western International Hotels) developed a hotel version of United Airline’s APOLLO reservation system.  The result was “Westron”, which was activated in December 1974.  In subsequent years Westron was licensed to seven major hotel chains and became the industry standard.

INVENTORY CONTROL

That first generation of hotel company computerized reservation systems held very limited data.  Marketing was restricted to basic inventory management — how many rooms would be made available, and at what rates.  Individual hotels updated their inventory status by telephoning or telexing the CRO, or in a few cases, by using simple computer terminals.

Responding to the need for greater flexibility, hotel CRS managers expanded the inventory control capabilities of their systems to allow selling against an allocation of rooms.  Sales controls such as closed-to-arrival, minimum length of stay, and sell-through were also added.  More recently, many systems have been further enhanced to provide central reservation offices with full inventory data, with the central system having the same availability information as the hotel so that the CRO can sell down to the last available room without fear of overbooking.

The GDSs worked to add similar inventory management functions and sales capabilities into their systems.  Between 1987 and 1993 each of the GDSs — Apollo (later Galileo International), SABRE, Worldspan, System One, and Amadeus — undertook massive renovations of their hotel and car sales modules.  The goal was to expand the booking choices of GDS users and improve the accuracy of the data displayed on the CRT screens.

These rewrites of the car and hotel sales programs by the GDSs were a recognition of the potentially sizable numbers of bookings that could be made by travel agents through their GDS terminals — with each booking generating a transaction fee for the GDS.  This interest by GDS management in increasing bookings also was exhibited by supplier company executives, who determined that electronic bookings were dramatically less expensive to confirm than those involving a toll free call to a CRO.

When the booking capability for non-air travel products was first added in the GDSs, the listing and descriptive opportunities were limited.  As an example, hotels could list a maximum of eight to twelve room types, depending on the GDS, with usually six or fewer rate types (rack, corporate, government, military, weekend, etc.).  Description opportunities, both for individual hotels and for the chain-wide policies and programs, were similarly restricted.

In this limited display environment room types were described with three letter codes — A1K, for example.  The A indicated that the room was the best category in the house; the 1 that it had one bed, and K that the bed was king size.  The best king size bed equipped room in every hotel — whether Rodeways, Ramadas, or Ritz-Carltons — were described as A1Ks.

By 1993, with implementation of enhanced non-air product listing and sales capabilities in all GDSs, the situation improved considerably.  Two fundamental limitations on the volume of bookings — caps on the number of product types and lack of adequate descriptions — were considerably lessened.  Activation of SHAARP Plus by SABRE, Room Master by Apollo/Galileo, Hotel Source by Worldspan, Hotel Select by System One, and Amadeus Hotels introduced a new family of function, and more importantly, a new range of marketing opportunities.

The new functionality lifted restrictive limits on room types and rates.  Not only were room type descriptive codes lengthened, but associated descriptions were made easier to locate.  Room types and rates were associated with one another and the number of specialty rates was increased.  Through the expansion and structuring of the hotel and chain descriptions, much more of the character and capabilities of each hotel could finally be communicated and marketed.

One of the most significant additions to the function of non-air product sales was implementation by each GDS of negotiated rates feature.  Increasingly, hotel sales staff were devising individual rates for their major corporate customers, customers who had traditionally been consistent users of travel agents.  But until now those travel agents could not use their GDS terminals to book hotel accommodation at the negotiated rates.  With activation of these new GDS features, a critical barrier to widespread and high volume booking activity had been overcome.

The growth in the set of GDS functions spawned a new breed of hotel marketers — marketing automation specialists — whose role was to develop and implement programs that utilized the increasingly rich range of electronic marketing and sales tools.

THE NEW ELECTRONIC SALES TOOL KIT

Marketing automation staff at hotel, car rental, and other travel supplier companies became increasingly proficient at presenting and positioning their products.  In addition to the range of the rates they chose to list, the specialty niche rates, and the security-controlled negotiated client and consortia rates (accessible only with authorization), they gained access in the late 80’s to a new range of marketing opportunities.  For example:

• Chain Programs & Policies
  Conveniently structured and easily accessible displays of data for reference by travel agents.  Standard topics generally include:

Company Overview	Room Type or Vehicle Category Descriptions
News	Corporate Rate Policy
Travel Trade Information	Guarantee/Deposit Requirements
Group Contacts	Booking Assistance Contacts
International Offices	Commission Payment Program

 

In addition, electronic pages on a wide range of other topics are generally provided, some in several languages.  These pages also are where “fun” topics, such as horoscopes, soap opera summaries, recipes, and contests are presented, in an effort to build product awareness and brand loyalty by GDS users.

• Hotel Property Descriptions
  Address, phone, fax, and other basic property data together with hotel specific policies (including special event deposits and guarantees) also may provide descriptions of special features and amenities which shape the character of the property.
• Sign-On Messages
  One or two line messages which appear on GDS users’ screens when they log onto their terminals.  These paid advertisements may be targeted to a global audience or focused on one or more specific geographic areas.
• Electronic Notice Boards
  Electronic bulletin boards in each GDS where two, three, or four line messages describing either single property, area, or chain-wide events, promotions, or special news can be listed, free of charge, for a week.
• Broadcast Messages
  System-wide or area messages — electronic mail — to GDS users, at a fee.
• Headline Messages
  One or two line advertisements, sometimes with associated descriptions, that appear at the top or bottom of a specific city display, at a fee.
• Electronic Image/Map Products
  Programs providing maps and/or pictures of hotels or other products, plus enhanced search capabilities accessing extensive feature and amenity data promoting participating suppliers.

Coordinated use of these GDS marketing opportunities, together with reinforcing activities such as distribution of GDS format cards, GDS conference participation, and sales staff training — which together remind travel agents of the opportunity to book electronically — now come together to constitute an element of every hotel or car rental company’s marketing program.

THE LEAP TO SEAMLESS

GDS marketing automation gained its most recent, and possibly most powerful product presentation advance with the introduction of seamless connectivity.  Unveiled by Apollo/Galileo in 1993, it will soon be offered for hotels by every major GDS.

To understand the significance of seamless connectivity it is necessary to know the origination of the car rental, hotel, and other supplier data viewed by a travel agent on their GDS terminal.

Until the introduction of seamless connectivity, travel agents used exclusively what is termed the Type A connectivity mode.  In Type A mode, they viewed room descriptions, rates, and availability information stored (and maintained by hotel, car rental, and other supplier companies) in each GDS’s data base.  In addition to the challenge of maintaining up to six complete GDS data bases plus the supplier’s own central reservation system data — all in a timely manner — the GDS data bases, as discussed earlier, severely limited the product or service description detail.

Christened “Inside Availability” by Apollo/Galileo, hotel seamless connectivity was first utilized by Radisson Hotels, through the switching facilities of Wizcom International.  In the seamless connectivity mode, room type information and descriptions (including availability and specific rates) are not taken from the GDS’s data base, but are instantly extracted from the hotel company’s computer, where generally, descriptions are much longer, more informative, and potentially more accurate.

Through the expanded description opportunity, cryptic codes (A1K, for example) can be replaced with a longer description in full, abbreviation-free English.  Suppliers can finally achieve the level of product portrayal sought for so long.  The impact of accessing the hotel system extends far beyond room type descriptions.  While allowing for more understandable, informative, and appealing descriptions; it also permits display of products — complicated rates, and packages (or vehicle rental conditions and options), for example — which could not be accommodated at all in the GDS data base.  The leap from selling on the basis of price, to selling on the basis of value has been accomplished.

Seamless connectivity functionality for vehicle rentals is currently either in development or under detailed considered by each of the GDSs.

A RESERVATION SOURCE THAT COUNTS

In its early years, productivity through global distribution systems was low and constituted a very limited portion of each hospitality company’s centrally booked reservations.  A consistent upward volume trend has seen that situation change.  Hotel and car rental companies now view GDSs as important reservation sources, whose presentation and promotion facilities require skilled management. As GDS hotel bookings approach 20 million for 1995, and as more and more companies report the majority of their centrally booked reservations to be GDS originated (some chains receiving 75-85 percent through these channels), adept use of GDS marketing opportunities has taken on a new priority.

A BOOKING CHANNEL WITH A FUTURE

As a leading GDS innovation, seamless connectivity has introduced a new era in product presentation.  Not only can the value of hospitality products be effectively communicated for the first time, but a host of previously unavailable products — packages, programs and promotions — especially important to the growing leisure market — will become available for electronic booking.  In coming years seamless connectivity offers the prospect of delivering the full functionality of supplier systems, from access to frequent traveler files and profile data to multi-media brochures and virtual reality property tours, to every GDS user’s terminal.

The potential of the Internet and on-line services to replace GDSs as booking mechanisms is debatable.  Many industry analysts are convinced that with continued attention to user needs — both those of the travel agents and those of the traveler — and ongoing technical innovation, the global distribution systems have a strong future.  They face continuing challenges from competitors, but they continue to win praise and the number of transactions continues to grow.

GDS users around the world will grow in number, sophistication and expectations.  The tools to meet their information needs are becoming available.  The challenge to suppliers — hotel companies, car rental firms, cruise lines and the many other travel services — is to develop and implement marketing automation programs that effectively address this electronic marketing and sales opportunity.