The Problem with Closed Travel Technologies

2007-06-08

Here is an excerpt from a Wikipedia entry about Sabre Holdings which clearly illustrates the inherent problems with a closed distribution system such as the GDSs. The original is available on Wikipedia.

In 1981 a study^[1] by American Airlines found that travel agents selected the flight appearing on the first line more than half the time. 92 percent of the time, the selected flight was on the first screen. This provided a huge incentive for American to manipulate their ranking formula, or even corrupt the search algorithm outright, to favor American flights. American eventually did just that under the name “screen science.”

At first this was limited to juggling the relative importance of factors such as the length of the flight, how close the actual departure time was to the desired time, and whether the flight had a connection. But with each success American became bolder. In late 1981, New York Air added a flight from La Guardia to Detroit, challenging American in an important market. Before long the new flights suddenly started appearing at the bottom of the screen.^[2] Its reservations dried up, and it was forced to cut back from eight Detroit flights a day to none.

On one occasion, Sabre deliberately withheld Continental’s discount fares on 49 routes where American competed. A Sabre staffer had been directed to work on a program that would automatically suppress any discount fares loaded into the computer system.

Congress investigated these practices and in 1983 Bob Crandall, president of American, was the most vocal supporter of the systems. “The preferential display of our flights, and the corresponding increase in our market share, is the competitive raison d’être for having created the system in the first place,” he told them. Unimpressed, in 1984 the United States government outlawed screen bias.

Even after biases were eliminated, travel agents using the system leased and serviced by American were significantly more likely to choose American over other airlines. The same was true of United and its Apollo system.The airlines referred to this phenomenon as the “halo” effect.

The fairness rules were eliminated/allowed to expire in 2004. The original notice of rule making is availiable from the US Department of Transportation at http://www.dot.gov/affairs/CRSrule.htm, and a pdf of the final rule is at http://www.travelweekly.com/specialreports/GDSrule.pdf/.

Web 2.0 technologies, specifically those that promote user created and controlled content have the ability to take the power of distribution out of the hands of the larger distributors and put the power in the hands of the individual tour operator or travel supplier. The idea is to create a standardized system for sharing and disseminating information but not specifically control the pricing or distribution. The end result should be a marketplace where products are priced based on fair market value versus an abritrary value set by the system.

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