Global Distribution Systems Essay Example

airline, the airline would then have to confirm seat availability and pricing, the agent would then convey the information to the customer and if they agreed the travel agent would then recall the airline confirming the booking (O’Connor, 2004). Therefore, one airline company, American Airlines decided that a system had to be developed that would better assist them in their reservation process.

In 1964 Sabre (Semi-Automated Business Research Environment) was completed and installed in American Airlines after years of trails (Sabre Holdings). However, despite American Airlines developing this system, they chose to keep it internal, only for the benefit of their airline company. Sabre fulfilled all that American Airlines could hope for at the time, a computerised system that stored all flight information and could be accessed anywhere within the company (O’Connor, 2004).

Although, American Airlines soon realised that it would be easier to place the reservation system, Sabre in the travel agencies, allowing them direct access to the information and to be an “extension of the airlines sales force” (Das, 2002). This was a benefit for both organisations as it cut costs immensely as it meant less communication expenses (O’Connor, 2004). The airline companies did not need as many employees to control the mass flow of information and it allowed travel agents to be more efficient and to spend more time with their clients (O’Connor, 2004).

What time frame has the innovation existed within? The Global Distribution System has evolved through two stages to become what it is now known as. Before GDS and all the software and applications that go with it were created, it was originally known as Airline Reservation Systems when the first computer

reservation software Sabre was invented in 1964 (Harrell Associates, 2002). It was known only as ARS, due to the fact that it was used by airlines alone; when the software became available to travel agents in 1976 it became known Computer Reservation Systems.

And by this point Galileo or as it was previously known as, Apollo was the second ARS to be developed by United Airlines (Harrell Associates, 2002). By the 1990’s other CRS’s were designed, WordSpan, Amadeus, Pegasus, and many more and they all became major competitors in a fast growing travel industry. Additionally, travel agents were able to do more then just reserve seats on a flight; they were able to book hotel rooms, hire cars, tours, etc. , due to this CRS soon became known as Global Distribution Systems (Harrell Associates, 2002). At what point in the innovation process does the example exist?

Global Distribution Systems is an innovative product that hit a peak when travel agents were granted access to the reservation software, in 1976. In 1978 the deregulation of the airline sector allowing airline companies to control pricing internally, created growth and competition amongst airlines, which consequently led to lower airfares (O’Connor, 2004). Although this meant an increase in sales for travel agents, it did not make up for the drop in airfares. This became a problem for travel agents as they received a 10% commission on all sales.

With the growing demand for travel agent services and the need to increase sales, travel agencies decided to start “cross-selling travel products” and meet the client demands for more information and services on travel products (O’Conner, 1999 P. 13). When the World Wide Web

or Internet started to become increasingly popular, travel agents immediately saw the threat they faced. What has became known as the Internet Booking Engine has allowed airlines to sell they product direct to consumers, bypassing travel agents (Sismanidou, Palacios, Tafur, 2009).

This allowed airlines to be more competitive as they could bypass the GDS booking fee allowing them to lower airline fares and distribution cost (Sismanidou et. al 2009). Hence the decline of GDS, in a bid for travel agents to remain a required customer service point, online travel agents were created such as Escape Travel (Sismanidou et. al 2009). However, the one advantage that travel agents have that they use to their advantage is knowledge. A potential traveller can spend their time researching trying to find the right information and destinations for their holiday or they could choose to use a travel agent.

A travel agent will have the knowledge and expertise, they can provide you with all your travel needs in one place, and there is also the benefit of holiday packages (Banks, 2008). Who has been responsible for the innovation? The creation of the first Airline Reservation System was by chance, in 1953 the president of American Airlines C. R. Smith was seated next to International Business Machines (IBM) salesman Blair Smith (Goff, 1999). Through conversation C. R. Smith talked of his companies need for some sort of system to make the companies operations easier (Sabre Holdings).

At the time, IBM (a computer, technology and IT consultant company) was working with the US Air Force on a program known as SAGE (Semi Automatic Ground Environment) that would send messages from radar sites to the interceptor

notifying them of nuclear bomb attacks (Living Internet). It was the development of SAGE that led to multiply user interactions and structured program modules (Living Internet). American Airlines and IBM soon joined together to develop a program that would eradicate American Airlines problems.

When Sabre was completed 11 years later in 1964 and installed, it was the second largest real-time data processing system (Sabre Holdings). The overall cost of Sabre including research and development and installation totalled $40 million (Reference for Business). What is the overall effectiveness of the innovation? The Global Distribution System has made a considerable impact on the travel industry. The first ARS, Sabre was designed to be used with computers that had only just been developed. IBM and American Airlines grasped the prospect of using new technology and used it to their advantage to make a software system.

Sabre was original only a solution to one airlines problems, a solution to there intense manual method of airline reservations. That solution of Sabre ARS reduced the large amounts of storage and filing of information, hence reducing employee costs. The introduction of ARS’s into travel agents meant communication costs were reduced with little need for airline companies and trave agencies to communicate via phone (O’Connor, 2004). GDS also formed to be a marketing tool and a distribution system, ‘connecting thousands of suppliers of travel inventory and hundreds of thousands of retail sales of travel products” (Sismanidou et. l 2009 P. 255). The succuss of GDS’s is evident in the fact that there are over 800,000 systems used world wide by travel agents and airlines (Jambro Computer Network). What are the future applications for the innovation?

Global Distribution Systems has hit its peak, the introduction of Internet Booking Engine has slowed the growth of GDS. With the rapid growth of the Internet and its consistent capability to offer users more, it did not take airlines long to realise the potential it had for them in cost savings.

In response to the Internet Booking Engines, GDS has tried to re-establish themselves in the travel market. Various GDS’s have taken three steps against the Internet threat: they have attempted to extend their services over a wider range of Information and Communication Technology’s (ICT’s) to emphasise that they are the main technology suppliers for airlines (Sismanidou et. al 2009). Also they have developed Internet based technology and have created their own Internet Travel Agencies, such as Travelocity, which is owned by Sabre (Sismanidou et. al 2009).

At its peak, GDS had an oligopoly; it faced little if no threat from other sources of technology, as their technology infrastructure was one of the best and it had internationalisation of operations, that is not the case anymore (Sismanidou et. al 2009). Although, GDS’s does have the added benefit that they have built business networks with various travel products and a firm reputation should ensure success (Sismanidou et. al 2009). Conclusion Global Distribution Systems has come along way since 1964, especially after being originally known as Airline Reservation Systems. GDS’s has made a major impact on the travel industry, in all sectors.

It has helped to make travel agents more efficient and ensured that consumer demands were met with GDS’s becoming a one-stop-shop for all their travel needs. Although, there is uncertainty of its future with many believing it will

soon fade out to the Internet. However, GDS still has a strong hold on airline reservation with many people still wanting that personalised experience and the ease of knowing that the travel agent has more knowledge. GDS was a breakthrough in innovative technology, it has shaped the way the travel industry operates and helped to path a way for future applications and will still be prosperous for time to come.

References

•Business Dictionary Viewed 1st April 14, 2010

•Banks, C 2008 “The Fate of the Modern Travel Agent” Legacy Travel, 3rd March Viewed1st April 14, 2010

•Das, S, 2002 “Global Distribution Systems in Present Times” Hospitality Net, 30 September Viewed 1st April 14, 2010

•Goff, L 1999, “1960: Sabre takes off” CNN, June, Viewed 6th March, 2010

•Harrell Associates, 2002 “The Internet Travel Industry” Viewed 6th March 2010 Living Internet Viewed 1st April 14, 2010

•Jambro Computer Network Viewed 1st April 14, 2010

•O’Connor, P 2004 “Using Computers in Hospitality” 3rd edition, Thomson, Croatia

•O’Connor, 1999 “Electronic Information Distribution in Tourism and Hospitality” CABI Publishing, United Kingdom

•Reference for Business – Sabre Holding Corporation Viewed 1st April 14, 2010

•Sabre Holdings Viewed 1st April 14, 2010

•Sismanidou, A, Palacios, M, Tafur, J 2009 “Progress in airline distribution systems: The threat of new entrants to incumbent players” Journal of Industrial Engineering and Management, P. 251-272