Transforming the travel industry

Global distribution system firm Abacus International is riding on opportunities brought about by technology and the low-cost carrier segment, reports ANNA TEOTHE dawn of the Internet Age and the rise of low-cost carriers may have revolutionised the travel market over the past decade.self storage But when you are essentially an intermediary in the business, the trends would seem a bit ominous, with travellers today booking directly on airlines' own websites and budget airlines typically eschewing the middleman.Robert Bailey, president and chief executive officer of Abacus International, couldn't be more upbeat, however, about prospects for the travel market and for his company - an intermediary provider of travel solutions and services.Abacus is what's known in the industry as a global distribution system (GDS); other major players include Amadeus and Travelport. Originally created in the 1970s by several of the largest airlines to distribute their flights through travel agencies, the GDS model has since evolved beyond a computerised reservation system with a portfolio that also includes hotels, car rentals, rail, insurance and leisure services, plus a suite of agency-support solutions.Abacus, which marked its 25th anniversary in May this year, caters to the Asia-Pacific market. The Singapore-headquartered GDS is owned by a consortium of 11 airlines - All Nippon Airways, Cathay Pacific, China Airlines, EVA Airways, Garuda Indonesia, Dragonair, Philippine Airlines, Malaysia Airlines, Royal Brunei Airlines, SilkAir and Singapore Airlines. Global travel technology leader Sabre Inc also holds a 35 per cent stake in Abacus.For Mr Bailey, who joined Abacus in 2008, the rise of low-cost carriers is "the big story here in Asia" - as much as it could be a threat to the GDS model."It's a growth story and a fabulous one," said the 48-year old Briton in an interview. "It's a double-edged sword for us because the business model that most low-cost carriers start off with is a consumer-direct model which doesn't have any intermediaries in it, so it's airline-to-consumer through the Internet. So they're stimulating demand in the low end of the travel market."But as low-cost carriers grow and evolve into hybrid carriers, they will seek to expand their international reach and tap the premium corporate travel segment - typically by joining a GDS, he said."The good news for travel in Asia is - this is stimulating travel, because it's enabling people who have never travelled before to travel; it's creating incremental business on top of the traditional carriers' business, and it's addressing this rapid growth in wealth and disposable incomes, in middle-class people who are interested in travel and certainly able to pay for travel because it's a price point that they can afford. So it's stimulating a whole new set of travellers who will then come back and typically they go up the value chain to more expensive, more adventurous (options) and that benefits the existing players and other elements in the industry. So it's a virtuous circle there."Mr Bailey cited some statistics that he found "remarkable" : "If you look at what's happening with the low-cost carrier market - in 2001, it really didn't exist in Asia, and now, this year, around 50 to 60 per cent of available capacity in South-East Asia is low-cost carrier seats, in certain markets."In value terms, the low cost segment probably accounts for 12 to 13 per cent of the region's air travel revenues, he reckoned.Still, low-cost carriers' share of passenger traffic in Changi Airport - at around 25 per cent - is still some way from the 40-45 per cent levels in the north American and European markets, he pointed out."So there is still room for the low-cost segment to grow, over and above the fairly sizable growth the traditional market is having. I think travel in the region is growing around 6 per cent per annum; some markets are growing much faster, some markets are probably two-thirds to half of that, depending on where they are in the economic cycle."Abacus serves travel agencies, so it hasn't quite seen a spike in core booking volumes as a result of the low-cost carrier boom. But "we see growth, we see halo effect . . . in the last five years, we have nearly doubled our turnover and it's been a combination of factors - business mix, volume growth and additional new services", said Mr Bailey.Indeed, he sees the growth of the low-cost segment as an opportunity for a GDS. "Clearly, it is a threat to an indirect model, but we see ways to participate in that growth, because it's creating new demand which didn't exist before, and it feeds into other adjacent business areas and so we're looking to build tools which help add value or offer additional services."Abacus' suite of products already includes travel agency and airline productivity solutions, on-line and mobile services, corporate Internet and professional IT service solutions."We're now looking at payment, we're looking at insurance services, other things around just a flight. And this is exactly what the successful low-cost carriers in Europe and North America have been doing - they have been building out ancillary services around the commodity air seat, so they perceive themselves as on-line retailers in a sense."Early this year, Mr Bailey launched Abacus Ventures, a unit within the company, to suss out new commercial opportunities that complement Abacus' business model and innovation objectives."It's an exciting area for us," he said. "We set it up to enable us to look at adjacent business opportunities that are co迷你倉plementary to our core business. The idea is to have a small team who are very fast and agile, who can look at a lot of these start-ups that are going on in the marketplace in travel and travel-related services. It's a whole area . . . anything to do with travel and the journey, to look at who's in the space. There are lots of companies, lots of technology start-ups, lots of players in different regions who want to enter this marketplace, and so Abacus Ventures is to give us a vehicle that can evaluate, sift through all the opportunities and then choose a few of the best opportunities to either invest in, partner or collaborate with, to grow more capabilities for Abacus and to share our distribution franchise. Our footprint in 31 markets has an immense coverage, so we can leverage that to bring new services and products to market."He let on that Abacus is in talks on an insurance-related venture. "We can already offer insurance services through our core existing products, so this is looking at - can we do something even better? Is there a productivity tool that we can develop which sits alongside the other tools that we have; is there something we can put into tablets, mobile phones, with automated payment attached to it, so that it's all a self-sufficient bundle and it's all linked to the traveller's profile . . . so there are all sorts of things."Indeed, technology has had "a massive impact" on the GDS business and the travel trade, he said."So if we roll the clock back to the '70s and '80s, most bookings were done directly with an airline and they'd probably involve you picking up a telephone or walking into an airline office to make a reservation for your trip, and that was, I'd say, a very static and quite stable model. And the airline industry had built up a technology infrastructure which connected up all airlines around the world through a proprietary private network to enable them to talk to each other and share information on passengers so that they could service those passengers on both sides of their journey.Possibilities"As we've gone on, technology has opened up possibilities and it's made a lot more flexibility available to the consumer but also to the airlines and other travel service providers. So what we've done is we've walked through those evolution phases of technology and gone from a closed e-commerce pioneer phase . . . to a much more open e-commerce global systems of both supply, communication, usage of technology, and it's like amorphous now."Abacus, which now works with more than 20,000 travel agencies across Asia, has to date invested some US$160 million to develop and localise travel support solutions to meet particular market needs."We at Abacus do have certain unique content and services because we work very closely with the travel service providers to provide extra value to the travel agencies and the end-consumers, so we try to be the one-stop shop with the most," he quipped."So we've evolved from being an airline call centre, airline office-type support tool, to being a channel to market through travel agents and airline sites, and as the Internet came along, to being able to do that through the Internet. So it's multi-channels."A molecular biologist by training, "with an MBA", Mr Bailey is a travel industry veteran in more ways than one. After five years in the chemical and plastics industry, he joined a GDS, Galileo, during its start-up phase, and had also been with Swissair in Switzerland. But he had lived in half a dozen diverse places even before he went to university at Cambridge: He was born in Kuching, Sarawak, and his father - who worked for the British government - later moved the family to New Zealand, Papua New Guinea, New Caledonia, Bolivia and Oman."I think once you have that in your DNA," he quipped, "there's something in the back of your mind which says . . . travel is interesting".On his goal for Abacus, Mr Bailey said that he would "ideally" love to "double the size of the headline figures in five years' time", as it did in the past five."I think what we're trying to do is to play a significant role in transforming the way people consume travel in Asia - that's the vision, that's where we're going. And the way we'll do that is to enable the whole ecosystem - and a core part of that is linking up all the suppliers and providing them with the means to distribute their services, and that also means that we need to have a distribution franchise, a footprint in the region, be it virtual or physical through the agencies or through on-line agencies to an end consumer, to join up the dots. And that's on the very basic, sort of mechanical level."On the business philosophy level, there's so much growth going on, there are so many emerging markets in the region, we're going to be playing a role in helping them grow, develop, evolve and become more open; it's driving economic growth, which has a social impact. In order to do that, we need to be good at what we do, we need to provide very good services, solutions and technology, so what we're doing is we partner with our suppliers, with our customers, and we're going to be helping them navigate their way through the complexity of the technology, to get the best out of it, to help their businesses in the process but also to improve their lives if they're end-consumers, and make it easier to do business or to travel. So it's a nice broad remit but ultimately that will have dollars and cents attached to it, and hopefully we'll continue the sort of growth path we've been on." This series is supported by IBM文件倉