The terrorist attacks of Sept. 11 did more than ground airline traffic for a few days. They also scuttled IT projects at companies throughout the travel industry.
"It came to a crunching halt," said Karen Brasher at the PhoCusWright Executive Conference here last week. Brasher, director of e-commerce at American Airlines Vacations, the packaged tour division of the Dallas-based airline, said her division was looking at a Web redesign and integrating information with the back-end system that links to hotels and other travel providers. Now that work has been put on hold.
John Marriott III, executive vice president of sales and marketing at Washington-based Marriott International Inc., said he would analyze IT projects for his family's multibrand hotel chains on a case-by-case basis.
Robert Dickinson, president of Carnival Corp. in Miami, said he cut some "bells and whistles" projects, like implementing a second-generation imaging system, but he will consider new IT projects that save money. "Basically, we said, 'If you can't find a way to justify it this year, and we've always done without it, we can probably get along without it. If you didn't need it in 2001, you won't need it in 2002' " unless it saves money, he said.
According to Henry Harteveldt, an analyst at Forrester Research Inc. in Cambridge, Mass., travel companies are looking to channel customers directly into their reservation systems via the Internet. That saves the airlines money on fees paid to global distribution system (GDS) companies like Sabre Inc. in Fort Worth, Texas. All travel suppliers will try to reduce costs by "direct connect" having customers buy travel online directly from the supplier. That sort of automation cuts down on GDS fees and costly call center staffing.
Orbitz LLC CEO Jeffrey Katz told an audience at the conference that he soon will have a direct connect from his travel site to an airline.
"Direct connect becomes more critical for them now," Harteveldt said. "Dollars saved from GDS booking fees trickle down to the bottom line. More than 25 percent of the savings will go down to the bottom line."
Dickinson said he's planning to create his own distribution system. "If the distribution systems over the past 30 years have been primarily shaped by the airline system, and they haven't been too concerned with our business, then we have to cover both sides of the fence," he said.
One attendee who isn't necessarily scaling back on new IT projects is Gino Giovanelli, director of interactive marketing at Radisson Hotels & Resorts in Minneapolis. "We are still going ahead with IT projects," Giovanelli said. "They have to pass a certain litmus test, [but] it's the same litmus test [as before]." He said his proposed budget has been trimmed, but it's not smaller than last year's.
One project Giovanelli is considering would streamline the reservation profile so users fill out fewer fields. "Thirty-five percent of the people who go to our site leave at the profile stage," he said. That is, after they have already picked dates and room types. "This number should not be zero, but I think it should be less than 35 percent."
All the attendees said they would push e-mail marketing as a cheap and effective way of increasing bookings; however, some are targeting customers based on customer relationship management information. Instead of offering deals to exotic locales, the hotels can offer quick-trip getaways near home by offering cheap hotel rates to all known customers in certain ZIP codes.
Giovanelli said he may not do that right away, but he does market destinations that are popular in certain areas by customizing the Web site. For example, if Florida is a common destination for people in the Northeast, he will send deals to customers with ZIP codes in the Northeast, and he might offer Scottsdale, Ariz., for customers in Minnesota.
The Catch-22 in Airline Security
Airlines are particularly sensitive to cutting IT costs right now because they don't know what they will be required to implement for back-end security screening or if the government will fund any of the costs.
"There's this catch-22. The airlines are waiting for the FAA to see what they have to do, while the FAA is waiting for the airlines to tell them what they can do. If government takes over the funding of security, then that returns some funding to the bottom line," said Henry Harteveldt, an analyst at Forrester Research. Until then, "substantial portions of IT budgets may be put on hold."
Airlines are also less likely to invest in security screening technology because it may not work as promised, and a cheaper version could be available in six months.
"These are already IT budgets that have been decimated," he said. "There's going to be a huge amount of beta testing. . . . You can't play with security. The risk of failure is too great right now."