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30 Sep, 2002

Amadeus, Abacus Chase SMEs in Asian Travel Industry

Two of the Asia-Pacific’s leading global distribution systems (GDSs) are beginning to target one of the most neglected travel industry customer segments: the thousands of small and medium sized enterprises (SMEs) who badly need access to low-cost reservation and booking systems to drive business.

Both are testing the technologies and administrative systems that will be necessary to bring in these new customers. Abacus is working with a Japanese company that handles the reservations for more than 200 ryokans, and its competitor Amadeus is pilot testing a system to benefit the smaller hotels and other non-airline tourism product suppliers in Taiwan.

Both projects are to be finalised for launch next year, a move that could go a long way towards preserving the independence of tourism industry SMEs and make them think twice before linking up with multinational chains and reservation systems.

The business rationale makes sense for both sides. Mr Don Birch, CEO of Singapore-based Abacus, notes that in future the 100 million Chinese outbound travellers are less likely to be staying in five-star hotels but more in three-star hotels.

Throughout the Asia-Pacific region, thousands of such small hotels, lodges, inns, guest-houses who want to be featured in the GDSs in order to attract low-budget customers who comprise the vast majority of global travellers.

Because GDSs derive their income from driving bookings, they have seen a clear opportunity to use their reservations technology, their main asset, to link up the huge number of potential buyers with a correspondingly large number of sellers.

Mr David Brett, managing director of Bangkok-based Amadeus Asia, notes that if the GDSs don’t, someone else will, as is already happening with the emergence of independent technology service providers.

Although GDSs no longer have a monopoly in providing technology for booking and reservation systems, they do have extensive experience in providing the entire gamut of front and back office systems to track the administrative and financial elements of those bookings. That is now being tested in Japan and Taiwan.

Because it is financially prohibitive for the GDSs to approach independent travel product suppliers individually, they need what Mr Birch calls an “aggregator”, a company or some other distributor who will bring in several of them at once. In Japan, it is eRyokan Service K.K. and in Taiwan, it is the travel agent community.

Mr Hideo Hirahara, president of eRyokan, said that the ryokans, traditional Japanese inns, were once domestic-oriented but are now increasingly targetting the international market. Bookings have been on the rise after the Internet site was set up a few years ago.

These bookings can be grown further if the ryokans can link their inventory databases with Abacus along with an effective means to manage payments, including commission schemes for travel agents. This will give the thousands of Asia-Pacific travel agents who use Abacus access to the Japanese ryokans who in turn will have the assurance that payments will follow.

Mr Hirahara said the required database link with Abacus is projected to be ready by the first quarter of 2003. He said Abacus is helping the ryokan company set up a payment guarantee scheme.

As for the booking fees, the main source of revenues which GDSs charge per booking, Mr Hirahara said a unique arrangement being worked out will see Abacus charging no booking fees but rather deriving its revenue under a commission splitting system with travel agents who book the ryokans through Abacus.

“We tried to develop something like this ourselves, but it is very costly,” he said. That was precisely the same reason why another potential “aggregator”, the Thai Hotels Association, ‘suspended’ a project to allow its small and medium sized members to also have access to an Internet-based reservation system.

Amadeus, too, is planning a first quarter 2003 launch of its project now under test in Taiwan. According to Mr. Tony Carter, Director, Regional Operations, Amadeus Asia, it will allow the thousands of Asia-Pacific accommodation units not currently available in Amadeus to be bookable by the region’s travel agents through “one integrated environment.”

Once the system is ready, it will be rolled out throughout Asia, with particular emphasis on travel product suppliers from China, Taiwan, Hong Kong, the Philippines, Thailand, Malaysia and Singapore.

He says travel agencies will benefit by gaining access to a wide range of highly competitive new products for travellers. Product suppliers will gain a new distribution channel to reach Amadeus subscribers, increase bookings and settle payments, and Amadeus will benefit by increasing the number of bookings through its systems.

The race is now on as to who will be the first to roll-out this new product. Mr Birch says that does not bother him. “No has any monopoly on good ideas,” he said. “It is all about how those ideas are executed and implemented.”

Both these projects will threaten the expansion of multinational hotel chains whose reservation systems are cited as a major tool to drive bookings for independent hotels which sign up with them. The chains also offer management and marketing expertise, but it is their reservation systems that are most needed.

Now, this strategy is set to face a major competitive threat as independent hoteliers will clearly have an alternative channel. With the GDSs clearly showing more flexibility and adapting their business models to the vast diversity of Asian conditions, the regional hotel associations can afford to wait and see how these models pan out and how they can benefit their smaller members.

Indirectly, the move could also drive membership in the hotel associations, and make them more representative of the industry at large, rather than just the bigger, well-established members.

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