Asia will come under similar pressures | Yeoh Siew Hoon Interviews Sabre CEO Sam Gilliland
Sabre CEO cautions against putting too much hope on region. Yeoh Siew Hoon reports from Los Angeles.
Asia will come under the same pressures as the US and Europe and Sam Gilliland, Chairman and CEO of Sabre Holdings Corporation, warns against putting too much hope on the region to pull the travel industry out of the current slump.
“We have seen the problems in the US migrate to the European economy and while there is still GDP growth out of China and India, Asia will come under the same pressure.
“Yes, it is a huge travel market and we are all hopeful that it will lead us back but there is huge dependence across economies. The world is more dependent on the US economy than we’d like to think.
“My thinking is, let’s not place too much pressure on the Asian travel business to pull us through. It has its own challenges. While there are plenty of bright spots still, growth that has gone from 20% to two percent is not what were built into investments.”
Gilliland said that while the travel industry had been through similar shocks, “this one may be deeper and longer”.
“But the travel industry is resilient and we will make our way through it. Even in depressed economies, people still need to travel.”
One bright spot is that the downturn will force companies to innovate and “drive more efficiencies in doing business and more efficiencies in servicing customers”.
“Companies will take advantage of new technology to find new customers and it will give them access to talent at low cost.”
Gilliland is also tipping more adoption of mobile devices “where Asia is clearly in the lead”. “That’s the way people want to be served and Japan is clearly leading the way in this space.”
He added: “I don’t expect to be taking our investment down in Asia. The business is going well, and we will continue to grow as we add new customers, new technology and new capabilities.”
He said Sabre had increased its investments in Asia in the last couple of months. “We have invested more in product and technology since going private 18 months ago and we won’t cut in areas that will fuel our medium to long term growth.”
He disagreed with the notion that Sabre, despite its early entry into Asia, had not made much headway relative to its competitors. “We are in a very good position today and we have increased our share in the Asian region.”
Through its relationship with Abacus, he said 65% of passengers in India were flying on airlines that used Sabre’s technology and that Sabre had been providing technology to Chinese airlines for several years, as it has with Vietnam Airlines.
He does not see further consolidation in the GDS space. “Effectively we have five GDS now – Travelport which is made up of three units and one which calls itself a travel technology solutions company and us.”
Asked if Sabre would distance itself from the term “GDS” as its competitors have done, he said, “We are a GDS. What you see is what you get. Strictly speaking, we provide global distribution to suppliers and travel agents.
“We could also call ourselves an IT solutions provider – I suppose it’s when you go public, then you’d have a different valuation. But we are all GDSs. We all have IT solutions. You can call yourself what you like, but we are pretty similar.”
Asked if the “magic formula” for a company like Sabre was one part, airline technology, one part, GDS and one part, online (Travelocity), he said, “I would hope so. It makes sense to have three assets.”
And while some pundits are predicting that a transformed industry, shaped by the downturn, will emerge two years from now, Gilliland sees more of the same. “Some companies will change, some will go out of business. That’s not new. We might see some new business models.
“At the end of the day, the objective is still maximum revenue per passenger. I’d be surprised to see dramatic transformation within two years. Maybe ten years,” he added.
Airlines in the US, he said, had already gone through a cost transformation in the last 12 months. “We’ve never seen capacity come out of the system as we have seen in the US, and it won’t come back till we get delivery of more fuel efficient aircraft. This is unprecedented and we may see this happen in other markets too.”
His priority is to focus on efficiency. “Do things at a lower cost, help deliver customers to our customers at a lower cost.”
Sabre will also continue to show leadership in the tough times ahead. “We like to think of ourselves as leaders all along and we have no intention of changing that. We led the way with new airline deals, we are doing that with new revenue models.
“Airlines will be forced to compete and the winner will be the ones who keep it simplest for the customer. There is an opportunity for leadership in that.
“We are going into it, eyes wide open. It’s not a simple prospect to simplify the process for the consumer and to work as an industry to take complexity out of the process.”
Having said that, Gilliland said while he was not fearful of the tough times ahead, he was “respectful of what will be a tough and difficult time ahead for our customers and the economy.
“It’s not going to be as much fun as the last few years, that’s changed.”
