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Chapter 1 Historical perspective.

Chapter Outline

Introduction

1929: Vision and Profit

1940s: ENIAC and Vacuum Tubes

1950s: UNIVAC and Mainframes

1960s: Jets and SABRE, the First CRS

1970s: Deregulation and Mini-Computers

1980s: The Personal Computer

1990s: Online Communications and Commission Caps

2000s: Evolution of the CRS

Objectives

After completing this chapter, you should be able to:

* Discuss the origins of the electronic computer and the Internet

* Discuss the evolution of the airline computer reservation system

* Discuss travel industry applications of the Internet

* Introduction

During the past 75 years the travel industry and computer technology became ever more intertwined. This chapter gives an overview of this tumultuous three-quarter century.

* 1929: Vision and Profit

An excellent article by John Brandt related the inception of the Internet to the innovation and events that ushered in commercial aviation. Brandt pointed out that the "buzz about the ... Internet is that while it may eventually be profitable, it still lacks any effective way for mainstream businesses to be profitable [or] to use it in marketing or managing." Brandt reminded these critics that the first commercial coast-to-coast flight in the United States "involved nearly as many miles on the ground as it did time in the air," and that "despite charging an exorbitant price of sixteen cents per mile, Transcontinental Air Transport lost $2.75 million in its first eighteen months." Brandt's trenchant conclusion--still noteworthy even after the dotcom boom and bust of the late 1990s and early 2000s--was that "only a fool judges the commercial future of a technological advance by his own limited vision of the present." (1)

1940s: ENIAC and Vacuum Tubes

In the beginning, there were big, slow, solitary computers. An early behemoth was the Electronic Numerical Integrator and Calculator (ENIAC), the invention of which was driven primarily by the needs of the American defense effort during World War II. This gym-sized, 30-ton machine depended on 17,000 vacuum tubes. Its major problem was not the two technicians needed to check and replace burnt-out tubes or its cumbersome diet of punched cards, but the difficulty of changing programs: applications designed by programmers were literally hardwired into the machine. The unwieldy ENIAC lumbered out to pasture in 1955. Some of its parts can be seen in a Boston museum, (2) where a contemporary sign on one of these ancient, cabinet-sized modules says it all: "In less than forty years, advances in micro-electronics technology have enabled the digital computer with performance far superior to the ENIAC to be placed on a one-quarter-inch piece of silicon." (3) The trend toward miniaturization was set in motion with the invention of the transistor in 1947.

1950s: UNIVAC and Mainframes

Civilian computing started with the installation of a Universal Automatic Computer (UNIVAC) at the U.S. Bureau of the Census, where the machine crunched numbers for population surveys. This machine received its input via magnetic tape rather than by the punch cards that were ENIAC's fibrous diet. Large corporations appreciated the abilities of these new machines, and by the end of the decade, about one thousand UNIVACs were humming at large companies and government departments. (4)

1960s: Jets and SABRE, the First CRS

Nevertheless, computing had certainly not yet made its way into aviation. During the later years of the Eisenhower presidency (1952-1960), many air travelers were still flying aboard propeller planes such as the Douglass DC-6, with a capacity of about 70 passengers. The commercial jet age was ushered in by the British Overseas Airlines Corporation (BOAC) when it inaugurated regular flights with a Comet 4 jet between London and New York on October 4, 1958. Three weeks later, Pan American followed suit, with Boeing 707 jets providing daily flights between New York and Paris, and domestic jet transportation was initiated by National Airlines with flights between New York and Miami in December of that same year. The 707 carried about 180 passengers, about three times the capacity of a DC-6. As of October 1998, the producer of the 707, Seattle-based Boeing Corporation, had ruled most of the civilian skies for 50 years.

At the beginning of the jet age, air transportation was a government-regulated industry. The Civil Aeronautics Board (CAB) controlled fares, and fewer than 1.5 million passengers flew to international destinations. (5) In contrast, in 1995 the airline industry reported almost 500 million domestic boardings and more than 1.2 billion worldwide. (6) Travel agents booked flights over the telephone and wrote tickets by hand. The voluminous Official Airline Guide (OAG) appeared monthly with information about fares and schedules.

The appearance of better, cheaper, and faster hardware and software led to major advances in computing. In 1959, the Bank of America revolutionized check processing by introducing magnetic encoding; in 1963, American Airlines introduced the first online computer reservation system (CRS) with its Semi-Automated Business Reservation Environment (SABRE), which used an IBM mainframe computer. By 1964, this system within American Airlines had expanded to reach from coast to coast and from Canada to Mexico. SABRE was the largest computer network outside the U.S. government.

Nevertheless, the defense industry continued to be the driving force in computer design throughout the Cold War years. Much of the government's research money flowed through the Advanced Research Projects Agency (ARPA), the incubator of the Internet. "It started in 1969 as the ARPANET, a network sponsored by the Department of Defense linking computers at university research facilities. It was launched with an exchange of messages between UCLA and the Stanford Research Institute in Menlo Park." (7) The archaic monochrome text-only format of these early exchanges still flickers on some CRS screens.

1970s: Deregulation and Mini-Computers

The first travel agencies hooked up to Apollo (the CRS of United Airlines) and SABRE in 1976; by 1977, American Airlines proudly announced that it had 300 agencies online. CRS services allowed large domestic airlines to sell their tickets cheaply and efficiently through travel agents, and the ease of use of CRSs--along with their income-generating capacities (commissions)--cemented travel agents' dependence on air carriers.

The dominance of large, mainframe computers (mostly manufactured by IBM) was challenged by the introduction of minicomputers. Their design and much smaller size were made possible by the microchip, most notably the TMS 1000 by Texas Instruments. The advent of mini-computers fostered the spread of computer use well beyond Fortune 500 companies to a wider audience, including tour operators and large travel agency chains. As this technology spread, new applications such as word processing also became available. Although mini-computers brought computer technology to a larger public, programmers retained their exclusive status as the only ones able to converse in code with these machines. Programmers' jargon meant job security, just as the coded language needed to use a CRS strengthened the travel industry's monopoly on access to computerized travel information.

Federally mandated domestic airline deregulation began in 1978, and it severely challenged the structure of the airline and retail travel industries. According to an American Airlines press release, "the effects of deregulation are still being felt.... Whereas in 1977 roughly 37 percent of airline passengers traveled on discounted fares, [in 1993] that number is closer to 92 percent.... Needless to say, by the late [19]70s, travel agencies needed CRS terminals to handle the growing number of passengers, and SABRE's client base grew by leaps and bounds. In March 1979, we installed SABRE in our 1,000th subscriber location." (8) The number of agencies more than doubled within 10 years of deregulation, the number of airlines more than tripled, and passenger numbers soared even more. This explosion of air travel richly rewarded travel agents with a bonanza of commission income even while many airlines sank into a sea of red accounting ink. As a consequence, airline wages shrank and airline bankruptcies became common. Airline efforts to reduce commissions were bitterly contested and successfully thwarted by travel agents, who maintained their near-monopoly on ticket issuance.

1980s: The Personal Computer

Important inventions of the mid- and late 1970s began to blossom in the next decade. Daniel Bricklin conceived Visicalc (the world's first electronic spreadsheet) while he was a graduate student at Harvard University. "VisiCalc was successful [because it allowed] users to use this electronic spreadsheet to manipulate numbers in a myriad of ways. This was something that couldn't be done on an IBM mainframe." (9) Two California dreamers, Jobs and Wozniak, created the Apple microcomputer in their San Jose garage to run this new software. Businesses began to use it for nimble accounting, budgeting, and forecasting. IBM belatedly entered the microcomputer arena with its benchmark Personal Computer (PC), running on the now-venerable DOS (Disk Operating System) created by Bill Gates and Paul Allen of Microsoft. The PC turned out to be the first computer that users could operate effectively and directly, without the need of a programmer. Soon the PC would also handle database management, graphics, and word processing in addition to spreadsheet applications.

While PCs were becoming ever-better stand-alone business machines, researchers began to use theirs to communicate with each other:
   Sending and receiving messages via the ARPANET became possible
   and E-Mail as we know it was born along with the by-now
   universal @ symbol in addresses. When ARPANET enabled incompatible
   computers to "talk" to each other, many new networks
   were created. They soon bypassed the ARPANET and communicated
   directly with one another: the Internet was born and the
   ARPANET was decommissioned in 1989. (10)


Just as soon as the Internet appeared, EasySABRE[SM] was created to provide frequent travelers and online computer users with easy-to-use access to the SABRE global distribution system (GDS).

The PC became the king of computer land, replacing the minicomputer almost entirely and relegating the mainframe and its attendant programmers to large-scale tasks. As a result, working with the PC and its growing software library became normal in many sectors of American education, business, and industry. People used the PC and its ever-growing connectivity, speed, and versatility to increase efficiency. The PC's attraction was hugely enhanced with the introduction of Microsoft's Windows operating system, which gave PC users an easy, graphics-oriented way to access applications.

By contrast, retail travel agencies generally missed the PC revolution, and continued to use their PCs primarily as CRS terminals (see Figure 1-1). Why didn't PC use blossom in the travel industry as it did in just about every other sector of American business? Whatever the reasons, the lack of computer literacy among travel agents became one of the retail travel industry's major handicaps.

[FIGURE 1-1 OMITTED]

1990s: Online Communications and Commission Caps

When Tim Berners-Lee invented the World Wide Web in 1990, the PC "went platinum" and the Internet began to move to center stage. Lee's invention made the Internet more user-friendly by adding graphics and the point-and-click capacity to connect almost instantly to just about any file, format, resource, or tool available on the Internet. In a very short time, the Web became the dominant feature of the Internet. Most companies use the Internet and its mind-boggling resources to transact their business, and online home computers connect about a quarter of America's households to cyberspace. By contrast, many travel agencies remain shackled to their CRSs, and their connections to the Internet are tenuous and underused. This lack of modern, online technology and the absence of computer savvy puts many travel agencies at a serious disadvantage in the current business environment.

Companies and organizations have connected to--and established presences on--the Internet at an astonishing pace, and its penetration of U.S. business is widespread. In Orange County, California, an Internet frontier, nine out of ten businesses were online by 1997, according to the Los Angeles Times. (11) The same article estimated that private participation in this same area had reached the magic 25 percent mark--magic because at this level of acceptance the new item or service becomes commonplace, and everybody has to have it. Without doubt, the Internet in Orange County has become a standard business, educational, communications, marketing, and research tool.

With decent computers costing less than $1,000, and with popular public access points for the general public proliferating, the Internet became accessible to most people. Libraries, convenience stores, truck stops, and Internet cafes were especially popular with travelers wanting to stay in touch via the Internet. (12) The Cyber Java Cafe of Venice, California, issued this manifesto:
   The profound gains for society offered by the Internet may be
   unevenly distributed if the large population without knowledge or
   access to computers are left out of Cyberspace. Promises of a
   "global village" and "digital democracy" may be unfulfilled if
   computers remain the exclusive tool of the specially educated or
   affluent. Cyber Java's mission is to bring Internet education and
   connectivity to coffee drinkers everywhere!


Many cafes and software programs included the term Java to indicate a connection with both the popular beverage and the application program called Java. The application was important for two reasons: It was the first programming language not specific to a particular operating system or microprocessor, and it transformed the Web from a text- and still-picture medium into an animated, more television-like medium. With Java, the brainchild of people at Sun Microsystems, and XML (Extended Markup Language), the Web took the quantum leap from hypertext to hypermedium (see Figure 1-2 on page 8).

[FIGURE 1-2 OMITTED]

In 1996, when 36 percent of households in the United States had PCs (in trendy southern California, the percentage was 46 (13)), SABRE debuted Travelocity on the World Wide Web. It was the first full-service, online, travel booking and information resource available to users of the Web. This service was squarely aimed at an upscale public, because computer literacy remained a trait of the more educated middle and upper classes: More than 80 percent of students entering private colleges used computers regularly. (14) However, only 22 percent of southern California households with incomes of less than $25,000 had personal computers, compared with 69 percent of those with incomes of more than $50,000. The most technologically adept were overwhelmingly male and highly educated. (15) By contrast, the typical full-time travel agent was female, with a high school diploma, earning less than $20,000 annually. (16) These figures may explain why computer and cyber-literacy were below average in the retail travel industry.

The winter of 1995 marked the introduction of commission caps. Since then, commissions paid by many airlines to travel agents have been reduced to zero. The sale of domestic air transportation in particular became less lucrative for travel agents. Airlines were chary with commissions, and started to promote ticketless travel, special Web sites for frequent travelers, and auctions--three techniques that helped to increase direct sales. Therefore, agents with their ears to the ground and a feel for the industry started to automate ticket sales and began to shift their agents' emphasis from the sale of airline tickets to high-margin cruises, packages, and tours. Home-based agents, niche marketing, and specialization found increasing favor as ways to remain profitable.

Millions of surfers used large, sophisticated Web sites, such as Expedia, Preview Travel, and Travelocity, for their travel needs, and some airlines offered complete travel services on their Web sites. Overall, the volume of travel services booked over the Internet almost quadrupled from 1996 to 1997, yet travel agents' share of this rapidly growing pie shrank from 79 percent to 52 percent during the same period. Another indication of what the future might bring was supplied by the Travel Industry Association of America, which estimated that online bookings for air travel, hotels, car rentals, and other travel products would grow from $827 million in 1997 to nearly $9 billion by 2002.

2000s: Evolution of the CRS

Actions taken by the Federal Communications Commission in early April of 1997 were intended to enable 50 percent of the American public to watch digital television (HDTV) by Christmas 1999. This new broadcast signal blurs the distinction between a computer and a TV. This convergence almost guaranteed that the Internet would reach critical mass in the United States by the year 2000, when 25 percent of the U.S. population was estimated to have gone online. From this threshold of acceptance, the Internet changed from something optional to something required.

The growth of the Internet was predicted to be even faster by Kate Delhagen, an analyst with Forrester's People & Technology Strategies service: "[B]y 2001, 135 million people in the United States will be communicating through e-mail. In other words, e-mail will reach 50 percent of the U.S. population within five years. Growth will be fueled by the increase in home PC penetration and business to business online transactions." (17) By 1998, the volume of e-mail exceeded the volume of letters sent by regular postal mail.

Many consumers have used, and will continue to use, their point-and-click personal computer or television appliance to access information and to transact business. This trend holds great promise for the travel industry, but dangers lurk in this brave new world. Just as telephone directory assistance and retail banking (think automated teller machines) are now carried out mostly by machines, airline reservations will become almost totally automated. The New York Times noted that "the airline industry is trying to persuade frequent flyers to book their own flights with software that takes advantage of point-and-click technology and offers more sophisticated features than EasySABRE." (18) Even if the public wants to keep making reservations with live travel agents, the cost savings for airlines and CRSs will drive automation to the furthest possible extent.

The Internet's Janus-faced nature will manifest itself dramatically in the travel industry: On the one hand, the Internet will eliminate dealing with air reservations as a major part of an agent's job description; on the other hand, it will create tools for travel design, marketing, and research of an efficiency and quality unimaginable just a few years ago. The power of the Internet will shift travel agents' focus from being reservations and ticketing processors to being travel consultants dealing in the complex products that online services do not handle well (see Figure 1-3).

According to an associate of Cruise Shoppes America (CSA), Robin's Travel Service in Lake Worth, Florida, "those who are not sold on the Internet are wasting money, time and sales." An associate explained:
      Clients came into our agency wanting to go to the Oktoberfest
   in Germany. They wanted to know when it would take place and
   what events were happening. We could have written the German
   Consulate and waited a month for the information and lost the
   sale, but it's all right there on the Internet--dates, events, even a
   listing of all the different beer tents. We were able to provide our
   clients all the information they needed in less than 10 minutes. (19)


[FIGURE 1-3 OMITTED]

Is it any wonder that organizations such as the German National Tourist Board are closing offices while expanding their Web sites?

Summary

Personal computers and online communication have become common in many sectors of American life and business. Although a late bloomer, the retail travel industry is beginning to adapt to this new reality. As this adaptation spreads, the power and capabilities of the Internet will shift travel agents' focus from being reservations and ticketing processors to being travel consultants, sales, and marketing experts.

End Notes

(1) John Brandt, "Naysayers Need a History Lesson," Industry Week, 5 June 1995, 6.

(2) The Computer Museum in Boston charts the history of the computer from the vacuum-tube era to Web TV and beyond.

(3) Philip Elmer-DeWitt, "A Birthday Party for ENIAC," Time, 24 February 1986, 63.

(4) Linda Runyan, "Forty Years on the Frontier," Datamation, 15 March 1991, 34.

(5) U.S. Bureau of the Census, Statistical Abstract of the United States (Washington, D.C.: Government Printing Office, 1961), 198.

(6) Aerospace Industries Association of America, Aerospace Facts & Figures 1995-96 (Washington, D.C.: Author).

(7) Amy Harmon, "Computing in the '90s: 'The Great Divide,' " Los Angeles Times, 7 October 1996, D1-D6.

(8) American Airlines press release, 1 March 1993.

(9) Runyan, "Forty Years on the Frontier," 34.

(10) Los Angeles Times Magazine, 27 October 1996, 9.

(11) Jonathan Weber, "Download This: The Dirty Secret about the Net--Hint: It's About Money (But Isn't It Always?)," Los Angeles Times (home ed.), 21 February 1997, D1-D6.

(12) Margaret Webb, Washington Post, 1 August 1995, D1.

(13) Greg Miller, "Getting with the PC Program," Los Angeles Times, 6 October 1996, 1, 36.

(14) William H. Honan, "College Freshmen's Internet Use a Way of Life, but Disparities Emerge," New York Times on the Web, 25 January 1999. Retrieved March 7, 2000 from http://www.nytimes.com.

(15) Harmon, "Computing in the '90s," D6.

(16) U.S. government figures for 1994 showed these annual incomes for travel agents: median $21,300; less than 1 year experience, $12,990; 1-3 years' experience, $16,481; 3-5 years' experience, $19,491; 5-10 years' experience, $22,122; more than 10 years' experience, $24,645. U.S. Department of Labor, Bureau of Labor Statistics, Occupational Outlook Handbook (Washington, D.C.: Government Printing Office, 1997).

(17) ISP World, 3 March 1997, 20.

(18) David K. Johnston, "Practical Traveler: Do It Yourself," New York Times, 30 June 1996, section 5, 4.

(19) Paid advertisement in TravelTrade Magazine, 24 March 1994.
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Author:Maurer, Ed
Publication:Internet for the Retail Travel Industry
Article Type:Chronology
Date:Jan 1, 2003
Words:3531
Next Article:Chapter 2 Travel reservations and the Internet.
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