IT at Rosenbluth Travel

1
IT at Rosenbluth Travel

• Eric Clemons and Michael Row
• Journal of MIS Fall 1991

2
Pivotal Ideas

• Rosenbluth Travel grew to be one of the 5 largest
  travel agencies in the US by
• Effectively taking advantage of deregulation
• By applying IT as a foundation of its business
• By having the vision to see an opportunity and
  the hustle to exploit it

3
Background

• Airline industry
• Pre deregulation (1978) Civil Aeronautics Board
  (CAB) set fares and routes
• In 1976 only 40 of passengers tickets were
  booked through Travel Agencies
• Computer Reservation Systems (CRS) created the
  need for specialists to use it
• By 1985 over 80 of air tickets were being
  distributed through Travel Agencies

4
Background

• Business Travel
• Business travel is the third highest expenses
  after payroll and data processing for the average
  US business
• In the 1980s negotiated rates and fares emerged,
  but they required information about travel
  activities
• Purchasing power cannot be exploited without IT
  to identify opportunities for negotiation and to
  monitor the effects of the program

5
Background

• Travel Business
• Fragmented industry lots of small players
• Over 93 of travel agencies use CRS
• SABRE and Apollo dominate the market (68)
• Three segments
• Corporate, Leisure, Incentive Meetings
• Travel agencies are becoming partners with
  businesses to manage travel budgets

6
Rosenbluth

• Hal Rosenbluths vision
• What did deregulation mean? Unclear, but
• The company that could gather information faster
  and turn it into knowledge would win
• Business travel was an important market and IT
  would play a critical role in developing it
• To exploit economies of scale it is important to
  gather and utilize information
• Grew from 40M in 1980 to 1.3B in 1990

7
Rosenbluths IT Initiatives

• READOUT
• Listed flights by fare instead of time
• VISION
• Back office system to record all client
  transitions
• PRECISION
• Front-end system with client profiles and READOUT
  database access
• ULTRAVISION
• Monitors transactions for completeness and
  accuracy

8
Impact of these IT Systems

• READOUT
• Thats when we realized we were in the
  information business, not just the travel
  business
• VISION
• Didnt need to compete on price, could offer
  guaranteed savings through negotiated rates
• PRECISION
• Brought information directly to the Travel
  Agents PC
• ULTRAVISION
• Identify route fare errors and correct them
  real-time
• Global Alliances
• This information allowed RT to make global
  alliances and lower fares for its clients on
  worldwide travel

9
RTs Market Dominance

• Information
• Filtering out the right info and adding other
  info like quality, ambience, etc
• Expertise
• Using the information to make effective decisions
• Information Technology
• Creating an infrastructure (building on
  successes)
• Scale of Operations
• Economy of scale
• Organizational Factors
• Vision and focus

10
IT and Competitive Advantage

• Exploiting a discontinuity (deregulation)
• Understanding importance of corporate travel
• First-mover effects and switching costs
• Building a core IT infrastructure
• Using systems to leverage critical resources
• More information for clients and travel agents
• The role of Vision and Culture
• Its not just IT, its how you use it and why