“Revenge travel” has been in full swing for a while now, with TSA checkpoint travel numbers finally matching – and exceeding – those before the pandemic hit us.
Revenge travel was a term coined back when restrictions began to ease as the COVID-19 pandemic waned, and now that that trying time is behind us, people are hopping on as many planes as they can to see what they’ve missed out on over the past three years.
That’s great news for the travel industry, especially the travel booking sector and the global distribution systems (also known as GDS) that provide their listings.
Travel booking companies currently rely on artificial intelligence to personalize recommendations, forecast flight statuses, predict seat availability, and find the best rates for travelers. They glean this information from the GDS.
It’s nice to be able to be served information about an all-inclusive Fiji trip if you’ve been Googling beach vacations lately, but travel companies are getting more savvy about using AI to increase profits – and investors stand to benefit…
Forget “Teslanaires” — Musk Has a New Profit Engine
“Teslanaires” made hundreds of thousands or even millions. But Forbes says Musk’s new project “is set to unleash the greatest profit engine in history.”
The Next Level
I’ve covered Sabre Corp. (SABR) in the past, most recently at the end of last year, recommending that my The Speculator subscribers stay the course and keep the Dallas-based GDS company in the portfolio, despite it facing far tougher headwinds than most stocks in the Speculator portfolio.
As I said in December 2022…
Only three companies dominate the travel industry’s global distributions systems…
Spain-based Amadeus IT Group SA (AMADY) is the largest of the three. It processes about 40% of travel bookings worldwide…
Dallas area-based Sabre Corp. (SABR) is No. 2, with a 35% market share…
And privately held Travelport is No. 3, with a 22% market share.
Together, these three make up 97% of all travel bookings worldwide.
Because more than 400 airlines and one million hotels use the Sabre system to process travel bookings, Sabre’s system processes 2.5 million bookings every minute.
The company generates its revenues from the volume of transactions it processes, not the dollar value of those transactions.
So, when travel activity increases, Sabre’s revenues also increase. The connection between the two is very close… and predictable.
It would be easy for a company like Sabre to sit around waiting for the travel industry’s inevitable turnaround, but that’s not why I’ve stuck with them. It has taken decisive steps to fortify its competitive moat by expanding its client roster and beefing up its industry-leading IT capabilities.
Back in December, I noted the company’s Google collaboration – Sabre migrated its IT infrastructure to Google Cloud and partnered with Google to develop a pioneering AI-driven technology platform.
And now Sabre is ready to take AI’s role in its business to the next level…
Sabre Rolls Out Retail Intelligence Products & Partnerships
In April, Sabre’s Vice President of Product Management, Offer Optimization, Bhaskara Guntreddy, sat down with Jiří Marek, Executive Officer of Air Serbia, to discuss how the company is monetizing personalized travel for airlines with its suite of Retail Intelligence products, which includes Air Price IQ and Ancillary IQ.
Air Serbia, like many airlines, was forced to change many of the ways it did business after the pandemic. Marek said…
We completely changed our distribution strategy… from static to dynamic, and also moved away from rules-based pricing. As a smaller regional carrier we don’t really have the capabilities, resources and investment to develop this on our own. So when we searched the market for a strategic partnership instead, the natural choice was to do it with the Sabre.
Guntreddy said of the partnership and products…
Air Price IQ is a tool that unlocks incremental revenue for airlines… For Air Serbia we’ve delivered an end-to-end solution from shopping, booking, exchanges, refunds, the data feed, and all the way down to revenue accounting data. We are also working on further personalization solutions together, to continually enhance their customers’ experience.
Long story short, by gathering real-time data from airline partners, Sabre can use its AI suite of products to provide real-time insights and machine learning models to increase revenue opportunities by moving from static pricing rules to targeted offers.
And it’s already paying off. Sabre has seen an overall 3% increase in overall airline revenue for the airlines using their AI systems.
Specifically, Guntreddy said that airlines are experiencing “up to 10% uplift in ancillary revenue of seats and have observed similar results when selling upgrades too. Another POC we conducted at another major airline saw an increase of 10%-20% upgrade revenue, depending on the business cabin operating capacity.”
Remember… Sabre is the #2 company in the global distributions system sector and travel recovery is something I’ve been pounding the table about since the stirrings thereof emerged in mid-2021.
But now, it seems to have the potential to truly take off… and Sabre is only one company that could reap significant rewards while the AI megatrend continues to explode…
Which Side Do You Want to Be On?
Back in 1995, Bill Gates went on the David Letterman Show to speak about a new technology called “The Internet.”
But hardly anybody listened, and in fact, the audience and David Letterman himself laughed at Gates.
Knowing what the Internet would become today, Letterman and the audience sure seem foolish, huh?
It certainly showed that even the craziest-sounding technological breakthroughs can make slews of millionaires… even billionaires.
And the rise of artificial intelligence is showing a similar sort of momentum, potential, and power.
Some of the richest businessmen in the world – including Gates, Jeff Bezos, and Warren Buffett – are pouring large amounts of capital into AI…
Because the returns are expected to be life-changing.
And if the AI movement is anything like the adoption of the internet… becoming a millionaire might not be out of reach…
But only if you act quickly and invest in the right places. You won’t be able to throw your money at any company and hope it turns out to be a winner.
I’ll show you exactly where I think the best AI investments are right now… and I’ll even give away one of my picks in the space for free. Just click here for more details.
Regards,
Eric
