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Tomorrow's Technology Deslie Webb, vice President & Chief Information Officer, Carlson Leisure Group

Deslie is the Vice President & Chief Information Officer, with Carlson Leisure Group.The Carlson Leisure Group is based in Minneapolis and is a global leisure andfranchise travel agency arm for Carlson company's and it manages travel operationsworldwide under a variety of brands. Leslie is responsible for the day to dayoperations and development for over 1300 travel agency locations. Prior to this shewas Director of Technology Solution and implemented the Carlson browser based restsystem. Before Carlson she was employed by Gemini consulting for two years and atWesley House for 5 years. She has an MBA from MIT and a Masters in ElectricalEngineering from George Washington University.Good morning, it's always good to go right before a lunch so I'll try to be timely. The presentation that I had was canned and done. Based on some of the comments fromsome of the speakers this morning I went ahead during the break and made somechanges here and that’s kind of where I want to start. We are a travel agencycompany we have 1300 travel agencies in the United States and what we see is thatthe number of travel agencies is actually static. Yes there are people leaving the business but what's happening is other agencies are acquiring them and then there'sstill a lot of people coming into the business. Carlson start up agency business is better than it has been in years so while we do see the industry consolidating we think that the mom and pop small travel agencies will be the ones that potentially leave theindustry and then the five to ten million dollar agencies and the agencies that aregreater than 10 million dollars the agencies that can give the economy a scale, theagency's that can leverage the technology to increase their productivity, they're goingto be the ones that are around and Carlsons vision is to help that consolidation helpthem consolidate to our brand. Also next point we want to be full service travel the people that want to book direct are a Hilton room or a American Airlines flight,Boston New York, New York Boston and that's all they do. Maybe they're better booking direct. We want to do the value and the full service travel so we think there'sroom in the marketplace for both and then travel distribution as an industry, very lowmargins, especially with the commission s being capped etc. etc. so we have to findnew and creative ways to make money. One of those is service fees. We have theGDS system, we can go in the GDS and we can look at the corporate rates, we canalso go into the internet and find the best fare, then we give the customer the best price possible and charge the customer twenty bucks, a service fee per ticket. Last point on this slide 80% of travel is still booked through travel agency network andwhen somebody is stuck at the airport at one o'clock in the morning and can't connectto the internet it's the lousy travel agents that they call so we think we'll be in business for a while and our strategy is threefold. And I haven't started my presentation yet.Growth we think that having a market presence, right now I think that Carlsons at 3%market share of travel agencies out there we want to grow this to 10% so that we canleverage size you can see this in the UK with the merger of Carlsons Bogonly Traveland Thomas Cook that growth pattern will continue in the US you can look for usduring acquisitions and mergers during 1999. Second and my presentation mostlytalks about technology but we want to be the most technologically sophisticated

agencies out there. We want to be able to leverage the internet distribution to makeour agency network part of that channel so that tickets drop not at a call centre not at asoftware company that doesn't know about travel but at travel agents who have beenin their office on their ticket queues that have been doing this and are in this businessfor years and I will share that business model with you in a few moments. And thenthe third point up here, vertical integration talked about the travel distributionsmargins being fairly low, a lot in owning inventory and making sure that you got butsin seats and all your beds filled in hotel rooms. In the UK we have boughtCaledonian Airways and we have bought a few tour operators and then you push that product out through your own distribution network and because they're your owndistribution network they sell your product and then your making money throughoutthe entire value chain we will continue that model and will grow that model in theStates so you can look for Carlson and start taking risk and owning inventory and pushing that inventory out through the agency channel and in some cases taking jointrisk with our travel agents so it's a win win solution our goal and intent is to never bypass the agency network. And that brings me to my presentation today. What Iwanted to talk about are why travel agencies won't be disintermediated and thensecondly technologies role in agencies of the future.To start off I wanted to find what travel technology is, I broken it into four components the first two of those people think of them automatically, hardware andsoftware, multimedia machines, windows 95 etc. etc. One of the things out there veryimportant is the information we are travel agents, we own agencies, we don't own product right now so all we have is information about the suppliers and we haveinformation about the customers and then we match it up, so we are an informationcompany, now what's funny about that is we are an information company but rightnow all of our information is actually stored in the CRS companies or the GDScompanies. Carlson is making sizeable investments and has made sizeable investmentso that customer information, the data warehousing, customer transaction history,loyalty information will all be stored in house as well as in the CRS systemtransparent to the agent so that every thing is still single point of entry and not morework for the agents actually keying in the information. The next thing that’s veryimportant to travel technology is the network. Especially in travel agency business,we have 1300 travel agency's and we need a way to communicate with them, whatwe've done is we've gone into preferred partnerships one with Apollo and one withWorld Span and they have given us use of their network so Carlson can run any datawe want over high speed pipes that give us internet access to every single agents desk top, so all of a sudden by partnering with somebody that's not a traditional partnershipif you will in the industry, Carlson now has a network that we can reach all 10,000 of our travel agents through by partnering with both World Span and Gallileo so that has been very successful and given us the access we need into our agencies. Once wehad the network we went ahead and we built an intranet site so now we are actually pumping Carlson information, information that we felt our agents need at their fingertips through those pipes. We see that the information will be the definition of power in the industry and it's knowing your customer knowing their trends, their habits, what adds value to them where they want to travel, that's what’s really going todifferentiate if you will the winners from maybe the losers in the future and we aremaking sure that we have that information so that we can be the customer intimatetravel agency, so if somebody wants to walk into a travel agency to buy travel theycan, if they want to call on the phone they can and we know all of their transaction

history, all their habits and you know what if they're on line and they want to book online point to point we're gonna have solutions and we have solutions that willenable them to book online and yet the tickets dropped at our agency's so that theystill have that customer relationship embalmed in that person when they're stranded atthe airport at 1.00 that they trust and can call. Yesterday's technologies, CRSmainframes, Text based systems not user friendly you have to remember /XYPQ/11Ameans upgrade to 1

st

class. Proprietary networks, and CRS databases and all that'schanging, but what happened because of the technology is you have really singlesources of power evolve, suppliers are the ones that own product, CRS companiesdistribute, agencies were basically order takers for suppliers and then the customer had no choice. Now where that's going as to web based platforms are network that Italked about are IP based our system that our agencies are actually booking with is a browser based system so no longer is software stored resident on the desk top whichmakes it very very much easier to support. The relationships that we went into withthe CRS companies Apollo and World Space enabled us to get multi media PCs onevery agents desk top and then the multiple data base sources, what that refers to isnot only the data in the CRS systems it's in Carlsons system and it's also in supplier system because now that we have the network we don’t need to get the inventorythrough the CRS system so that anybody that has the capability of actually taking the bookings we can go around the CRS system book directly with suppliers. We're in pilot projects with that technology now. Web sets, we have an extra net, that's how wecommunicate with all 1300 of our agencies and I'll talk more about that later and wealso have an internet site a general public site, the difference between what we'redoing and say what Expedia's doing or Travelocity is doing is anybody who book'son-line, they take a travel agency and the ticket dropped at the agency level the mottofor the site, real people, real places, real service and what it does our agents love it, itdoesn't bypass them so we have nowWhile the booking levels are relatively small we do see that as growing and we wantour agencies to be part of this market when it does explode and we're situating themand we're training them and we're communicating to them the importance of this, sothat when the market and the people are ready, Carlson agents are ready so it'll be awin win for everybody. Now what's happening in the industry is roles are reallychanging and I want to talk about that for a minute. This is porters five forces modelof an industry, it's just a way to do an industry analysis, I've got the travel agencies inthe middle because that's the industry that I'm particularly interested in. I've got acompetition a new competition on the top, substitutes on the bottom, things that ways people that buy other than travel agencies, suppliers and then your travellers who areour customers. Roles are changing, substitutes, people can now buy travel on theinternet they can also buy travel through call centres a lot of suppliers are setting uplarge call centres because they want to handle this traffic direct, but right now, like theHilton I believe has only had 1%, if all of a sudden they had 80% I wonder if they'retransaction costs would be so low especially when they're handling all those customer service costs as well. Call Centres, interesting thing happening in the Call Centrecommunity, a long time ago you had main-frames, and then technology changedreally quickly and now you have little lap tops that weigh 2lbs and they're oneverybody's desks and they're relatively cheap. In the telephony industry you havelarge switches and are very expensive, they can be up to millions of dollars but thattechnology is changing as well so now a lot of things you need a switch for you cando on a computer system making it cheaper and more robust solutions for call centres

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