GDS Alternatives Take Toll on ARC

ARC locations have dropped by more than 25 percent in the past five years

By: Lisa Jennings

In the mid-1990s, agent Fred Munroe managed an agency that was accredited by the Airlines Reporting Corp. to sell air tickets.

But when air commissions began to disappear, the agency dropped its GDS contract, and Munroe was forced to find a host agency to handle his ticketing needs, for a split commission.

Now Munroe has found another way to sell air tickets, book cruises and tours without having his own GDS contract or sharing commissions: Magellan 360, an “alternative” business model that allows agents access to the major GDS systems without establishing their own ARC-accredited retail location.

Magellan is just one of several alternative systems that have emerged in what some in the industry are calling the wave of the future for small agencies and independent agents.

The trend has helped send the number of ARC-accredited retail locations plummeting by more than 25 percent over the past five years, according to ARC statistics.

ARC-authorized retail locations reached a high of 33,500 in 1997, but then began a steady decline as airline commissions began to disappear, ARC figures show. By the end of 2002, there were just 24,679 ARC-accredited retail locations.

Exact reasons for the steady decline are unclear; ARC does not track reasons for the drop.

Industry experts say several factors appear to be at work, including a general travel agency consolidation that has lead to some agencies simply closing their doors.

More agents are also simply buying air tickets through consolidators, directly on the Internet, through host agencies or, like Munroe, using companies such as Magellan 360, which shares access to an ARC number and began offering ticketing services about a year ago.

Magellan has about 300 agents and agencies, but the board of directors for the Association of Retail Travel Agents last week approved a contract with Magellan that would make it available to ARTA’s 3,000 members.

Last week, details of the contract had not been finalized, but John Hawks, ARTA president, said, “Any agency that does less than $2 million in air would be crazy not to look at this sort of arrangement.”

From ARC’s standpoint, Magellan is one authorized location. But potentially, thousands of agents could buy all the products available on GDS systems through that one location, which offers the benefits of buying in aggregate.

Magellan offers agents access to the four major GDS systems, and it also handles the back-office paperwork of processing tickets and reporting the sale to ARC.

Agents can sell tickets without carrying the burden of the bonds required to become an ARC-accredited location, the fees of having a GDS contract, buying ticket stock and the time-consuming process of filing ARC reports.

At Magellan, there’s a per-invoice fee that varies, depending on monthly volume. “I now see between 30 to 40 percent more in commissions,” said Munroe, an independent whose Grover Beach, Calif. agency is called Travel With Fred. “And I can track every invoice I’ve written since Day One.”

But companies like Magellan are designed for agents who don’t need the hand-holding that a host agency might offer. And tickets are printed in Chicago, so, at best, Munroe doesn’t have the ticket in hand until the next day.

Magellan is the relative newcomer on the block. Nexion (www.nexionnet. com) has been offering such alternative GDS services for about four years and now claims about 1,000 agents.

Like Magellan, Nexion offers GDS access and ARC reporting services. But Nexion offers access to the four major GDS systems at once, translating commands from one system to another.

Nexion offers five pricing plans with varying combinations of monthly fees and commission splits.

Another option for agents is the Independent Travel Agency Support Network, or iTASN, ( a group of about 220 mostly brick-and-mortar agents who do ticketing under one ARC number to leverage booking volume and lower costs. With iTASN, agents have access to Sabre only.

There’s an annual fee and small monthly fees, but agents get paid 50 cents per segment. Agents also keep 100 percent of commission claimed at ticketing, and 50 to 60 percent of back-end commissions, said manager Alan Kawadler, who predicts that such services will catch on.

Said Kawadler: “If we could look in a crystal ball and predict the future, I predict we will have the top 100 agencies selling air tickets, and groups like ours supporting the small agencies.”