Technology 9-1-2006

The Future of GDS

By: J.L. Erickson

As expected, changes are coming fast and furious this year with the global distribution systems. From opt-in programs to segment fees, the developments are the latest in an industry under growing competitive and economic pressures. Experts say that far from being the last, these changes are likely to only be the first in an ongoing and accelerating evolution.

“In a nutshell, what I think is going on now is you’re seeing action to the talk,” said Jim Davidson, chief executive of Farelogix. “The last six months there’s been a lot of talk about control over channels. Now it’s manifesting in true action.”

“I think the airlines will basically sign the deals with all GDS, but I do think they will circumvent and get true desirable content private content,” said Davidson. “That’s the layer of the onion no one has peeled back yet. Private fares are the sleeping giant right now. Read between the lines & all the talks are about published fare access. The idea of private fares will take off in six to nine months.”

Others predict changes in a variety of areas.

“I think you will see airlines continue to innovate ways to differentiate their products and prices,” says John Ische, president and CEO of Trisept Solutions. And Eric Maryanov, president and founder of All-Travel, predicts increased integration of GDS competitors into the agency environment.

“While GDSs have long served as the technology bridge between the travel agency industry and the airlines, the GNEs are the result of changes in technology, which does encourage the agency industry to carefully review their booking methods and business models,” he said.

Ellen Lee, co-founder and vice president of G2Switchworks one of those GNEs which distributes G2Agent platform that offers access to nine U.S. airlines’ fares believes the current GDS changes are here to stay.

“If you look back to what Northwest did in August 2004 which is very similar to the airline programs being announced today the difference was there was no GDS support of the idea in 2004. The GDSs [particularly Sabre] fought Northwest, and Northwest backed down.

“In 2006, the GDSs led with announcements and rumors of opt-in programs before airlines indicated their plans ... ,” she said. “I believe this approach will make all the difference and penalties for booking in ‘high-cost’ channels will stick this time around.”
Other changes in the future of GDS/airline evolution could include further reductions or elimination of incentives over time (much as commission caps turned to zero commission), said Ellie Knight, director of agency automation and training at Signature Travel Network.

“There will be far fewer individual GDS contracts as smaller agencies will host out these services to other larger agencies. Both the GDS vendors and airlines will have to deal with fewer entities but more powerful ones,” Knight said. “In addition, GNEs will take a larger market share, especially as these engines improve their airline share and capacities over time.”

Owen Wild, director of marketing at Amadeus, said the company is in discussion about creating its own opt-in program.

“What I think is becoming clear is that there will not be a single solution that fits every customer today, and that’s a good thing. Development of new technology has increased a lot of things that are good about the industry. But it also creates a lot more complexity and challenge. I doubt it will get any easier to make decisions on behalf of the customer. But the customer also now has the ability to look at very new options,” he said.

Ultimately, experts continue to say agencies need to evaluate all options carefully.

“Insulate yourself,” said David Cerino, chief marketing and product officer of Farelogix, “so you have technology in place and no matter what, you have the ability to source where you need to in an efficient and productive manner.”

Adds Maryanov: “Basically, as the game changes, we need to continually review our own business models. Rather than ‘coping,’ agencies must continue to adapt and develop dynamic business models that are prepared to change and adapt and innovate within the continually changing environment.”

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