DISTRIBUTION / GDSs
and agility. Moreover, the fact GDSs have to spend masses of money to retrofit into legacy technology can’t be helpful. The original commercial model saw airlines paying the GDSs money to carry and enable the sale of their content. The GDSs in turn paid the agencies – the TMCs – to distribute their content. Thus the more bookings a TMC made, the more money they would receive as an incentive payment from the GDS. So far, so good – after all, it is totally rational that if you add value to a process, you should be paid. But maybe it isn’t. Put another way, Ian Luck, head of airline distribution at T2RL, says: “It’s an odd market where [a GDS] being a highest cost to the supplier [the airlines] actually gives you an advantage in the marketplace.” Any outsider would assume that any customer or user of a service (in this case the TMC) would pay the provider (the GDS) of that service for it. However, the GDS pays – through its incentive scheme – the TMC to use it. TMCs are businesses so they are obliged to maximise their revenues just as the GDS organisations are, but this is a factor that is clearly impeding the development of travel distribution. Travel management companies are well aware that change is on the way. In the words of David Bishop, chief operating officer at Gray Dawes Group: “Eventually we will pay them rather than them us.” TMCs typically receive airlines’ NDC content from aggregators. This is similar to how it receives content from low-cost carriers such as easyJet. Luck explains, “A lot of large airlines have done significant distribution deals with GDSs. Airlines connect their
NDC pipe to the GDS” – commonly through a third party aggregator such as Travelfusion. There is a pertinent question for the wider industry though, according to Luck: “Is the same content going into the NDC pipe as what is on the GDS?” He explains: “Overall, it is clear that NDC will enable new content to be distributed that would not be possible with the existing technology.” There are at least three main examples, he says. The first is dynamic/ continuous pricing (implemented by Global distribution systems have diverged a lot in our trajectory. Distribution now is a small fraction of what we do Lufthansa, for example). The second is loyalty offers and the third is customer- specific products and bundles. But for the present it’s important to note that the GDSs provide more than content to TMCs. They provide other free technology such as their mid and back-office systems. This is especially important for business travel management companies because of the importance of services such as booking changes and client refunds. For TMCs it is vital to surmount any hurdles to prevent their ability to support corporate governance
requirements and provide services to their customers (see p48-50). The GDSs are thoroughly aware that the world is changing and they are changing with it. “This industry is complex. How do we simplify that supply and demand side of the equation and the reinvention of retailing for that audience? We need to move the industry towards retailing. We may be travelling on business but we’re all consumers,” reflects Travelport’s Clarke. His views are echoed by Abdou. “The
user doesn’t care if it’s EDIFACT (Electronic Data Interchange for Administration, Commerce and Transport – the original GDS system) or XML/NDC – they just want customers not to get lost in translation when booking air fares. We want to make sure content is consumed in a seamless way.” Gallego concedes that “We have diverged a lot in our trajectory. Distribution now is a small fraction of what we do. At the core of our role is to provide content – which is increasingly complex – as holistic as possible. What you see on the [supplier] website but not with the agency makes it even more
challenged. The old concept of stable classes is disappearing. Fares in aggregators are cheaper than airlines because of volatility and changing prices.” He adds: “Each airline has a slightly different EDIFACT or NDC – our job is to connect them all and also to integrate downstream. We need to do all the plug-ins to mid-offices, back offices etc.” The GDSs occupy a unique position and have been with us for a long time. But they are on a journey and their eyes are firmly fixed on the future.
38
businesstravelnewseurope.com | SPRING 2023
Made with FlippingBook Online newsletter maker