Stuck between a rock and a GDS

By Charlie Funk

CharlieFUNK100x135Many years ago at a travel industry function, I had a discussion with a longtime agent who commented about the great partnership between the airlines and the travel agency community. I remarked that when the day came that the airlines could do themselves what we do for them and do it at a lower cost, they would take our commissions.

He replied that such a thing would never happen. I hadn't been in the business long enough, and I obviously didn't understand how deep the partnership ran.

I said he obviously didn't understand enough about business to know that executives and managers of any corporation have an obligation to their shareholders to maximize return on shareholder investment.

Six years later, the airlines did indeed begin taking away our commissions. And it was and still is all about corporate responsibility. Sentiment and emotion ultimately have no place in the business relationship equation. Those commission cuts were examples of corporate decisions made to protect the assets of the shareholders, even when some others were ill served.

Airline executives continue to fulfill that responsibility today, often in new and novel ways.

Recently, an airline executive proposed that travel agents pay for the right to access the carrier's content on a GDS. Doing so would save millions of dollars a year.

Another airline has notified selected agencies that they will no longer be allowed to use its merchant account to process credit card charges to purchase its tickets. Rather, the agency must remit cash and use its own merchant account and pay the service charge, again resulting in the savings of millions of dollars by the airline.

Both are examples of cost shifting, passing a cost of doing business to the travel agent. Both are examples of executives finding creative ways to discharge their responsibilities to their shareholders.

Credit card fee shifting is all the more creative in another way, because it shields the airline's assets from refund responsibility should the airline file for bankruptcy. Rather, it is the travel agency that would be doubly responsible to the consumer for the refund, having also lost the cash paid to the now-bankrupt airline.

All these examples are fiscally responsible and corporately correct.

And they are all wrong. Not because of what they attempt to achieve but because their method as well as their choice of which players they dump on are without honor.

Make no mistake. Neither of the cost-shifting ideas described above is about the retail travel distribution system, nor have they ever been. The real targets of these policies are the GDSs.

It doesn't take a genius to realize that the travel agent can dispense with all these irritations by simply booking on the airlines' websites, not through the GDS. If the GDS isn't used, there is no credit card fee and no content charge. Travel agencies are pawns in the battle between the airlines and the GDSs, and to put travel agencies in such a position is Machiavellian and duplicitous.

The end result, should these or other similar wrong-headed initiatives be permitted to stand, will be time lost in gathering information sufficient to make an informed purchase decision, increased cost to the consumer in fee pass-throughs and restraint of trade by making the selection process sufficiently more difficult to discourage comparison.

Consumers will either incur higher costs or stop using travel agents who continue to use a GDS to book their air travel.

And, just as I correctly foresaw in 1989 (unfortunately) that commissions would go away, I'll go on record now and say that the next cost shift by the airlines will be to require travel agents to pay the fee the airlines must pay to ARC to process tickets for the airlines.

At the pool the other day, I observed a large, black bird being chased by a much smaller bird. Perhaps the crow was a threat to the smaller bird's nest. In short order the small bird was joined by five or six other birds that came to the aid of another, even though they weren't directly threatened.

I'm not sure how the one bird alerted the others. Maybe it twittered an alarm. No matter the method, the little birds, working together, chased away the larger predatory bird.

The next few months are pivotal to the future of the retail travel distribution system. Each owner must make an independent decision but be alert at the same time to a threat that doesn't directly affect them right now. Tweet tweet.

Charlie and Sherrie Funk own Just Cruisin' Plus in Nashville. They have written several books on travel agency operations and produce sales, marketing and operations seminars for agency owners and managers.

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