Mark Pestronk writes a poignant column with respect to IATA's NDC (New Distribution Capability) implementation [Legal Briefs: "IATA's New Distribution Capability could mean end of GDSs," April 8].
But don't be fooled.
Mr. Pestronk's [law practice] is dependent on representing travel agents, some of whom he represents in negotiations with GDSs. In that regard, his practice is dependent on the GDS business model being sustained.
If he were to alienate GDSs with even a whisper of the possibility of agents being able to use the new IATA system successfully, the GDSs would cease to negotiate with or through him in his dealings with them on behalf of his clients. Like many agents and agencies with tight links to the historic GDS platform, he has a bias.
More to the point, the only thing Mr. Pestronk did not exaggerate in his column is the first line: "Think of NDC as like American's Direct Connect except that, instead of being pushed by just one airline, it is going to be backed by all 240 IATA airlines."
With respect to his first argument that airlines "could pressure your agency to book through NDC only, bypassing the GDS process," he fails to note three things:
- GDS incentives will not go away because the GDSs will be able to consolidate agent buying power to offer the same incentives as a wholesaler in most other industries.
- GDS incentives controlled by the GDSs is what the airlines find necessary to ameliorate through open-market mechanisms made possible by NDC.
- Agents will be free to negotiate their own airline incentives with the airlines as appropriate to their market needs and volume, while also being able to take advantage of GDS "wholesaling" prices where their own market volume cannot support negotiated discounts with the airlines.
With respect to raising fees, that is a red-herring threat at best since the entire travel distribution process is already restructuring to meet the needs of buyers with access to instant information.
With respect to his second argument -- "NDC may well kill off the GDSs, which would lose booking fees on which they depend" -- NDC will not kill off any GDS. It will likely force the GDSs to restructure their services to better meet travelers' needs, better meet the airlines' needs and to become true wholesalers in their role of serving agents' and agencies' travel distribution channel.
The only GDSs that will go away are those that are already going away due to inept management.
With respect to his third argument -- "The GDSs would no doubt be replaced by a system in which carriers charge agencies for access to carrier content" -- the GDSs themselves currently require agents to pay for access to the airline's inventory. Who is he kidding?
Would you rather deal with the GDS or the airline? In some cases, the answer will be the airline. For smaller agencies, the answer will still be the GDS.
The GDSs have the distribution outlets to consolidate links to the airlines and to buy bulk rates on behalf of agents, thus offering its own negotiated solutions.
What is likely to really happen is 1) the GDSs will lose control of the full distribution process and be forced to become competitive true wholesalers in an open market; 2) other bulk buyers, such as megacorporations, large tour operators, other yet-to-be-determined packagers, will build inclusive travel solutions that integrate air travel and destination solutions that are niche-targeted at specific traveler-needs (not unlike we're all turning to the use of apps on the Internet); and 3) travel distribution will become an increasingly automated solution.
And in the last case, the GDSs will continue to play a major role in evolving apps for agents and agencies that have neither the skills nor inclination to build them themselves.
With respect to his fourth argument -- "Agencies would have to spend money to re-aggregate all the information from NDC bookings with information from other non-NDC supplier bookings, such as hotels, cars, cruises and tours, all of which are aggregated in the GDS today" -- GDSs do not aggregate air and nonair supplier bookings.
GDSs provide a controlled platform that enables their software to integrate some product offerings (certainly not all), but only as long as the integration package is done the way the GDSs' software mandates. NDC will allow other middlemen into the distribution channel, driving prices lower for buyers.
Air travel has become a commodity, and the only way for margins to increase in the distribution channel is through targeted and niche-induced repackaging that tailor-makes travel to buyer needs, which will be the agents' role.
GDSs might provide some of the tools, but others will offer tools, as well, using the NDC platform accesses. The GDSs will be forced to compete with other distribution packagers.
As for accurate management reports, ridding the industry of legacy GDS reporting systems currently constrained by old design, dated architecture and antiquated business rules will free agencies, businesses and individual travelers to incorporate travel expenses in modern accounting systems, thus eliminating a major cost burden of today's travel, tracking expense.
With respect to his final argument -- "NDC is designed to curtail airfare transparency" -- NDC will not curtail transparency any more than Google, eBay or Priceline has forced major retail, hotel or destination vendors to curtail the transparency of their prices, fees or service charges.
In point of fact, GDSs today force false fare displays on unsuspecting buyers (including agents and agencies) because their systems cannot adjust to the new unbundled marketing needs of the airlines or the competitive environment the airlines find themselves in.
Open digital information is supplanting the controlled information channels of the recent past, and NDC is simply the very late recognition by the airline industry of its need to update the distribution process to the modern era of information management.
Richard Eastman
The Eastman Group
Newport Beach, Calif.
(The writer is a California-based consultant working with travel distribution technology solutions.)
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