Q: A recent ASTA study showed that the majority of agencies break even or make just a small amount of revenue from using their GDS. I have always thought that it was vice versa: that the vendors offered substantial incentives to agencies and that those incentives were much greater than the costs of the system, if any. After all, you have written that GDS incentives are higher than ever and that GDS money is often an agency's largest single source of revenue. Has the system recently changed so that your statements are no longer true? If only smaller agencies break even or lose on GDS segment incentives, what is the dividing line between the winners and losers?
A: The system has not changed: GDS incentives are indeed better than ever for large agencies of all kinds and for primarily corporate agencies of all sizes. With some exceptions, small, leisure-based agencies, which probably constitute the majority of ASTA's membership, get the short end of the GDS stick.
The dividing lines are based on numbers of GDS segments. A segment is a reservation for an airline flight between two points, a hotel stay, a car rental, a tour or a cruise, except that some vendors offer more credit for tours and cruises. Sabre calls segments "bookings," but their definition is the same as what the other vendors call "segments."
If we assume that a productive, front-line agent can make at least one sale per hour and that there are an average of three GDS segments per sale, then one agent produces at least 6,000 GDS segments per year.
If your agency has 10 such agents, you are probably producing more than 60,000 GDS segments per year. At the 60,000 mark, I believe that you enter the cohort of agencies that get very good GDS offers today.
For example, Sabre has a set of charges, discounts, waivers and incentives called the "Assured Advantage Plan" that appears to be aimed at agencies with fewer than about 60,000 annual segments. For larger agencies, Sabre offers the "Optimal Earnings Plan," which carries bigger incentives per segment and larger signing bonuses.
However, if yours is not a large or corporate agency, do not despair. Some of my small, leisure-oriented clients get top-notch GDS deals through excellent negotiating strategy, persistence or alternative booking sources.
The best negotiating strategy is to obtain offers from each of the three vendors, make clear that you have done so and tell them that you will go with the vendor that offers you the best financial deal. Even if you end up renewing with a vendor that didn't offer the best deal, that deal will be much better than what you would have gotten if the vendor had not been forced to compete.
Persistence pays off because it will take two or three rounds of negotiations to get a top-notch offer. Often, agencies' GDS contracts run out before the negotiations are over.
You will need the assistance of an attorney or consultant who knows what the best deals are, as you cannot take a vendor's own word for what a good offer might be.
If all else fails, obtain GDS access through a host agency that offers to split its segment incentives. Your share might well exceed what you could obtain on your own.
Mark Pestronk is a Washington-based lawyer specializing in travel law. To submit a question for Legal Briefs, email him at [email protected].