Technology Distributors debate: Game over or is it just beginning? By Dennis Schaal / March 15, 2006 Share 1 -- DALLAS -- What a difference a year makes -- or doesnt make. Officials from Sabre, Cendant and Worldspan squared off against their counterparts at ITA Software and G2 SwitchWorks at the Res-Expo 2006 conference here debating developments in the distribution environment.It was deja vu all over again, in some respects, since the same companies that participated in Res-Expos Global Distribution in a Changing World panel pitched their value propositions in a similar panel at the conference a year earlier.Jeremy Wertheimer, president and CEO of ITA Software, leveled the most pointed charges, accusing Sabre of trying to negotiate exclusive deals in new airline contracts.Sabre certainly thinks exclusivity is a good thing, said Wertheimer, who added that Sabre is spreading disinformation if it says otherwise.Chris Kroeger, senior vice, North America, for the Sabre Travel Network, took offense at the allegation and countered that Sabre opposes exclusive GDS deals.However, Kroeger acknowledged that the exclusivity issue indeed surfaces in negotiations, but that suppliers initiate the majority of those conversations.Moderator Arnie Weissmann, editor in chief of Travel Weekly, questioned the officials on what had changed in the past year, and whether it was game over for ITA Software and G2 SwitchWorks since Sabre signed five-year contracts with Northwest, US Airways and AirTran.Ellen Lee, vice president of business development at G2 SwitchWorks, referred to the recently announced Sabre-Amadeus inventory-sharing agreement and said her company is the only distributor to have airline content locked up for the next five years. Thats because major airlines invested in the start-up and pre-paid tickets.Lee said shed be happy to offer G2 SwitchWorks services as an insurance policy to other GDSs.The Sabadeus agreement, as Farelogix President and CEO Jim Davidson dubbed the deal in an earlier panel, was the buzz of the conference and the backdrop for the distribution discussion.The traditional GDSs are not inefficient and provide value, Lee said. She added that there is room for niche players.Wertheimer said that ITA Software will be a viable player as a distributor if it provides value to suppliers and agencies, and so Sabres deals do not end the marketplace competition.Kurt Ekert, senior vice president of supplier services at Cendant Travel Distribution Services, said the marketplace is hyper-competitive and that booking fee price points will be lower in the next round of airline deals.Commenting on tough negotiations with airlines, Ekert said, Its tough for us to walk in and allow the airlines to give us a haircut.Ekert argued that the booking fees that Galileo charges suppliers should be based on the value it provides, and not its costs. He said Galileo could change its business model tomorrow, if it wanted.It is unclear what value the new-entrant distributors provide, he added. It really is a mystery.Kroeger of Sabre led the attack against G2 SwitchWorks and ITA Software, charging that their story has changed in the past year.Kroeger noted that the stated goals of the airlines, ITA Software and G2 SwitchWorks in the past year was to eliminate travel agency incentives, but that inducements creeped back in.Lee of G2 SwitchWorks, which offers agency incentives, countered that the goal was never to eliminate incentives, but to take them out of the distribution system.She was referring to the dominant GDS business model, where airlines pay booking fees and incentives to the traditional GDSs, who redistribute the incentives to agencies.Kroeger said Sabre has focused in the past year on securing airline content and the company is in the best position in that regard compared with its competitors.He said it was a prudent move for Sabre to strike a deal with Amadeus in the unlikely event that an airline dropped out of Sabre or Amadeus.However, Kroeger said that agency incentives play a key role in customer acquisition, and that any new business models should be developed through industry consultation and not by unilateral moves.Meanwhile, Ninan Chacko, Worldspans chief commercial officer, said Worldspan is confident it will secure airline content.In response to a remark from Weissmann that the Amadeus-Sabre pact left Worldspan and Galileo in a weaker position, Chacko said he does not envision Worldspan forging an agreement with another GDS to share inventory.So, if representatives of the traditional GDSs and the start-ups offered diverging perspectives, what of the competition between G2 SwitchWorks and ITA Software?Weissmann asked them how they differentiate themselves and view each other.Wertheimer of ITA Software said he doesnt view G2 SwitchWorks as a competitor since G2 SwitchWorks uses ITA availability and pricing technology and is a customer.He also noted that ITA Software makes more money on G2 SwitchWorks bookings than it does from some other customers.To contact reporter Dennis Schaal, send e-mail to firstname.lastname@example.org.