Mark Pestronk
Q: Our agency still makes more money from GDS incentives than from any other source of revenue. This makes the GDS contract our agency's most important agreement, and ours is coming up for renewal. What's new in GDS deals these days?
A: Consolidation in the agency industry has given those remaining greater bargaining power than ever. As a result, GDS deals are better than ever.
On the leisure side, the agency business has been largely reconfigured. Instead of a very large number of smaller agencies, each with its own GDS contract, many if not most agencies are hosted by larger ones, and the GDS contracts belong to the hosts.
On the corporate side, continuing acquisitions have resulted in fewer players with more segments. Further, with the prevalence of corporate online bookings, many of the remaining corporate agencies are producing more GDS segments than they used to.
By "better than ever," I mean that signing and segment incentives are increasing compared to what they were a few years ago.
In addition, the vendors, which have copied each others' incentive ideas, have devised a few new forms of incentives, including higher ones for certain kinds of segments, such as hotel and car, in some cases.
Another development driving up the overall level of incentives is the increasing prevalence of longer-term contracts. Whereas the term of the typical large-agency GDS contract used to be five years, it is now six or even seven years, and the longer the term, the higher the overall level of incentives.
GDS deals will not be as good in five years as they are now, so agencies might as well try to lock in today's incentives for as long a term as possible. I share this pessimism about the future of GDS deals, given major airlines' plans or wishes to bypass GDSs in whole or in part using technology such as IATA's New Distribution Capability.
On the legal side, the vendors' contracts are remarkably unchanged, with no changes to the numerous traps for the unwary, such as the clauses giving the vendors the right to cut incentives under certain circumstances. One interesting exception is the standard Amadeus contract, which now requires Amadeus agencies to adopt and implement a bunch of data-protection measures, including these:
"You agree to...revoke and/or change user credentials and/or passwords for persons no longer authorized to access the system; implement and maintain active firewalls; implement and maintain active and regularly updated antivirus and anti-malware tools; only use currently supported, up-to-date and patched versions of application software; use strong passwords, with no sharing of credentials between several individuals or reuse of the same password in multiple products or tools; and conduct awareness sessions for all employees and other authorized users on how to recognize and prevent phishing attempts."
In the U.S., most Amadeus agencies probably have never implemented most of these data protections, so Amadeus' decision to add them to the contract is probably a good idea.
The catch is that Amadeus goes on to provide that, if there is a data breach, then Amadeus will blame you: "Customer shall indemnify Amadeus against all costs in connection with such customer's failure to implement, maintain or comply with any of the above security requirements."
It probably won't be long until Sabre and Travelport adopt similar requirements.