I have always wondered
whether the four GDS vendors resent the large productivity bonuses
that they pay to highly productive agencies. When the Department of
Transportation proposed to outlaw productivity pricing and bonuses,
did the vendors urge the DOT to adopt that proposal?
A: Two vendors came out strongly in favor of
productivity pricing. One was lukewarm, and one was neutral.
Galileo addresses the issue most candidly. It says it needs to
pay bonuses: "In a fiercely competitive marketplace, Galileo, like
other GDSs, must offer substantial financial incentives to win and
keep travel agency subscribers. ... Financial incentives based on
volume are an ordinary and common feature of business
transactions."
Galileo also makes an original argument: Bonuses help fight
against the local monopoly airline's use of its
affiliated GDS to keep travel agencies from switching. In other
words, every agency in Atlanta will think it needs to stay with
Worldspan unless Galileo can come along and make it worthwhile to
break up the tying arrangement.
Sabre notes that but for bonuses, agency service fees would have
to go up and that "these incentives help more agencies stay in
business." Sabre says that its own Simplicity Plan, Galileo's
Select and Connect and Amadeus' Easy Access offer no-quota deals to
any agency that wants one.
Worldspan is not quite as enthusiastic; it defends productivity
pricing by noting that the DOT has never regulated or prohibited
override payments to travel agencies, so it should not start with
GDS bonuses, which are more benign.
Worldspan's half-hearted support for productivity pricing is
ironic because, as far as I know, it is the only vendor left that
still requires agencies of all sizes to meet a monthly quota. It
has been talking about the need for a "new model" for a year now,
but it has done nothing but talk.
Amadeus "does not offer any views on the merits of productivity
pricing proposals." The neutrality also is ironic, as its offers
have been responsible for pushing all of the vendors' bonuses ever
higher over the last couple of years.
If agencies and vendors do not oppose productivity pricing, who
does? Most of the major U.S. airlines, as we will discuss in my
next column.
Mark Pestronk is a Fairfax, Va.-based attorney specializing
in travel law. He answers your questions in the TravelWeekly.com
Legal Ease forum. To contact Mark directly, e-mail him at [email protected].