Q: Because of the pandemic, my agency extended its GDS contract until Jan. 1. The vendor has finally presented us with a renewal offer, so I feel pressed for time, as the vendor might cut us off if we let the contract expire. Also, the vendor says that we need to accept immediately if we want the new contract to be effective Jan. 1 and not have a gap of time during which we don't earn incentives. These tactics have me very worried. Are my concerns valid? Also, can you tell me if NDC bookings through our GDS will generate incentives for us like traditional bookings do?
A: According to Travel Weekly's Travel Industry Survey 2022, only 20% of airline bookings now go through the GDS, so many readers may not appreciate the significance of your concerns. The fact is, for most large agencies GDS incentives remain the largest source of revenue derived from any single source, so I realize that you need to make sure that your GDS renewal negotiations go well.
Your GDS sales representative has hit you with three separate pressure tactics:
• The sales rep waited until the last minute to send you a renewal offer that could have been sent many months ago. To prevent that from happening, you could have told your rep months ago that you were soliciting offers from the other two vendors, as that would have made your vendor act sooner.
• The rep has implied that the vendor may cut you off when your contract ends. In my experience, this never happens as long as you are continuing to negotiate with your vendor. Some of my clients have let their contracts expire for a year or more until they were offered the deal they held out for.
• The rep has stated that you cannot make the new contract retroactive. This is a common deception. Once the parties finally agree on terms for a renewal, the vendor always makes the contract retroactive, if the agency insists on it as a condition for renewal.
So instead of falling for these pressure tactics, you should consider turning the tables so that the pressure is on the vendor. You can do this by creating a credible threat of conversion to one of the two other systems and then giving your vendor a wish list of the financial terms that you want, along with a deadline to respond.
Now, as to NDC segments, the situation is unsettled. One of the goals of NDC is to reduce the fees that carriers pay the GDSs, so it is reasonable to expect that the vendors will not be very enthusiastic about paying you incentives on NDC segments booked through their systems.
To illustrate the unsettled nature of the NDC-incentive issue: One vendor has announced that NDC bookings on a few, named carriers will count for incentive purposes, but its new contract states that NDC bookings will not count for either incentive or segment-quota purposes.
More Legal Briefs columns on GDS contracts: