Q: Our GDS vendor recently sent me a proposal for a new five-year contract because our existing contract, which we signed in 2014, is expiring. Although the incentives are somewhat better than they were five years ago, the overall structure of the deal is the same as it was in 2014 and 2009 before that. With all of the new developments in travel distribution, how have the GDSs managed to keep their deal structures the same as they have been for over a decade?
A: It isn't a mere decade. My experience evaluating GDS offers goes back 35 years, and it is remarkable how little has changed, other than the progressively higher levels of incentives.
In late 1984, the government repealed the regulation that had required GDS vendors to offer equal access to all carriers. Immediately, the vendors began to charge the carriers a "booking fee" in order to participate in the GDS, and the vendors began to share those funds with agencies.
Since then, the only major change occurred in 2006, when, following Sabre's lead, Worldspan, Apollo and Amadeus all imposed an 80-cent fee for booking carriers that offer "full content," i.e., fares that would otherwise be available on the carrier's website.
The 80-cent full-content fee was supposed to be a temporary measure, but the fee, like all other parts of GDS deals, has endured beyond its expected life.
Today, GDS offers take no account of any recent developments. Although the vendors make frequent announcements about how they are working with carriers that are pushing IATA's New Distribution Capability (NDC), offers made to agencies make no mention whatsoever of NDC.
The reason for this remarkable inertia is that the GDS vendors have a captive market. Although some very large agencies are trying to integrate non-GDS bookings into their business flow, the vast majority of productive agencies have no choice but to use the GDS for all airline, hotel and car-rental bookings in order to operate efficiently and profitably.
GDS deals will finally change if the carriers pushing NDC and direct connections offer agencies meaningful incentives to switch. So far, there has been no sign of anything but token offers to a small number of large agencies.
In the absence of meaningful competitive offers from suppliers, the GDS vendors may not need to change much of anything for the foreseeable future.
Follow Up: In my Aug. 5 column, "You can still plan and operate tours to Cuba," I noted that it is still possible to operate tours to Cuba under the category of "Support for the Cuban People." I wrote that "you can use a privately owned Cuban destination management company (DMC) to organize the tour for you." Kate Simpson, president of Academic Travel Abroad, pointed out that Cuban law requires you to use a government-licensed DMC and that most if not all such DMCs are government-owned. Kate also pointed out that some government-owned hotels are not on the State Department's restricted list, so you can use them for your tour.