Q: My agency's GDS contract is going to expire later this year, and the GDS vendor's salesperson has been trying to get me to sign a new contract. I am very concerned about my agency's future in the current environment, so I want to negotiate a free out at any time on 30 or 60 days' notice. However, the salesperson claims that adding such a clause is not necessary because it's already in the contract. Is it really correct that if I sell my agency or close it, I can get out of my GDS contract?
A: Under the standard GDS contracts in effect today, you definitely cannot get out of your GDS contract just by selling your business to another agency. Although you certainly could try to add such a clause, I have rarely known any of the three vendors (Sabre, Travelport, Amadeus) to agree to it.
Therefore, if you are thinking of selling in the near future, you should avoid signing a new GDS contract altogether. In my experience, the vendors will usually allow you to go month-to-month for many months after your contract expires, as long as you appear to be still negotiating with the vendor.
If you need to re-sign for some reason, then try to get a one-year extension of your current contract. If you are forced to sign a long-term agreement, you may well be facing major liability if your buyer won't assume your GDS contract.
However, if you arrange to sell to a larger agency that has the same GDS, the larger agency may be able to help you by negotiating to add your agency identifier (also known as a pseudo city code or PCC) to its contract and to have your long-term contract terminated. If the larger agency offers to take this action, you should get at least an informal go-ahead from your vendor before the sale is final.
If your buyer has a different GDS and is unwilling to take over your contract, you may still be able to avoid liability by structuring the transaction creatively. For example, you and your staff could become independent contractors or employees of the company that would otherwise have been the buyer, and your compensation could reflect the value of your business.
If you go out of business entirely, the standard contracts of all three vendors let you out of the contract on certain conditions, some of which may be onerous. You may have to repay a pro rata portion of any signing bonus, and you may owe an early termination fee.
Travelport has a unique condition: If your company or any of its owners goes back into the agency business before your contract would have expired, you must give Travelport the right of first refusal to automate you.
As I noted in my May 11 column, "Giving notice when closing your business," if you have had a good business, it makes more sense to try to sell it than to close up shop.