After reading Philip
Wolf's recent Travel Weekly column about the coming shift to online
booking by corporations using brand-name, technology-heavy
intermediaries ["On American Express and Rosenbluth"], I have
to wonder if there is much of a future for our midsize corporate
agency.
Given this uncertainty, wouldn't it be wise to refrain from
signing a new, five-year GDS contract with high shortfall
penalties, as we have done many times in years past?
A: Not necessarily. It depends on your
tolerance for risk, patience, negotiating skill and, of course, the
terms of the contract.
For the first time in a generation, you now are able to
eliminate all GDS contract risks, if that is what you want to do.
All four vendors now are offering three-year contracts with low or
nonexistent quotas.
Under such contracts, you use your own computers and broadband
access, and you lease just printers and other paraphernalia from
the vendor.
If you make a minimal number of GDS bookings, such as 30 per PC,
per month, you pay nothing. The flip side is that the bonuses per
booking generally are much smaller than traditional ones.
With such plans, there are no shortfall penalties for lost
bookings, so you can afford to make all your bookings on supplier
Web sites or make no bookings at all. Indeed, if you want to get
rid of the system entirely in the middle of the contract, the price
would be affordable.
An interesting phenomenon is that, as such contracts become more
prevalent, the average bonus per booking paid by the vendors to all
agencies will go down. Thus, without intending to do so, the
vendors could achieve their often-articulated goal of "doing
something" about the allegedly high level of bonuses today.
At the other end of the spectrum of GDS deals, if you can
stomach a five-year contract with a high quota and a large penalty
for not achieving it, bonus plans are better than ever.
As you know, the DOT has proposed to outlaw such plans, so you
take the added risk that you could end up with long contract
burdens and no rewards.
For agencies with patience and negotiating skill, it now is
sometimes possible to get the best of both worlds: a low or
no-quota deal with top-notch bonuses.
Under such contracts, you have the flexibility to shrink as much
as you need to, if Philip Wolf's prediction comes true.
Finally, in between the extreme cases discussed here, there are
all kinds of compromises with livable quotas and decent
bonuses.
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].