Mark Pestronk
Mark Pestronk

Q: My agency's GDS vendor is offering us a new contract that has no monthly or annual booking quota, so that if business doesn't get back to our 2019 levels for a few years, we will not owe a penalty. Instead, the new contract will impose a penalty of $2.40 for every booking that we make on another GDS. How in the world would our vendor ever find out what we booked on another GDS? Does the vendor really enforce this quota, or is it a scare tactic? Where does the $2.40 figure come from? What if we acquire a travel agency with another GDS?

A: These market-share quotas have been around for about a dozen years, and most GDS contracts probably have such clauses by now. While most such contracts require that 100% of GDS bookings use the contracted vendor, some contracts have lower percentages, especially for agencies with two or three systems.

The trend toward market-share quotas makes sense for both parties. The agency does not have to worry about not having enough GDS bookings, and the vendor does not have to worry about losing market share to a competitor.

Some large agencies do not want to be bound by share quotas, and the vendors may substitute a volume quota in their contracts. They may also agree to a low share quota and an annual volume quota, as well.

You can probably tailor the share-quota clause to exclude bookings by acquired agencies that are on another vendor's system. You may also be able to lower the penalty amount.

Your GDS vendor can find out whether you are using another GDS and, if so, how many bookings you have on it. The three vendors sell this information to each other in a format traditionally known as marketing information data tapes, or MIDT, although I doubt that the format is still computer "tape."

A market-share quota system among oligopolists and the exchange of information present antitrust law problems for the vendors, but, as far as I know, the system has never been challenged. That may be because the penalty seems to be so rarely enforced.

The sloppy way in which the quota clauses are written shows that they may not be intended to be strictly enforced and may be mere scare tactics. For example, most Travelport agencies' contracts state, "Subscriber agrees to generate 95% of its total travel reservations in the Travelport GDS in each contract year ('annual target')." The term "travel reservations" is not defined, and it literally covers bookings directly with suppliers. Although Travelport will tell you that it only refers to GDS segments, the clause is probably too ambiguous to be enforceable.

The $2.40 amount was originated by Sabre, and the other vendors copied Sabre. It appears to be an estimate of the average supplier booking fee collected by the vendor minus the average agency's segment incentive.

If you have no intention of using a second GDS, the market-share quota probably makes sense for your agency. 


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