Mark Pestronk
Mark Pestronk
Q: Our agency's GDS contract is up for renewal this year. Our current contract has productivity incentives, penalties for shortfalls and penalties for all bookings outside the vendor's system. All these clauses can be adversely affected by the coming proliferation of New Distribution Capability (NDC) bookings as well as so-called private channel deals and direct-connect transactions that I read so much about. What should I try to provide for in our new contract to minimize the adverse effect of these developments?

A: The three U.S. vendors -- Sabre, Travelport, and Amadeus -- have so far not changed their contracts one iota to accommodate these new developments. Perhaps they have chosen to ignore them and hope they go away like other airline-sponsored attempts to save money by bypassing the GDS gatekeepers.

So, if you are going to try to get a new contract that anticipates the adverse effect of these developments, you will have to be proactive in proposing specific changes to the business and legal terms. As with any other GDS contract changes, what you can accomplish depends on your size, persistence and ability to mount a credible threat of conversion to a competing system.

If your contract has an annual quota, a market-share quota and segment incentives, you have to start by examining each such provision in light of each of the anticipated industry developments. Definitions are key, as are the vendor's rights to change them.

For example, one key issue is whether NDC bookings using the GDS, which is a capability the vendors either provide or have promised to provide, count for purposes of your segment incentives. The answer is unclear under all the vendors' standard contracts, and even if they do count, the vendors may reserve the right to lower incentives for some bookings and not others.

In the standard Sabre contract, a booking for incentive purposes is "an airline, hotel, tour, rental car or cruise segment for which a participant has paid a booking fee to Sabre or an affiliate of Sabre and that is created in or processed through the Sabre System by customer ..." Whether an NDC booking provided by Sabre is a booking "through the Sabre System" remains to be clarified.

Another key issue is whether NDC or private channel bookings outside your GDS will result in penalties under your market-share quota, as those penalties can be as high as $2.40 per segment. The answer may depend on whether another booking aggregator is involved in the process.

Some third-party aggregators already claim the capability to offer NDC bookings on multiple suppliers, which means that Sabre could penalize you for booking on them, as Sabre defines the term "GDS" to include "any third-party, computerized reservations system that acts as an intermediary between multiple travel suppliers and travel agencies to provide reservation services to such agencies." So, basically, any third party that offers reservations on two or more suppliers is a GDS as far as Sabre is concerned.

Travelport's share quota applies to your "total travel reservations" and Amadeus uses "net GDS air segments," but neither vendor has any relevant definition.

A third issue is whether the GDS vendors have the capability of tracking your third-party aggregator bookings. Although the standard contracts require you to report all such bookings, I have no idea how your vendor would find out if you didn't report them.

It will probably take a long time for the vendors to focus on all the issues involved. Your job will be to try to help your vendor resolve them in your favor.
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