Q: Every week, I read that IATA's New Distribution Capability (NDC) is being adopted by air carriers, GDSs, technology companies and agencies. Some have big plans to replace traditional GDS bookings with NDC-powered sales. However, our agency would prefer to keep the GDS-only system in place because of the incentives and the ability to aggregate air and nonair in one transaction. Our GDS contract is up for renewal this year, and we are wondering if GDS vendors are making it more attractive for us to stick with the GDS so that we don't start using NDC in the coming years. Are GDS offers in fact improving?
A: GDS offers are better than ever. Not only are traditional signing and segment bonuses on the increase, but vendors are also offering new kinds of incentives, lessening penalties and offering options for longer contract terms.
I don't know whether the better deals are a reaction to the threat of NDC or just the result of traditional competitive pressure among the three vendors, Sabre, Travelport and Amadeus. My best guess is that it is the latter, as the vendors are probably skeptical about whether NDC really has the capability of ever replacing the GDS.
The hierarchy of vendor offers remains the same as it has been for many years: All things being equal, Amadeus offers are better than Travelport offers, which are in turn better than Sabre offers. There are exceptions, especially if the offer involves a conversion, as the nonincumbent vendor will typically offer a better deal than you can get from your current vendor.
Since each vendor's offer to each large agency is structured differently from the other vendors' offers, I compare them by adding up the total of all incentives and dividing that by the agency's expected annual booking total over the contract term, assuming no changes over the term. This exercise yields a dollar amount per segment (a segment being a flight segment, a hotel booking or a car booking).
For example, let's say that your agency has 80,000 GDS segments per year and that you are being offered a five-year contract with a $20,000 signing bonus, $10,000 per year for achieving 80,000 segments and $2 per segment. This yields $20,000 + ($10,000 x 5 years) + ($2 x 400,000 segments), or $870,000. Divide the last figure by the 400,000 segments expected over the five-year term, and you get an average $2.17 per segment.
Now, let's say that the $2.17 offer is being made by Amadeus. Using the hierarchy that I explained above, you could expect Travelport to come in around $2.07 and Sabre to offer about $1.97. From each, you would deduct the standard 80-cent full-content fee.
These are just examples and averages in my experience. I don't mean to imply that this is exactly what your agency would be offered, as that depends on many other factors, but the averages have been increasing.
Aside from the traditional signing, fixed annual and segment bonuses, the vendors have recently been devising a few other kinds of incentives. Travelport has instigated most of these, and the other vendors have largely copied them, especially for large agencies.
Perhaps to lock you in or keep you from making too many NDC bookings in the future, all three vendors have recently been offering six- or seven-year contracts in addition to the traditional, standard terms of three and five years. I recommend that agencies accept longer terms, as GDS offers will probably not be as good in five years as they are now, so you might as well consider locking in today's incentives for more years.