For agencies, changes mean less incentives, better technology
By Nadine Godwin
Agents said they see two prospects in the current GDS ownership changes: a likely reduction in GDS-paid incentives and the prospect of better technology. They said those good news, bad news scenarios are not mutually exclusive.
Harold Stevens, the president of Stevens Travel Management in New York, described himself as "simplistic" when he said that everyone in the buying or merging mode "wants to be bigger and stronger, to have more assets and to cut costs."
With fewer GDSs, he said, each vendor becomes more powerful and the trade's position becomes weaker, so incentives could drop and contract conditions would be "much tougher." The only "open factor" for each agency, he said, will be its clout with the GDSs.
His agency uses three systems: Amadeus, Sabre and, primarily, Worldspan.
Michael Dixon, president of Travelink, an American Express rep firm and a Sabre agency in Nashville, was less concerned about the potential for lost income, figuring the three survivors would be very competitive.
In any case, he said, the ownership changes to Worldspan and Sabre could yield owners "with stronger financials to develop the technology."
To contact the reporter who wrote this article, send e-mail to Nadine Godwin at [email protected].
Travelport's $1.4 billion proposal to
acquire and merge with Worldspan would be a massive undertaking
that could have ripple effects across the GDS, online and airline
Although the full
impact could take a couple of years to be felt, Travelport could
eliminate one or two of its GDSs, forcing agencies to switch
vendors and alter long-held business practices. Phasing out a
system could also force an airline or two to transition to a new
host for internal reservations systems.
Worldspan's prominence in the online world, any changes could spur
new alliances and alter supplier relationships and other
On the integration
front, Travelport's predecessor, Cendant's Travel Distribution
Services, had a poor record in selecting, pricing and blending
Cendant acquired Cheaptickets in 2001 and tried to operate it
alongside a kindred enterprise, Trip.com. But the two-brand
strategy flopped, as the inventory and customer base were
With losses piling
up, Cendant shuttered Trip.com in 2003.
Travelport still is
engaged in a prolonged effort to integrate under-performing
e-Bookers in Europe with Octopus Travel, Orbitz and
So if the
Blackstone Group's deal to acquire Worldspan closes, as projected,
in the second or third quarter of 2007, Travelport will face huge
With $953.8 million
in revenue in 2005, Worldspan, a leader in travel e-commerce and
powering online agencies, has been bleeding customer share as its
clients diversify GDS vendors.
Atlanta, Worldspan has more than 1,700 employees and provides GDS
services to clients in more than 60 countries and territories
around the world.
independent Travelport notched 2005 revenue of $2.4 billion while
still part of Cendant, and its Apollo and Galileo GDSs have
around-the-world ties to 52,000 travel agencies.
Travelport is the
No. 2 player in the U.S. among traditional agencies, with Sabre
sitting at No. 1. Worldspan, with a weak presence outside the U.S.
and a relatively small presence among traditional agencies in the
U.S., is probably the leading player globally in providing booking
engines to online agencies.
By 2006 standards,
pairing the bookings of Galileo and Worldspan would give the
beefed-up Travelport 52% of the U.S. GDS market share, besting
Sabre's 41%. Globally, Travelport would command 40% of GDS market
share, compared with 31% for Amadeus and 29% for Sabre.
President and CEO Jeff Clarke, who came on board this year with a
reputation as an accomplished integrator at CA (formerly Computer
Associates), said two weeks ago that Travelport would not rush to
make changes and would keep the three GDSs, Apollo, Galileo and
Worldspan, up and running for now.
in North America use the Apollo system, while Travelport agencies
outside the U.S. largely use the Galileo system.
In theory at least,
merging the systems would generate significant cost efficiencies,
but it could also threaten to cause massive disruption among
source, who declined to be identified, said he did not believe
Travelport executives had yet made a decision on the fate of the
Travelport will undertake a prudent review of the platforms," the
source said. "You can't rush from three to two to one."
should ultimately decide to phase out the Worldspan system for
travel agencies, those customers might get inducements to switch to
agencies are Travelport's to lose," said Douglas Quinby, a
PhoCusWright analyst. "Travelport needs to tread
An opportunity for the competition
could be an opportunity for competitors.
"I don't see any
reason why Amadeus and Sabre wouldn't jump in," Quinby said. "If an
agency is forced to switch its GDS platform, there's no reason
necessarily to go to the new owners of Worldspan. Agencies could go
noted that one of the key value propositions in the
Travelport-Worldspan transaction would be economies of scale and
consolidating staffs and facilities.
Worldspan could complicate things for Delta and Northwest, which
are hosted by Worldspan.
that more strategic moves would come into play.
consider selling or going public with some of Travelport's online
businesses as it considers which of the hodgepodge of 21 businesses
fit into its strategy and which don't.
"Some pieces make
more sense than others," Quinby said. "Some are holdovers from
Cendant's muddled acquisition strategy."
contact reporter Dennis Schaal, send e-mail to [email protected].