Travel Market Report

Phocuswright Travel Market Report Highlights Trends and Challenges Involving GDS's

GDSs have survived the turbulence of the recession, M&A and the TA-OTA chan­nel shift. According to this travel market report, they are about to face their next hurdle: effective airline merchandising of an unbundled product. Given that about 60% of air bookings are flowing through their systems (source: Phocuswright’s U.S. Online Travel Overview Eighth Edition), GDSs must make ancillary services a priority. How GDSs and their customers and distribution partners adapt to this ever-changing landscape will determine how they survive over the next five years.

It is difficult enough for airlines to manage these new forms of products and services with their own systems – and much more so to enable distribution to GDSs, TAs and other points-of-sale. GDSs provide points-of-sale for over 163,000 travel agencies and redistribution for a plethora of retailers, such as TMCs and OTAs, which have their own POS technology. If GDSs are to continue to be effective, they must change their internal systems to support shopping, booking, ticketing and adjustments (e.g., additions, changes, deletions, refunds and exchanges) of ancillary services and branded fares. They must also reconfigure the feed to the agency back-office systems where the con­firming documents for the airlines originate. Otherwise, the inventory will continue to be available only through the airline.


Travel Market Report on GDS's


The air product distribution system is deeply rooted in ATPCO and ARC standards, according to this travel market report. All GDSs will implement (at different speeds) the ATPCO standards (for distribution or sale) for these unbundled/rebundled services as well as an ARC solution for ordering and paying. GDSs also have the option to bypass ATPCO and ARC and go directly to the airlines. Not all GDSs plan to embrace to the same extent direct supplier connectivity for these new products.

Unfortunately, it is also not clear that the air­lines will adhere to those standards anyway. It is quite possible – almost probable – they will attempt to offer ancillary services not standard­ized by ARC and ATPCO. While ATPCO feels that it accommodates these changes, American Airlines has already indicated that ATPCO standards won’t always work for the company and that it will be better able to serve its customers directly.


As GDSs struggle with these new technical capabilities, airlines continue to make progress toward direct distribution. U.S. airline-direct online sales increased from 26% of total pas­senger revenue in 2006 to 33% in 2009 (pro­jected). If the GDSs are unable to provide the tools (to the points-of-sale they support) to shop for and book this content, then the trend toward airline-direct distribution may acceler­ate, further marginalizing the roles of both GDSs and travel agencies. Even if GDSs do provide the tools for today’s content, airlines could continue to change the product mix, leaving GDSs to forever play catch-up. Check out the latest Phocuswright travel market report for your area to get the latest trends and analysis.