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
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.