Talking Transparency: The GDS Value Proposition For Airlines & Managed Travel
April 12th, 2011
Why are low-cost carriers WestJet, AirTran, JetBlue, easyJet and Southwest embracing global distribution systems to distribute their airfares and ancillary fees? Simple, because it’s a proven and low-cost way to snare much-valued high-yield business travelers. Another proof point for the value of the GDSs: major carriers such as Finnair, Air Canada and United Airlines are increasingly selling not just fares but optional services through the platform.
For airlines, the benefits of using the GDS systems far outweigh the costs. The system delivers excellent returns on each dollar invested in terms of revenue, customer acquisition, average passenger yield and technological innovation.
Consider this: the average blended GDS fee paid by airlines for domestic U.S. business travel tickets is around one percent per round-trip ticket. That represents a high-value proposition both for airlines leveraging the reach of GDSs and for customers who eventually pay for GDS services in the airfare. With about 50 percent of airline bookings coming through the GDSs, the value proposition to airlines is clear.
Even more, the capital outlays, operating costs and IT staffing requirements funded by the GDSs are all obligations that carriers avoid. The costs in terms of financial and management time and attention associated with hundreds of individual airlines endeavoring to replicate the reach and product depth of the GDSs would be almost unimaginable.
Another distribution cost avoided is the so-called “look-to-book’’ phenomenon, in which consumers are search travel websites before ever booking travel, often with the airline directly. In this increasingly common scenario, airlines acquire passengers without paying a dime to the GDSs that published their products.
And the GDSs are more than keeping up with the ancillary fee movement in the airlines. According to Carlson Wagonlit Travel’s Andrew Winterton, President, Suppliers, Products and Technology, “GDSs continue to invest an estimated $750-800 million annually to enhance their system capabilities. As a result, they are technically capable of supporting new and evolving airline products and services during the shopping and booking process.” This means airlines can use this system to continue to create new revenue opportunities for themselves at no additional cost, while promoting a more transparent marketplace for consumers.
The benefits of GDSs are clear for corporate travel managers, too. They rely on the universal approach that GDSs bring to the purchase and cost control of air, rental car, hotel, rail and other business-travel related services. They rely on the GDS-supported capacity to travel and rebook travelers in crisis. And they rely on the GDS-provided capability to combine carriers on one itinerary. For managed travel, there is no solution currently in the marketplace as robust as the one provided by the GDSs.
In one of the most intensive IT environments known to business, GDSs process billions of messages daily and quickly and reliably handle continuous loads of travel transactions all day, every day, all around the world. Hundreds of thousands of travel professionals and billions of travelers are able to access the power of these complex, real-time information systems in an easy-to-use environment.
In short, GDSs are proven, reliable and able to handle the increasing needs of airlines, agencies, travel managers and consumers. Attempting to recreate ta level of efficiency through new models would require tens of millions of dollars in new investments and only disadvantage customers in the end.