Global Distribution Systems

“For the past decade, airlines have been relentless—and successfully so—in their pursuit of direct bookings.” 

1. Based on current trends, airlines (and hotels) are now competing with GDSs. Why did the airline industry adopt the original GDS system and structure?

When American Airlines and IBS created the first CRS, they believed they were creating an IT solution for their on-site agents. It wasn’t until implementation that they realized that SABRE CRS would be very valuable at the point of sale. After American Airlines success, the industry adopted the CRS model, which evolved into a GDS in the 1990s and into our current GDS configuration in 2009, in order to increase revenue, efficiency, and productivity. The system was a huge success: According to the research material the original CRS increased revenue by 400 percent, but only required a 20% increase in employment. (Productivity= Revenue/Resources = 4/.2=20% increase).

 

2. GDSs were thought to be the end of the travel agency business. What is the current role of Travel Agents and why did we still need them?

Travel Agencies provide a higher profit margin than OTAs; therefore they are of great value to organizations within the hospitality industry such as airlines and hotels. Corporate travelers have specific needs including security and risk and expense management and reporting as stated in the research material. Although businesses are concerned with price, they are willing to pay a logical fare to meet these diverse needs. As a result, many businesses rely on travel agents to make arrangements that meet these needs and to work out any details with the property or company prior to the traveler(s)’s arrival.

 

3. With increased direct bookings and restructured fees and commissions, is there a need for GDSs?

GDS is still necessary in today’s hospitality industry and will likely remain relevant for many years to come. GDS is constantly evolving and working to keep up with the ever-changing industry and consumer. As the volume and types of travel websites continue to grow and evolve and as businesses continue to focus their efforts on e-commerce, particularly B2B in the case of the GDS, goals regarding new technology and movement towards a full content GDS will be beneficial despite the risk for fragmentation. Fragmentation would make “all-in” pricing comparisons difficult for the end user, but can be successfully managed by maintaining price transparency.

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