The distribution landscape’s backbone for decades,
legacy global distribution systems are now grappling
with keeping content together

When GDS is mentioned in travel trade circles, the first word association is of those long-established holders and distributors of content. In the words of Angel Gallego, executive vice president distribution for Amadeus, “GDSs were created to give scale to the industry –  we needed to build consumption at a global level. We put in one place all the content you [agents] need to sell.”

But, as Gallego and others are keen to point out, these organisations have changed hugely since their creation by airlines to distribute their owners’ content. They began by adding other travel category content such as hotels, car and rail. However, when they stopped being part of their parent carriers and became independent corporations, they also became not only travel content aggregators and distributors but also airline IT companies, providing a service to their erstwhile owners.

If you ask a GDS directly what they are, however, the answer is different again. With Travelport – whether via its website or talking to its chief commercial officer, Jason Clarke – you can’t escape the word “retailing”. Amadeus uses the word e-commerce. The GDSs are on a journey, if not to revise their business model, at least to rebrand it.

Sam Abdou, executive vice president, air, rail & global online, Amadeus, sums it up thus: “GDSs are evolving massively. They are e-commerce platforms, so more than ever relevant. They are evolving from a single point of aggregation (EDIFACT) to multiple channels which includes NDC.”

Yes, GDSs are evolving from being the vast data depositories which at one time were said to have been exceeded in data storage volume only by that of the US Department of Defense. They held the information on availability, seating, pricing and more of every IATA airline flight in the world. Why should there be any problem?

The GDSs’ challenges are rooted in that history of plenty. According to Ann Cederhall of LeapShift, “Distribution was simplistic. GDS was an extension of airlines’ reservation systems. They figured this would be a better way to offer content to travel agents so they could book on these systems. I personally think this all went wrong when airlines no longer had ownership in these companies.”

Perhaps this is because both Sabre and Amadeus still run the airline IT businesses which were part of the original package as well (Travelport has sold its to Delta). Cederhall believes that making NDC content available to third-party distributors such as GDSs is challenging for the majority of the world’s airlines because they don’t own their own APIs.

The dual businesses also complicates the model. Amadeus is commercially obliged to maximise the revenue out of two distinct entities which is an impediment to its developing, for example, something on its air IT side that might harm the GDS side of its business. Having that factor to consider has the potential to impede innovation and agility. Moreover, the fact GDSs have to spend masses of money to retrofit into legacy technology can’t be helpful.

The original commercial model saw airlines paying the GDSs money to carry and enable the sale of their content.  The GDSs in turn paid the agencies – the TMCs – to distribute their content. Thus the more bookings a TMC made, the more money they would receive as an incentive payment from the GDS. So far, so good – after all, it is totally rational that if you add value to a process, you should be paid.

But maybe it isn’t. Put another way, Ian Luck, head of airline distribution at T2RL, says: “It’s an odd market where [a GDS] being a highest cost to the supplier  [the airlines] actually gives you an advantage in the marketplace.”

Any outsider would assume that any customer or user of a service (in this case the TMC) would pay the provider (the GDS) of that service for it. However, the GDS pays – through its incentive scheme – the TMC to use it. TMCs are businesses so they are obliged to maximise their revenues just as the GDS organisations are, but this is a factor that is clearly impeding the development of travel distribution.

Travel management companies are well aware that change is on the way. In the words of David Bishop, chief operating officer at Gray Dawes Group: “Eventually we will pay them rather than them us.”

TMCs typically receive airlines’ NDC content from aggregators. This is similar to how it receives content from low-cost carriers such as easyJet. Luck explains, “A lot of large airlines have done significant distribution deals with GDSs. Airlines connect their NDC pipe to the GDS” – commonly through a third party aggregator such as Travelfusion. There is a pertinent question for the wider industry though, according to Luck: “Is the same content going into the NDC pipe as what is on the GDS?”

He explains: “Overall, it is clear that NDC will enable new content to be distributed that would not be possible with the existing technology.” There are at least three main examples, he says. The first is dynamic/continuous pricing (implemented by Lufthansa, for example). The second is  loyalty offers and the third is customer-specific products and bundles.

But for the present it’s important to note that the GDSs provide more than content to TMCs. They provide other free technology such as their mid and back-office systems. This is especially important for business travel management companies because of the importance of services such as booking changes and client refunds. For TMCs it is vital to surmount any hurdles to prevent their ability to support corporate governance requirements and provide services to their customers.

The GDSs are thoroughly aware that the world is changing and they are changing with it. “This industry is complex. How do we simplify that supply and demand side of the equation and the reinvention of retailing for that audience? We need to move the industry towards retailing. We may be travelling on business but we’re all consumers,” reflects Travelport’s Clarke.

His views are echoed by Abdou. “The user doesn’t care if it’s EDIFACT (Electronic Data Interchange for Administration, Commerce and Transport – the original GDS system) or XML/NDC – they just want customers not to get lost in translation when booking air fares. We want to make sure content is consumed in a seamless way.”

Gallego concedes that “We have diverged a lot in our trajectory. Distribution now is a small fraction of what we do. At the core of our role is to provide content – which is increasingly complex – as holistic as possible. What you see on the [supplier] website but not with the agency makes it even more challenging. The old concept of stable classes is disappearing. Fares in aggregators are cheaper than airlines because of volatility and changing prices.”

He adds: “Each airline has a slightly different EDIFACT or NDC – our job is to connect them all and also to integrate downstream. We need to do all the plug-ins to mid-offices, back offices etc.”

The GDSs occupy a unique position and have been with us for a long time. But they are on a journey and their eyes are firmly fixed on the future.