12 December 2022, etc.venues Monument, London
Business Travel Show Europe, presented by The BTN
21 November, London Hilton Metropole
There’s a strong headwind blowing our way, threatening to raise the cost of managed business travel and overcomplicate the booking process. Fragmenting travel content does nobody any good, be it airlines, global distribution systems (GDSs), travel agencies or travel management companies (TMCs). It’s our mutual customers, however, who may be hardest hit.
Airlines must embrace and not reject transparent pricing and provide full content to the technology providers who help distribute their products and services through TMCs, namely the GDSs.
Today, there’s considerable “spin” and confusion in the marketplace over direct and indirect distribution channels. Let’s be clear: there are more than six billion airfares stored in the GDSs. 50% of these are private fares that are negotiated either by corporations or TMCs. Furthermore, airlines have direct control over these fares by loading them through ATPCO (Airline Tariff Publishing Company) and under ARC/BSP regulations. The system is working most efficiently.
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.
Thanks to GDS functionality, airlines are already “merchandising” fares in a targeted manner that takes into account clients’ individual profile such as frequent flyer membership, site location, region or geographic market. Their direct distribution channels, on the other hand, cannot process and respond to as much personalised data as the GDSs.
In addition, the direct connect functionality being proposed as an alternative provides only simple, point-to-point itineraries that do not get changed or amended. Statistics show that business travel itineraries are changed nearly six times per trip. Today, direct connects also exclude services from other travel providers and are incapable of booking multiple carriers on the same ticket, including airlines in the same alliance.
TMCs have important responsibilities to their clients. They expect them to be productive and efficient at the point-of-sale by offering them a full range of competitive travel options in a seamless, one-stop shopping environment, to ensure the best return on their T&E investment. Having to connect directly to hundreds of suppliers to ensure that clients have access to the best products and fares available is the antithesis of productivity and efficiency. In fact, CWT estimates that clients’ transaction costs would have to increase by more than $50 if it were forced to redevelop today’s highly efficient GDS infrastructure with a proliferation of direct connect models to provide the shopping and servicing functionalities GDSs currently offer.
Traveller safety is another crucial question. By being able to locate travellers quickly in an emergency, TMCs can provide invaluable assistance while helping companies meet their duty of care. Today’s GDS environment enables this requirement.
It is also important to note that airlines charge a substantial premium for the high degree of flexibility and service needed for business travel—sometimes a multiple of four to five times the lowest public fare. Surely this should compensate for the estimated $7.50 per ticket airlines pay to the GDSs. Moreover, airfares distributed through direct channels reportedly cost $200 less per ticket than those distributed through GDSs. The math speaks for itself.
A solid, financially viable airline industry helps sustain the travel industry overall. A fundamental restructuring of the industry has taken place and the results are stellar. This is good news for all of us. We encourage airlines to openly recognise that the managed distribution model is working well: GDSs and the intermediaries they’re teamed up with continue to play an important role in successfully distributing airline products and services that satisfy customer needs and drive revenue growth.
Direct connects, on the other hand, mean less transparency for the business traveller and escalating technology costs for corporate travel programmes.
Who knows where this debate will end. The commitment to delivering efficient and innovative solutions that optimise clients’ corporate travel programmes will not be well served through a direct connect model.
Andrew Winterton, president, suppliers, products and technology, Carlson Wagonlit Travel