The Role and Value of the Global Distribution Systems in Travel Distribution

©2009 PhoCusWright Inc. All Rights Reserved.

A PhoCusWright WHITEPAPER

The Role and Value of the Global Distribution Systems in Travel Distribution

Researched and Written by Douglas Quinby, Senior Director, Research with Ralph Merten, Market Analyst, Europe

Edited by Colie Hoffman

Sponsored by:

The Role and Value of the Global Distribution Systems in Travel Distribution November 2009


This whitepaper was sponsored by:

The Interactive Travel Services Association whose membership comprises Global Distribution Systems and Online Travel Companies, promotes consumer choice, access, confidence, protection and information in the rapidly growing world of online travel. ITSA seeks to develop consensus among industry, consumer organizations and policy makers on issues related to consumer use of the Internet to meet their needs.

PhoCusWright wishes to thank the following companies for their assistance in the research for The Role and Value of the Global Distribution Systems in

Travel Distribution:

AmadeusExpedia

ITA SoftwareOAGSabre

Travelport



About PhoCusWrightPhoCusWright is the travel industry research authority on how travelers, suppliers and intermediaries connect. Independent, rigorous and unbiased, PhoCusWright fosters smart strategic planning and tactical decision-making.

PhoCusWright delivers qualitative and quantitative research on the evolving dynamics that influence travel, tourism and hospitality distribution. Our marketplace intelligence is the industry standard for segmentation, sizing, forecasting, trends, analysis and consumer travel planning behavior. Every day around the world, senior executives, marketers, strategists and research professionals from all segments of the industry value chain use PhoCusWright research for competitive advantage.

To complement its primary research in North and Latin America, Europe and Asia, PhoCusWright produces several high-profile conferences and trade shows in the U.S. and Germany, and partners with conferences in Canada, China and Singapore. Industry leaders and company analysts bring this intelligence to life by debating issues, sharing ideas and defining the ever-evolving reality of travel commerce.

The company is headquartered in the United States, with offices in Germany and India.

PhoCusWright Inc. • 1 Route 37 East, Suite 200 • Sherman, CT 06784-1430 USA +1 860 350-4084 • +1860 354-3112 fax • www.phocuswright.com

This article is published by PhoCusWright. The information herein is derived from a variety of sources. While every effort has been made to verify the information, the publisher assumes neither responsibility for inconsistencies or inaccuracies in the data nor liability for any damages of any type arising from errors or omissions.

All PhoCusWright Inc. publications are protected by copyright. It is illegal under U.S. federal law (17USC101 et seq.) to copy, fax or electronically distribute copyrighted material beyond the parameters of the License or outside of your organization without explicit permission.


©2009 PhoCusWright Inc. All Rights Reserved. Page v

The Role and Value of the Global Distribution Systems in Travel Distribution

ContentsExecutive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii

Study Purpose & Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii

Key Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii

Introduction: The Founding Fathers of Travel E-Commerce . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

The Origins of Travel Automation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

The GDSs Today . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Study Purpose & Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Key Terms & Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Key Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

The Role of the GDSs in the Global Travel Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6Key Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

GDS Share of Total Travel Sales by Region . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

GDS Share of Total Travel Sales by Product Category. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

The Role of the GDSs in Travel Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10Key Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

The Heart of the Travel Intermediary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Leisure Impact: Travelers & Travel Agents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Corporate Impact: Corporations & TMCs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Travel Supplier Impact: Business & Leisure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

The Future of the GDSs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21Key Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

The Surge in Supplier Direct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Content Fragmentation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Pay for Distribution, or Pay for Content? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

GDS Outlook 2009-2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Summary Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

List of FiguresFigure 1 Overview of the Major GDS Companies in 2009. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Figure 2 Select Aggregated Statistics of the GDS Companies in 2008. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Figure 3 The Travel Distribution Chain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Figure 4 GDS-Owned Online Travel Services for Leisure and Corporate Travel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Figure 5 U.S. Total Travel Market (Gross Bookings) & GDS Share, 2006-2008. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Figure 6 Europe Total Travel Market (Gross Bookings) & GDS Share, 2006-2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Figure 7 U.S. Airline Gross Sales & GDS Share, 2006-2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8


Page vi ©2009 PhoCusWright Inc. All Rights Reserved.

Figure 8 European Airline Gross Sales & GDS Share, 2006-2008. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Figure 9 U.S. Hotel Room Revenue & GDS Share, 2006-2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Figure 10 U.S. Car Rental Revenue & GDS Share, 2006-2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Figure 11 European Hotel Room Revenue & GDS Share, 2006-2008. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Figure 12 European Car Rental Revenue & GDS Share, 2006-2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Figure 13 U.S. Travel Market Gross Bookings and Share by Travel Intermediaries (OTAs and Travel Agencies) and Consumer Direct, 2006-2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Figure 14 Germany Total Travel Market Gross Bookings and Share by OTAs, Travel Agencies and Consumer Direct, 2008 (€B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Figure 15 Intermediaries’ Share of U.S. Air, Tour and Cruise Revenue, 2008. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Figure 16 Total Travel Gross Bookings and GDS Share by OTAs, Travel Agencies and All Intermediaries in the U.S. Travel Market, 2008. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Figure 17 U.S. Traveler Motivations for Using a Particular Web Site When Shopping for Travel . . . . . . . . . . . . . . . . . . . . 12

Figure 18 OTAs vs. Suppliers: Typical Purchase Channel for Lodging and Air . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Figure 19 Typical Air Purchase Channel by Age . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Figure 20 European Traveler Motivations for Using a Particular Web Site When Purchasing Travel . . . . . . . . . . . . . . . . 13

Figure 21 OTA Airfare Search Results Matrix Display and Itinerary Review with Interline and Single-Carrier Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Figure 22 OTA Airfare Search Results Display with Interline and Comparative Lowest Fares via the Same Airline Web Sites . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Figure 23 U.S. Corporate Travel Market Gross Sales for Air, Hotel and Car Rental; Share by Direct and Intermediaries (Travel Agencies and TMCs), 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Figure 24 Percentage of Corporate Travel Agents for Whom GDS Is the Usual Booking Channel for Air, Rental Car and Hotel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Figure 25 Average Airfares Booked via OTAs and Travel Agencies and Fare Difference in the U.S., 2007-2008. . . . . . 19

Figure 26 Average Differences in Airfares Booked via OTAs and Travel Agencies: France, Germany and U.K., 2007-2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Figure 27 Average Hotel/Car Transaction* Value Booked via OTAs and Travel Agencies and Difference in the U.S., 2007-2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Figure 28 U.S. Airline, Hotel and Car Rental Web Site Share of All Category Revenue, 1999-2008 . . . . . . . . . . . . . . . . . . 21

Figure 29 Supplier Web Site Share of All Gross Travel Bookings by Country, 2006-2008. . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Figure 30 European Traditional Airline, Low-Cost Carrier, Hotel and Car Rental Web Site Share of All Category Revenue, 2006-2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Figure 31 2Q09 Sales Performance by Travel Industry Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Figure 32 U.S. Total Travel Revenue and GDS Share, 2006-2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26


©2009 PhoCusWright Inc. All Rights Reserved. Page vii

The e-commerce revolution of the 1990s brought about a breakthrough in business and a deep and lasting transformation in the way consumers research, shop and buy. From music to mortgages, discount toys to high-end electronics, just about anything and everything is available for purchase online.

Most people associate the birth of electronic travel distribution with the advent of the Internet and the explo-sion in e-commerce in the late 1990s. But in fact, electronic commerce in travel pre-dates the “dot-com” boom by some three decades and had be-come quite commonplace by the mid-1980s. The technology systems powering electronic travel commerce were then referred to as CRSs, or com-puterized reservation systems. They were the predecessors of today’s global distribution systems, or GDSs.

The GDSs have traveled far in the past four-plus decades. The three major GDS companies today power the critical reservations and technology infrastructure of over 163,000 travel agency locations and enable bookings by nearly half a million travel agents around the globe. The GDSs generated more than $9.6 billion in revenue and more than 1.1 billion transactions in 2008. That equates to just over 2,100 transactions per minute.

The GDSs are most often thought of as a distribution environment for airlines; more than 550 airlines and the overwhelming majority of com-mercial airline fares and inventory are accessible via the GDSs. However,

they also deliver an ever-expanding array of content to online travel agen-cies and traditional brick-and-mortar travel agencies. More than 90,000 hotel properties, the world’s largest car rental companies, hundreds of tour operators and the major cruise lines distribute their products to travel agencies via the GDSs.

STuDy PuRPoSE & METHoDoloGy

The Interactive Travel Services As-sociation (ITSA) commissioned PhoCusWright to study the role and influence of the GDSs in travel distri-bution and the global travel economy. This paper examines the following:

The share of U.S. and European travel that is distributed through the GDSs

The role played by the GDSs across various segments of the travel industry, such as air, online, leisure and corpo-rate travel.

The impact of the GDSs on con-sumer choice and competition.

This study derives market data from PhoCusWright’s Online Travel Overview Eighth Edition Update: 2009-2010, PhoCusWright’s European Online Travel Overview Fourth Edi-tion and other research. Amadeus, Sabre and Travelport also provided to PhoCusWright transaction and trans-action value data from 2006 to 2008 for air, hotel and car rental bookings. All data presented in this paper regard-ing GDS channel size reflects the ag-gregation of this proprietary data from all three major GDS companies.

KEy FInDInGS

The transactions processed by the • GDS represent a significant share of the global travel industry:

The GDSs processed more than –1.1 billion transactions in 2008, representing over $268 billion in global travel sales.In the U.S., GDS transaction –value represented more than one-third of all travel supplier revenue in 2008; GDS air trans-actions accounted for nearly two two-thirds of all airline passenger revenue in 2008.GDS transaction value in Europe –represented more than one-fifth of all traveler supplier revenue in 2008; GDS air transactions ac-counted for nearly half of all air-line passenger revenue in 2008.

The GDSs play a central role in the • online travel agency and traditional agency business model. These travel intermediaries account for nearly half of all travel industry sales in U.S., and a substantial portion of all travel sold in Europe, which varies widely by country.

More U.S. and European trav- –elers cite intermediaries as their usual channel for travel shopping and purchasing. The GDSs provide essential and –efficient business infrastructure for 163,000 travel agencies, which employ or contract nearly half a million travel agents worldwide. OTAs have played a major role –in improving the travel shopping experience and convenience for

Executive Summary


Page viii ©2009 PhoCusWright Inc. All Rights Reserved.

consumers as well as increasing pricing transparency. The GDSs In the U.S., the GDSs processed –$98.7 billion in travel agency and OTA bookings in 2008, repre-senting 72% of the nearly $137 billion in travel booked through intermediaries. GDS share of tra-ditional travel agencies is higher at 75%.

The GDSs account for a significant • share of the nearly $78 billion in U.S. corporate travel booked via intermediaries, which represents a much higher average yield per transaction for travel suppliers.

The average fare booked via a –traditional travel agency is sig-nificantly higher than the aver-age fare booked via online travel agencies. GDSs are the preferred book- –ing method of corporate travel

agents, who require not only ac-cess to travel content for booking but also a range of technologies and services to ensure efficient management of corporate travel programs.

The GDSs have adapted to the chal-• lenge of content fragmentation by introducing new financial models for airlines and travel agencies and investing in new technology to sup-port airline merchandising and sales of optional services.Should penetration of the pay-for-• content model spread, whereby air-lines will compel OTAs and travel agencies to pay for access to some or all of their content via the GDS, the risk is high that this could lead to significant downstream distri-bution costs for intermediaries and consumers.

GDS share of the total travel mar-• ket is projected to increase slightly in 2009 and 2010 because of two main trends: OTAs’ countercycli-cal lift amid the recession and the growing trend by corporate travel buyers and TMCs to drive more travel spend under management and via the GDS.The GDSs today play a major role • in both leisure and corporate travel distribution, but they are also beset by a range of challenges – from the rise on supplier direct bookings to changes in airline products (option-al services) and distribution pric-ing models. But if they continue to innovate and adapt to meet the evolving needs of travel suppliers, distributors, and ultimately travel-ers themselves, they will continue to shape travel distribution for years to come.


©2009 PhoCusWright Inc. All Rights Reserved. Page 1

Introduction: The Founding Fathers of Travel E-Commerce

The Internet is no longer an emerging channel, but a major – and in many cases, primary – channel in any travel company’s sales and marketing strategy. More than nine in 10 U.S. travelers used the Internet at some point in the travel planning process in 2008.3

Most link the birth of “e-travel” with the advent of the Internet, but in fact travel e-commerce pre-dates the “dot-com” boom by some three decades.

Most people associate the birth of electronic travel distribution with the advent of the Internet and the explo-sion in e-commerce in the late 1990s. But in fact, electronic commerce in travel pre-dates the “dot-com” boom by some three decades and had be-come quite commonplace by the mid-1980s. The technology systems powering electronic travel commerce were then referred to as CRSs, or com-puterized reservation systems. They were the predecessors of today’s global distribution systems, or GDSs.

THE oRIGInS oF TRAVEl AuToMATIon

The first electronic travel booking did not take place on Expedia, Travelocity, or the Web site of any major airline or hotel company. No travel companies had Web sites, nor had anyone con-ceived of an interactive travel agency, when the Semi-Automated Business Research Environment (SABRE) first came “online” in 1964.4

3 PhoCusWright’s Consumer Travel Report 4 Michele McDonald, “Selling Seats,” Air

Transport World (May 1, 2004).

The joint creation of American Airlines and IBM, SABRE was the first of many airline-owned and -op-erated CRSs. At first, these systems were created for use at the airlines’ internal reservations centers. But car-riers quickly realized the opportunity for deploying their systems in travel agencies. Delivering accurate sched-ules, fares, availability and booking capability instantly at the point-of-sale would extend the efficiencies gained internally to the travel agency distribu-tion channel. Airlines that had more control over the travel agent’s desktop were in a far stronger position to influ-ence flight selection and move market share. By 1985, U.S. travel agency sales had risen to $54 billion. More than nine in 10 agencies with sales greater than $1 million had a CRS (versus just 6% not even a decade earlier). Agency revenue had surged 400% over the same period, while agency employ-ment increased by only 20%.5

In less than a decade, CRSs enabled the travel agency industry to grow revenue 400% while growing employment by only 20%.

By the late 1990s, CRSs had evolved into four large companies known as global distribution systems. They served as a critical nexus of distribu-tion, bringing together hundreds of thousands of travel agents and other distributors with thousands of travel suppliers. The GDSs provided access

5 Chicke Fitzgerald, Global Distribution Sys-tems: Outlook for the 21st Century (Garrett Communications Inc., MTech Strategies Inc., 2000).

The e-commerce revolution of the 1990s brought about a breakthrough in business and a deep and lasting transformation in the way consumers research, shop and buy. From music to mortgages, discount toys to high-end electronics, just about anything and everything became available for purchase online.

Travel is quite possibly the perfect product for online distribution. Un-like purchasing in most industries, the travel transaction involves the exchange not of physical inventory, but of information. The traveler must choose from hundreds or thousands (or theoretically, billions) of potential products, services and prices that may vary with the slightest adjustment of any number of parameters. Consider, for example, a simple, one-way air-plane ticket. That same ticket, for the very same seat on an identical aircraft, could be significantly more or less ex-pensive should the consumer choose to take delivery of the product (i.e., a departure date or time) just a few hours earlier or later. The price for the very same product could also change if the traveler were to make the purchase a day earlier or later.

The unique dynamics of travel shop-ping and buying are ideally suited to the Internet, and the impact of this relatively new medium has been nothing less than spectacular. Online sales of leisure and unmanaged business travel in the U.S. surged from just $6.5 billion in 19991 to more than $95 billion in 2008.2

1 PhoCusWright’s The Online Travel Market-place 2001-20032 PhoCusWright’s U.S. Online Travel Over-view Eighth Edition Update: 2009-2010


Page 2 ©2009 PhoCusWright Inc. All Rights Reserved.

to not only content from their found-ing airlines, but from nearly all major airlines and other travel categories as well, such as hotels, car rentals, pack-age tours and cruises. They served as both the major distribution outlet for airlines and the primary booking me-dium for travel agencies:

Amadeus was formed through a • consortium of major European air-lines and System One, the original CRS of Eastern Airlines.Galileo evolved from the merger of • the Apollo CRS (created by Unit-ed Airlines) and the Galileo CRS (founded by a competing consor-tium of European airlines); it is now a part of Travelport.Sabre emerged from the original • SABRE CRS and other technol-ogy divisions within American Air-lines.Worldspan resulted from the merg-• er of the TWA PARS CRS and the Delta Air Lines DATAS II system; it is now a part of Travelport.

THE GDSs ToDAy

The GDSs have traveled far in the past four-plus decades, going through a va-riety of mergers, acquisitions and own-ership structures. From the late 1990s through the early 2000s, three of the four GDS companies were publicly held (Worldspan was the exception). As of 2009, there are six major global distribution systems and three GDS companies, each owned by private eq-uity investors (see Figure 1).

The global marketplace for travel distribution and electronic reservation processing services is huge, and the GDSs reflect this. Together, the three major GDS companies power the critical reservations and technology infrastructure of over 163,000 travel agency locations and enable bookings by nearly half a million travel agents6

6 The term “travel agents” throughout this paper refers to professional travel agents who sell and book travel, and does not include travel agency staff that do not directly sell travel or use a GDS (e.g., administrative staff).

around the world (see Figure 2). The GDSs generated more than $9.6 bil-lion in revenue and more than 1.1 bil-lion transactions7 in 2008 – just over 2,100 transactions per minute (and the infrastructure of each GDS can support volumes far greater).

The GDSs are most often thought of as a distribution environment for airlines; more than 550 airlines and the overwhelming majority of commercial airline fares and inventory are acces-sible via the GDSs. However, they also deliver an ever-expanding array of con-tent to travel agencies through their agency software solutions. More than 90,000 hotel properties, the world’s largest car rental companies, hundreds of tour operators and the major cruise lines also distribute their products to travel agencies via the GDSs (see Fig-ures 2 and 3). The GDS companies

7 Total global transactions of 1,103,918,338 for 2008 refer only to air, hotel and car rental segments, and do not include tour, cruise, rail and other transactions.

FIGuRe 1 Overview of the Major GDS Companies in 2009*

Amadeus Sabre Travelport

Owned & Operated GDSs

Amadeus Sabre (ownership stake in Abacus, GDS in Asia)

ApolloGalileoWorldspan

Net Revenue 2008 (millions)**

€2,861 $2,881 $2,527

Employees (approx.)** 8,750 9,000 5,500

Ownership WAM Acquisition (shareholders: BC Partners, Cinven, Air France, Iberia and Lufthansa)

Silver Lake,Texas Pacific Group

Blackstone Group, One Equity Partners, Technology Crossover Ventures and Travelport management

* Information sourced from company Web sites and public financial filings. There are other, regional GDSs, including Axess, Infini, Topas and TravelSky, which operate principally in Asia and the Middle East. Since this paper is primarily concerned with the U.S. and Western European regions, it does not address the regional GDS companies. ** Figures for the three GDS companies include revenues and head counts for all business units and not just the GDS business.

Source: PhoCusWright Inc.



continue to add to their Long Tail8 content: Today, GDS-connected travel agencies can also shop and book rail, travel insurance, in-destination activi-ties and events, vacation and apart-ment rentals and much more.

While airline distribution services remain central to GDS business, each of the GDS companies has expanded well beyond its original mission and is now integral to travel distribution, reservations processing and technol-ogy services for the global travel in-dustry. Many travel agencies today use their GDS vendors not just for shopping and booking travel services, but also for mid- and back-office tools (i.e., quality control procedures and accounting), customer management and marketing software, online book-ing engines for leisure and corporate travel, and other functions.

The GDSs are also critical to online travel. They have provided shopping, pricing, booking and ticketing services to the online travel agencies since the OTAs’ founding in the mid-1990s. Worldspan and Expedia jointly de-veloped an air shopping and faring tool that has long been vital to the Expedia.com air shopping path; it is now known as Travelport e-Pricing™. Sabre established Travelocity in 1996, now one of the four largest global OTAs. Today, each of the three GDS companies owns one or more OTAs (see Figure 4), provides one or more online booking tools to the corporate

8 The Long Tail principle debunks the 80/20 rule, where 80% of a company’s revenue comes from 20% of products. In the Long Tail, embracing niches wins because the niches cumulatively outnumber or outweigh higher-frequency plays. See Philip Wolf ’s “The Long Tail and Travel”: http://www.phocuswright.com/the_phocuswright_con-ference_2007_the_long_tail#philipwolf

FIGuRe 2 Select Aggregated Statistics of the GDS Companies in 20081

Transactions2 1,104M

Revenue3 $9,624B

Travel Agency Locations4 c. 163,000

Users5 c. 490,000

Airlines More than 550

Hotel Properties More than 90,000

Car Rental Locations More than 30,000

1 Includes air, hotel and car rental transactions only2 Air, hotel and car rental transactions only: data provided by Amadeus, Sabre and Travelport3 Amadeus revenue converted to US$ at an average exchange rate of 1.47 (Source: OANDA)4 Assumes reduction of 7% for locations that use more than one GDS5 Assumes approximately three agents per location


FIGuRe 3 The Travel Distribution Chain

SupplyAirlines

Hotels

Car Rental

Cruise

Rail

Other

Online TravelAgencies

TravelAgencies

TMCs

Connectivity Retail Market

LeisureTravelers

BusinessTravelers


FIGuRe 4 GDS-Owned Online Travel Services for Leisure and Corporate Travel

GDS Leisure Market Corporate Market

Amadeus Opodo Amadeus e-Travel Management

Sabre Travelocity, which includes: lastminute•World Choice Travel•Zuji•

GetThereTravelocity Business

Travelport Travelport holds a majority stake in Orbitz, which includes:

CheapTickets•ebookers•HotelClub•RatesToGo•

TraversaOrbitz for Business




travel market and offers a range of e-commerce services (from booking en-gines to fulfillment processes) to travel intermediaries and suppliers alike.

STuDy PuRPoSE & METHoDoloGy

The Interactive Travel Services As-sociation (ITSA) commissioned PhoCusWright to study the role and influence of the GDSs in travel distri-bution and the global travel economy. This paper examines the following:

The share of U.S. and European • travel that is distributed through the GDSsThe role played by the GDSs across • various segments of the travel in-dustry. For example:

Air –Hotel –Car rental –Online travel –Leisure travel –Corporate travel –

The impact of the GDSs on con-• sumer choice and competition

This study derives market size9 data from PhoCusWright’s U.S. Online Travel Overview Eighth Edition Up-date: 2009-2010, PhoCusWright’s Eu-ropean Online Travel Overview Fourth Edition and PhoCusWright’s Corporate Travel Distribution Fourth Edition. Readers interested in a full discussion of market sizing methodology should consult these reports.

9 “The Role and Value of the Global Distri-bution Systems in Travel Distribution” does not use term “market size” in any specific technical or legal sense, but rather as a general reference to all sales in a particular sector or industry.

In brief, PhoCusWright sizes the travel industry by aggregating relevant supplier revenues across the air, lodging, car rental, tour, cruise and rail indus-tries. Non-travel related revenues such as airline cargo, hotel retail and food and beverage, and cruise line onboard revenues are excluded. Data is sourced through public filings of individual travel suppliers and extensive executive interviews. PhoCusWright also consults a wide range of leading third-party re-search and data sources to inform and corroborate its own findings.

To size the GDS channel within the U.S., European and global travel industries, Amadeus, Sabre and Trav-elport provided to PhoCusWright transaction and transaction value data from 2006 to 2008 for air, hotel and car rental bookings. All data pre-sented in this paper regarding GDS channel size reflects the aggregation of this proprietary data from these three companies.

Readers of this report and PhoCus-Wright’s U.S. Online Travel Overview Eighth Edition Update: 2009-2010 will observe some differences in travel market size data. The discrepancy is international air: PhoCusWright’s U.S. Online Travel Overview Eighth Edition Update: 2009-2010 methodology sizes the air market by counting passenger revenue of airlines based in the U.S. and does not count sales by interna-tional carriers through a U.S. point-of-sale (e.g., when a consumer or travel agent books with Lufthansa or Cathay Pacific). The market sizing for air in this paper includes all airline book-ings made via the GDS through a U.S. point-of-sale. This increases the size of the air and total travel markets.

Discussion of Europe includes the following countries: Austria, Belgium,

Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom. These countries were included to maintain consis-tency with the methodology of Pho-CusWright’s European Online Travel Overview Fourth Edition.

KEy TERMS & DEFInITIonS

Computerized reservation sys-• tem (CRS): A computerized system originally developed for airlines to manage reservations and inventory and later adapted for use by travel agencies. CRSs are the precursors of GDSs and became widely adopted by hotels, car rental firms and other travel companies.

Global distribution systems • (GDSs): Electronic travel distribu-tion networks that facilitate con-nectivity, shopping and booking among thousands of travel suppli-ers and more than 163,000 travel agencies around the world.

Managed business travel (corpo-• rate travel): Managed or corporate travel refers to all air, car and hotel expenses made by corporations where purchases are governed by a formal travel policy. A travel policy can refer to a preferred travel man-agement company, supplier, online booking tool, negotiated rates and/or booking channel. Managed travel also includes rogue, or out-of-policy, purchases that are captured as part of a company’s corporate travel budget.

Online corporate booking tool:• Also referred to as a self-booking tool, SBT or CBT, corporate self-booking tools are online reserva-



tion tools that automate the book-ing of corporate travel reservations for travelers and traveler assistants within a managed travel program.

Online travel agency (OTA):• An entity whose branding is oriented online and that principally conducts business online. There are several hundred online travel agencies in the U.S. and Europe (defined as a travel agency for whom at least 50% of sales are derived online). Howev-er, the four largest OTAs – Expedia, Orbitz Worldwide, Priceline, Trav-elocity and their affiliated sites – represented some 96% of all online travel agency sales in 2008.10

Segment:• The base component of a booked transaction as measured by a GDS, a segment represents a flight from point A to point B for a single passenger. For example, a roundtrip plane ticket where each leg of the flight was nonstop would consist of two segments if only one passen-ger was included in the itinerary; a roundtrip ticket for one passenger whose flight legs each included one stop would have four segments. The GDSs charge suppliers a “segment fee” for each segment booked.

Supplier (or travel supplier):• An owner/operator of a travel service, such as an airline, hotel, car rental company or cruise line (as opposed to an intermediary or retailer, such as a travel agency, that resells sup-pliers’ products).

Travel agency:• A retail storefront or office-based travel agency business. PhoCusWright uses this term to the exclusion of online travel agencies.

10 PhoCusWright’s U.S. Online Travel Over-view Eighth Edition

Travel management company • (TMC): A type of travel agency that provides management and consulting services for corporate travel programs, which may include contract management and procure-ment, expense reporting, and pro-gram development and oversight, as well as more conventional travel agency services, such as booking and fulfillment of travel.

Unmanaged business travel:• All air, car and hotel expenses associated with business travel in firms that do not have a travel policy dictating the channel, type of travel, supplier or fare/rate used. For market sizing, PhoCusWright combines unmanaged business travel with leisure travel.

KEy FInDInGS

The GDSs provide essential and • efficient business infrastructure for 163,000 travel agencies, which employ nearly half a million travel agents worldwide. The GDSs pro-cessed more than 1.1 billion trans-actions in 2008, representing over $268 billion in global travel sales.U.S. and European travelers favor • intermediaries for travel shopping and purchasing. The GDSs play a primary role in facilitating the travel agency business model.OTAs have greatly contributed to • improving the travel shopping expe-rience and convenience for consum-ers and have also increased pricing transparency. In the U.S., the GDSs processed • $98.7 billion in travel agency and OTA bookings in 2008, represent-ing 72% of the nearly $137 billion in travel booked through interme-diaries. GDS share of traditional travel agencies is higher, at 75%.

The GDSs facilitate multi-carrier • itinerary shopping and the booking and fulfillment of interline tickets across more than 500 airlines for travel agencies and OTAs.The GDSs account for a significant • share of the nearly $78 billion in U.S. corporate travel booked via intermediaries. They are also the preferred booking method of cor-porate travel agents.The GDSs have adapted to the chal-• lenge of content fragmentation by introducing new financial models for airlines and travel agencies and investing in new technology to sup-port airline merchandising and sales of optional services.Should penetration of the pay-for-• content model (whereby airlines may compel OTAs and travel agencies to pay for access to some or all of their content via the GDS) spread, there would be a high risk of major downstream distribution costs for intermediaries and consumers.GDS share of the total travel mar-• ket is projected to increase slightly in 2009 and 2010 because of two main trends: OTAs’ countercycli-cal lift amid the recession and the growing trend by corporate travel buyers and TMCs to drive more travel spend under management and via the GDSs.Two developments in airline dis-• tribution – the rise of optional ser-vices and fees and the pay-for-con-tent model – hold the potential to disrupt how air tickets are bought and sold. Both could fragment con-tent and add cost to downstream intermediaries and points-of-sale, making true “all-in” and “inclusive” price comparisons more difficult for consumers.



KEy FInDInGS

The GDSs provide essential and ef-• ficient business infrastructure for 163,000 travel agencies, which em-ploy or contract nearly half a mil-lion travel agents worldwide.The GDSs processed nearly 1.3 • billion transactions in 2008, repre-senting more than $268 billion in global travel sales.GDS transaction value in the U.S. • represented 35% of all supplier rev-enue and 64% of all airline passen-ger revenue in 2008.GDS transaction value in Europe • represented 21% of all supplier rev-enue and 47% of all airline passen-ger revenue in 2008.The GDSs are a significant enabler • of the travel agency and airline in-dustries, which represent a total economic impact of more than $1.1 trillion and 10.2 million jobs in the U.S.

GDS SHARE oF ToTAl TRAVEl SAlES by REGIon

Global View

The World Travel & Tourism Council (WTTC) projected the global travel economy at just over $4 trillion in per-sonal and business travel and tourism spend and nearly 80.1 million in direct industry employment11 in 2008. The three major GDS companies, with combined revenues approaching $10 billion and approximately 24,000 em-ployees worldwide in the same year,

11 “The 2008 Travel & Tourism Economic Research Executive Summary,” TSA Tourism Satellite Accounting, The World Travel & Tourism Council (WTTC)

may seem just a sliver of that rather large pie. But the GDSs serve as an important (and often unseen) global circulatory system for travel informa-tion and commerce.

Together, the GDSs provide valu-able technical infrastructure for the vast majority of travel shopping and booking, at more than 163,000 trav-el agencies worldwide. These travel agencies, both online and traditional, directly employ or contract roughly 490,000 individual travel agents. The GDSs processed more than 1.1 billion transactions in 2008 for these agencies, representing more than $268 billion in total travel transaction value and 7% of global personal and business travel and tourism demand.12

The u .S . Travel Market

The U.S. is the largest travel market in the world, representing nearly $280 bil-lion in direct supplier revenue (source: PhoCusWright Inc.) and nearly $1.1

12 PhoCusWright Inc. and WTTC

trillion in total personal and business travel consumption in 2008.13 The volume of U.S. travel transactions booked via GDS accounted for well over one third of total U.S. travel since 2006 (see Figure 5). The GDSs pro-cessed 449 million transactions for air-lines, hotels and car rental companies in 2008, representing $98.7 billion in total travel value. This represented 35% of the total travel market (sup-plier revenue) and 9% of all personal and business travel consumption in 2008.

The reach of the GDSs extends throughout the U.S. travel economy and well beyond a conventional eco-nomic impact assessment. Roughly 83% of travel agencies rely on a GDS for their core business infrastructure for reservations processing.14 Most travel agencies value their GDS, which

13 Travel & Tourism Economic Impact 2009: United States, WTTC14 2008 GDS Report, American Society of Travel Agents

FIGuRe 5 U.S. Total Travel Market (Gross Bookings) & GDS Share, 2006-2008*

200820072006

259.2

93.6

36%

272.5

98.2

36%

278.7

98.7

35%

300

250

200

150

100

50

0

US$B

GDS Total U.S. Travel Market

*This figure slightly undersizes GDS share of sales because it does not include cruise, tour and rail transactions handled by GDSs, while the total travel market size does include gross bookings from tour operators, cruise lines and rail.Source: PhoCusWright Inc.

The Role of the GDSs in the Global Travel Industry



gives them the ability to shop and book across thousands of suppliers in real time, handle payment processing and other fulfillment services on be-half of clients and suppliers, perform customer service functions such as changes, cancellations and re-issues, and efficiently manage all of this busi-ness activity through direct data feeds from the GDS to the agency mid- and back-office systems. That a single GDS can provide so many services to an agency increases its efficiency.

Travel agencies provided employ-ment to 86,420 people in the U.S. as of May 2008, representing an aggre-gate annual payroll in excess of $2.8 billion.15 While these employment and payroll statistics have almost certainly declined since the onset of the eco-nomic recession in the U.S. in 2008, travel agencies still play a major part in travel distribution.

Another key area of broad and far-reaching economic impact is, of course, the airline industry. A 2008 study by the Federal Aviation Admin-istration projected the 2006 airline in-dustry impact on the U.S. economy at $1.1 trillion in economic output and 10.2 million jobs.16 The GDSs make a large proportion of these airline trans-actions possible. GDS air transactions had a market value of $78 billion in 2006 (see Figure 7), representing two thirds of all airline passenger revenues. The GDSs enable tens of thousands of points-of-sale and drive traveler de-mand, which cannot help but affect the airlines.

15 “Occupational Employment and Wages, 41-3041 Travel Agents,” U.S. Bureau of Labor Statistics, May 200816 The Economic Impact of Civil Aviation on the U.S. Economy, FAA Air Traffic Organiza-tion, October 2008

The european Market

The European travel market is the world’s largest regional travel market in gross bookings. It expanded from €237 billion in 2007 to €246 billion in 2008 (see Figure 6). GDS companies processed nearly 292 million air, hotel and car rental transactions in 2008, representing more than one fifth of the total European travel market (€53 bil-lion in gross bookings). Travel booked via a GDS represented 6% of the €857 billion in total personal and business travel consumption in 2008, accord-ing to the WTTC.17

GDSs are just as critical in the Eu-ropean travel economy as they are in the U.S. Travel agencies represent a major point-of-sale for both leisure and business travel sales across Europe – a point-of-sale equally enabled by the GDSs. In some markets such as Ger-many, where travel agencies accounted for 47% of the total travel sales in 2008 (see Figure 14), the impact of the GDS in travel agency bookings extends far

17 Travel & Tourism Economic Impact 2009: European Union; WTTC; PhoCusWright Inc; US$ > EUR conversation at 0.683 for 2008

beyond air, hotel and car rental res-ervation processing. The TOMA and Merlin tour booking interfaces from Amadeus and Sabre, respectively, rep-resent a substantial portion of all tour operator package bookings made by travel agents in Germany. Data from the European Travel Agents’ & Tour Operators’ Associations indicates that in Austria, France, Germany, Italy, Spain and the U.K., there are nearly 41,000 travel agencies and tour opera-tors employing some 335,000 people.

GDS SHARE oF ToTAl TRAVEl SAlES by PRoDuCT CATEGoRy

Airline

Despite the rise in consumer book-ings via airline Web sites over the past decade, the GDSs continue to repre-sent the majority of air travel. They processed more than 376 million air transactions in the U.S. in 2008, rep-resenting nearly two thirds, or 64%, of all airline passenger revenue (see Figure 7).

The GDSs command a smaller but still substantial share of total air-line sales in Europe. They processed

FIGuRe 6 Europe Total Travel Market (Gross Bookings) & GDS Share, 2006-2008

200820072006

224

56

25%

237

55

23%

246

53

21%

GDS Total Europe Total Europe

300

250

200

150

100

50

0

€B




FIGuRe 8 European Airline Gross Sales & GDS Share, 2006-2008

200820072006

94

53

56%

100

51

51%

104

49

47%

GDS Air Europe Total Air Europe

120

100

80

60

40

20

0

€B


FIGuRe 9 U.S. Hotel Room Revenue & GDS Share, 2006-2008

200820072006

99.6

11.111%

106.7

13.1

12%

108.2

12.7

12%

GDS All Hotel Room Revenue

120

100

80

60

40

20

0

US$B


FIGuRe 10 U.S. Car Rental Revenue & GDS Share, 2006-2008

200820072006

16.9

4.8

28%

17.7

5.1

29%

17.6

5.0

29%

GDS All Car Rental Revenue

20181614121086420

US$B


FIGuRe 7 U.S. Airline Gross Sales & GDS Share, 2006-2008

200820072006

116

78

67%

123

80

65%

127

81

64%

GDS Total U.S. Airline Market

140

120

100

80

60

40

20

0

US$B




more than 276 million air transac-tions in 2008, representing €49 bil-lion and 47% of total air sales (see Figure 8). GDS share of sales declined more quickly in Europe following the surge in growth among low-cost car-riers (and some tour operator charter airlines), which have largely pursued a consumer-direct distribution model.

Hotel & Car Rental

The GDSs play a far smaller but still considerable role in hotel and car

FIGuRe 11 European Hotel Room Revenue & GDS Share, 2006-2008

200820072006

71.9

2.43%

76.9

2.94%

78.8

3.04%

GDS Hotel Europe Total Hotel Europe

80

70

60

50

40

30

20

10

0

€B


FIGuRe 12 European Car Rental Revenue & GDS Share, 2006-2008

200820072006

9.9

0.76%

10.1

0.77%

10.4

0.77%

GDS Car Europe Total Car Europe

12

10

8

6

4

2

0

€B


rental distribution – segments of the travel industry in which the major-ity of bookings are handled over the phone or in person, usually directly with the local hotel property or car rental location. The GDSs processed 39.3 million hotel transactions and nearly 33 million car rental transac-tions in the U.S. in 2008, representing 12% and 29% of those travel sectors, respectively (see Figures 9 and 10). Cumulative non-air product sales via GDS reached nearly $18 billion.

In Europe, the hotel market is much more fragmented than in the U.S., and the majority of hotels are inde-pendent, small properties unaffiliated with larger hotel brands (and central-ized branding and distribution servic-es). GDS penetration of the European hotel market was just 4% in 2008. In the car rental sector, GDSs accounted for only 7% of all transactions. Com-bined, GDSs processed €3.7 billion in hotel and car rental transactions in Europe in 2008.



KEy FInDInGS

Online and traditional travel agen-• cies accounted for nearly half of all U.S. travel supplier revenue in 2008.U.S. and European travelers favor • intermediaries for travel shopping and purchasing.

Although Web sites of travel sup- –pliers (airlines, hotels, car rental companies) account for more sales, online travel agencies are the most popular types of travel sites among U.S. travelers for shopping.More than two thirds of Euro- –pean online travelers cite inter-mediaries as their usual method of shopping and buying travel.Access to lower prices and com- –prehensive product information drives channel selection.

OTAs have greatly improved the • travel shopping experience and con-venience for consumers and have increased pricing transparency.GDSs enable the retail travel agency • and OTA business models.

GDS technology allows for travel –shopping, booking and fulfill-ment for consumers across thou-sands of suppliers and products in a single display that provides access to comprehensive infor-mation and drives competition among suppliers.The GDSs processed nearly three –quarters of all intermediary (trav-el agency and OTA) sales in the U.S. in 2008.The GDSs help provide interline –ticketing, which makes lower-fare options available to travelers

and accounts for an estimated one fifth of air tickets sold via OTAs in the U.S.

The GDSs are critical to corporate • travel distribution, which is handled principally through national and international TMCs.The GDSs process transactions • for the vast majority of corporate travel.They provide valuable support for • the complex reservation require-ments of corporate travelers and corporations throughout the res-ervation life cycle, enabling cost containment and driving efficien-cies in managed corporate travel programs.

The GDS connect airlines with –the much higher-yield business travel segment, whose average transaction value is nearly twice that of a comparable online lei-sure transaction.

The GDSs enable suppliers to make • their products available to consum-ers globally through travel agencies in markets where they might not otherwise be able to achieve efficient market penetration through direct marketing efforts.Corporate travel agents favor the • GDSs as a usual booking method for air, hotel and rental car.

THE HEART oF THE TRAVEl InTERMEDIARy

This section examines the role of the GDS in the shopping and purchas-ing processes of travelers and travel agencies, and analyzes GDSs’ impact on both online and offline points-of-

sale for the leisure and corporate travel markets.

Intermediaries have long been central to travel distribution. The travel industry is comprised of many thousands of travel suppliers across air, lodging, ground transportation, cruise, in-destination activities and other services. This adds up to an im-measurable volume of travel products and options, and intermediaries have provided a critical service by enabling and guiding consumers to shop, se-lect and purchase in such a large and dynamic marketplace. By aggregating content and information from this in-calculable universe of supply, interme-diaries empower consumer selection, allowing would-be travelers to shop thousands of suppliers in a single and efficient experience.

Although travel suppliers have in-creased their sales directly to consum-ers over the past decade, traditional travel agents and OTAs continue to represent a major share (just under half) of all travel sales in the U.S. in 2008 (see Figure 13).

PhoCusWright estimates that the total intermediary share of all travel sold is higher in Europe, although there is great variation in both the use of the Internet and travel agen-cies by country. PhoCusWright’s Euro-pean Consumer Travel Trends Survey revealed that 72% of European online travelers18 usually shop for travel via an

18 PhoCusWright’s European Consumer Trav-el Trends Survey surveyed adults in Britain, France, Germany and Spain who traveled by air or rail, stayed in a hotel in the past year and used the Internet within the past month.

The Role of the GDSs in Travel Distribution



intermediary (either online or offline) and 69% usually book through one. In contrast, 19% shop suppliers and 21% book directly. In Germany, which rep-resents the third-largest travel market in Europe (though it is almost identi-cal in size to number two France),19 OTAs and travel agencies combined account for 56% of the total travel market (see Figure 14).

Intermediaries play an even larger role in travel’s more complex segments, where either the nature of the product itself or the consumer selection process presents more demand for the infor-mational and consultative services they offer. Travel agencies (both online and traditional) account for a significant majority of the air, tour and cruise revenue in the U.S. (see Figure 15).

In the case of cruise and tour – products typically associated with vacation travel and larger per-trip ex-penditure – travel agencies play an im-portant, consultative role in the prod-uct selection decision for travelers. For example, the multiple steps of a cruise purchase – especially for the first-time cruiser – can be daunting. They can include not only the itinerary, schedule and price, but also considerations such as the cruise line, the ship, cabin type, dinner seating, shore excursions, on-board activities and services and pre- and post-cruise transportation. OTAs have indicated that a substantial por-tion of their cruise sales are actually completed over the phone.

When compared to the decisions a traveler must make for a more ex-pensive, multi-component vacation package or cruise, shopping and book-ing flights seems relatively simple and certainly more commonplace. The

19 PhoCusWright’s European Online Travel Overview Fourth Edition

FIGuRe 13 U.S. Travel Market Gross Bookings and Share by Travel Intermediaries (OTAs and Travel Agencies) and Consumer Direct, 2006-2008

200820072006

123

104

133

104

142

100

33

53%

36 37

Travel Agency Online Travel Agency Total Direct

300

250

200

150

100

50

0

US$B

51% 49%


FIGuRe 14 Germany Total Travel Market Gross Bookings and Share by OTAs, Travel Agencies and Consumer Direct, 2008 (€B)

2008

44%

46.5

47%

9%

50454035302520151050

€BDirectOTAsTravel Agencies

Source: PhoCusWright Inc. and fvw, June 2009

FIGuRe 15 Intermediaries’ Share of U.S. Air, Tour and Cruise Revenue, 2008

CruiseTourAir

36%

64%

31%

69%

26%

74%

Intermediatry Direct




airline product (a seat) is more or less a commodity, and travelers usually make their selection based on price and schedule. But from the supplier or retailer perspective, air shopping and booking is in fact dizzyingly com-plex. Although innovation in GDS and online technology has made these processes increasingly easy and trans-parent for both consumers and travel agents, there are more than 500 air-lines, millions of possible flights each

with multiple fare classes and fares that can change several times a day. One GDS calculates that, at any one time, there are some 4.3 billion shop-pable fares in its system.

As travel intermediaries play a key role in travel distribution, GDSs play an important role for the intermedi-ary. By aggregating inventory and rates across thousands of suppliers, GDSs provide travel agencies – both OTAs and traditional leisure and corporate

retail agencies – with valuable access to comprehensive schedule, fare and availability information, plus the abil-ity to shop, book, process and fulfill travel for their customers. The GDSs processed $98.7 billion in travel agency and OTA bookings in 2008, representing 72% of the nearly $137 billion in travel booked through inter-mediaries (see Figure 16). GDS share of traditional travel agencies is higher at 75%.

lEISuRE IMPACT: TRAVElERS & TRAVEl AGEnTS

The sheer volume of air travel sup-ply (f lights and fares) and demand (passenger traffic) generates a large, complex and fast-changing buffet of choice in which price, information and user experience are the most influen-tial elements in the consumer selection process. In the leisure travel market – and especially in the recessionary eco-nomic climate of 2009 – price trumps all other considerations. While six in 10 U.S. travelers say price drives their choice of Web sites when shopping for travel, previous positive experience and wide selection of product options and information are also important to 58% and 40% of travelers, respectively (see Figure 17).

It is not surprising, then, that online travel agencies are the most popular resource for leisure travelers. More U.S. travelers cite OTAs (38%) as their usual purchase channel for air than any other channel, including airline Web sites, according to Pho-CusWright’s Consumer Travel Report (see Figure 18). This may appear to conflict with Figure 13, which indi-cates that booking directly with sup-pliers accounts for 51% of all travel sales in 2008. Supplier Web sites did

FIGuRe 16 Total Travel Gross Bookings and GDS Share by OTAs, Travel Agencies and All Intermediaries in the U.S. Travel Market, 2008

AllIntermediaries

TravelAgency

OTA

36.5

23.364%

100.3

75.5

75%

136.9

98.7

72%

GDS Share Gross Bookings

160

140

120

100

80

60

40

20

0

US$B


FIGuRe 17 U.S. Traveler Motivations for Using a Particular Web Site When Shopping for Travel

It has the best prices/offers 60%

58%

40%

39%

35%

I have had good experiencewith this Web site before

It offers the widest selectionof travel options

I am most familiar with this brand

It provides the most informationand photography

Question: What motivates you to use this/these Web site(s) when comparing and choosing leisure travel products? Select all that apply. Base: Online shoppers (n=1,365)

Source: PhoCusWright’s Consumer Travel Report



account for a larger share of all online travel sales in the U.S. in 2008 (61% of online gross bookings).20 However, supplier Web sites and OTAs appeal to different segments of the traveler population: OTAs are most popular with infrequent leisure travelers, who also tend to be younger and more budget-conscious. Supplier sites are preferred by more frequent, loyal, and older travelers, who also tend to spend more per trip (see Figure 19). So while OTAs have more traveler share, supplier Web sites have more trip and wallet share.

PhoCusWright’s European Consumer Travel Trends Survey revealed very sim-ilar findings about European travelers. While the survey methodology of this study differs from PhoCusWright’s Con-sumer Travel Report (which covers U.S. travelers) and the data in Figures 17 and 20 cannot be compared directly, the results are clear: European online travelers also choose their purchase channels based on price and access to comprehensive information.

While many factors drive the popu-larity of OTAs, a central component of their customer proposition is offering a user experience that enables travel-ers to efficiently shop and compare products, schedules and prices across many suppliers. Price-sensitive leisure shoppers can conveniently consider schedules and pricing in a single on-line retail session, and the OTAs have continued to introduce innovations to improve this experience. Some of the most important innovations include the following:

Matrix display:• First introduced by Orbitz (based upon technology

20 PhoCusWright’s U.S. Online Travel Over-view Eighth Edition Update: 2009-2010

FIGuRe 18 OTAs vs. Suppliers: Typical Purchase Channel for Lodging and Air

Lodging33%

28%

Air Travel38%

34% Online Travel AgencySupplier Web Site

Base: U.S. travelers (n=1,990)

Source: PhoCusWright’s Consumer Travel Report Part One: Behavioral Trends

FIGuRe 19 Typical Air Purchase Channel by Age

18–24 24%52%

31%48%

39%38%

37%33%

40%27%

25–34

35–44

45–54

55–64

34%29%55–64Online Travel AgencySupplier Web Site

Base: U.S. travelers (n=1,990)

Source: PhoCusWright’s Consumer Travel Report Part One: Behavioral Trends

FIGuRe 20 European Traveler Motivations for Using a Particular Web Site When Purchasing Travel

Lower prices 40%

24%

13%

13%

3%

Broader selection

Brand name I trust

Best customer service

Loyalty rewards

Base: Online travelers who have taken at least one holiday or vacation trip

Source: PhoCusWright’s European Consumer Travel Trends Survey



from ITA Software) and now stan-dard throughout online travel, the matrix display allows consumers to click on any cell within the matrix to sort airfare search results by price, airline and number of stops.

Opaque fares:• Initially made fa-mous by Priceline’s Name Your Own Price airfare bidding model, opaque fares allow travelers to get deeply discounted plane tickets. In return, the airline and exact de-parture times are hidden until the flight is purchased, and travelers do not receive loyalty credits.

Dynamic packaging:• Debuted by Expedia and now standard through-out online travel, this “book togeth-er and save” option allowes travelers to shop for multiple components in a single search, such as “Flight + Hotel.” This feature generally pro-vides a lower overall price than if the two components are purchased independently. It also allows sup-pliers, particularly hotels, to hide their discounted rates within pack-ages to avoid alienating premium customer segments, such as business travelers.

Flexible and alternative date • search: This feature allows travel-ers to compare flight options across multiple departure and return dates to find the lowest possible fare.

Alternative airport search:• Trav-elers can search across multiple de-parture and arrival airports within an acceptable distance to find the lowest possible fare or most conve-nient schedule.

Low-fare notifications:• OTAs in-troduced a feature that would email customers when there were specific

deals on particular O&D (origin and destination) pairs.

Hotel search, results display and • sorting: OTAs have made signifi-cant contributions to hotel search result displays and sorting options to make it easier for travelers to compare options from hundreds of possible results. Compelling addi-tions include:

Searching and sorting by prox- –imity to a specific address or landmarkMap-based search results dis- –playTraveler reviews integrated with –the resultsMultiple sorting options, in- –cluding price, star rating, brand, guest rating and amenities

The OTAs have contributed sig-nificantly to traveler shopping con-venience and pricing transparency within the airline industry and for travel overall. Even suppliers that compete for for these same transac-tions by attempting to drive travelers to book directly on their Web sites have acknowledged OTAs’ role. The following is an excerpt from a state-ment made by Douglas M. Steenland, CEO of Northwest Airlines, before the Senate Judiciary Committee Sub-committee on Antitrust, Competition Policy and Consumer Rights on April 24, 2008:

Over the past several years, online sites such as Orbitz, Expedia, and Travelocity have… provided enor-mous benefits to consumers and have increased the price-competitiveness of the airline industry. In fact, there are few businesses in which there is as much pricing transparency. A con-

sumer can log on to the Internet and, at the push of a button, review choices available across a wide variety of car-riers.

Over the last several years, online travel sites have developed advanced search functions such as flexible-date airfare searching and route-specific e-mail fare alerts. Furthermore, [they] provide their advanced pricing infor-mation and functionality to custom-ers free of charge.

In sum, customers have become far more sophisticated at comparing the offerings of competing carriers, and airline consumers have more tools at their disposal than do consumers in the vast majority of industries in the United States.

To serve the market demand for comprehensive product information, online (and traditional) travel agen-cies must have access to comprehensive travel product information, including schedules, pricing and availability, as well as the ability to book, take pay-ment, fulfill the reservation (ticket the reservation, generate customer docu-mentation, and settle payment with the supplier) and handle post-booking customer care, such as changes and cancellations. The GDSs are critical to the retail travel business model and automate many different processes, which makes the operation much more efficient:

Access to comprehensive travel 1. information: The GDSs func-tion as a central hub, aggregating schedules, fares, availability and booking capability for more than 500 airlines though a single point of access. This enables any travel agency, OTA or other point-of-sale



to provide comprehensive flight information and selling capability to its customers without having to build connections from its reserva-tions system to several hundred air-line inventory systems. In addition to creating a single access point for content, GDSs also homogenize the content and information re-ceived. This uniformity stream-lines the internal functionalities required by most travel agencies, such as international tickets and points-of-sale, interline ticketing, post-booking changes and internal accounting processes.

Mission-critical availabil-2. ity and response times: In the “always-on” age of the Internet, GDS infrastructure must support a tremendous volume of requests and transactions 24 hours a day, seven days a week. Travelport states that its systems in aggregate handle some 65 million price and availability requests daily, and the other GDSs support comparable workloads.

GDS response times – the time it takes the host system to serve up a response to a search request – represent another important element of the consumer experi-ence. Consumers demand effi-cient service, and a marketplace will naturally move to a product or provider that delivers efficiency. Travel agents using a GDSs must not only provide efficient service to their customers, but must also strive to maintain their own op-erational efficiencies. In the case of online travel, page load times are essential to Web site stickiness (keeping visitors from defecting to other sites) and conversion.

A 2008 study by the Aberdeen Group found that a delay of just one second can impact page views by 11% and conversions by 7% percent.21 Although many fac-tors contribute to travel agency efficiency and Web site page load times, GDS response time – typi-cally measured in fractions of a second – is a main component.

Unbiased fare displays:3. The GDSs were born of airlines, and as travel agency adoption of the systems ex-panded in the 1980s, airlines widely took advantage of the opportunities they presented. A study by Ameri-can Airlines in 1981 indicated that travel agents selected a fare from the first results screen 92% of the time.22 The implications were clear: CRSs could (and were) biasing search results in favor of their air-line parents, significantly restricting access to comprehensive flight in-formation and negatively affecting consumer choice. In 1984, the Civil Aeronautics Board (whose oversight of the GDSs eventually passed to the Department of Transportation) stepped in to regulate the airline distribution system, prohibiting screen display bias by carrier and compelling equal access to GDS distribution services for non-GDS owner airlines.

This significant regulation held until 2004, when the DOT elimi-nated these rules and significantly deregulated the GDSs. Although they are restricted by no specific

21 Aberdeen Group: The Performance of Web Applications: Customers are Won or Lost in One Second 22 “November Line of Sale Analysis,” memo to R. E. Murray from S. D. Nason, American Airlines, Dec. 3, 1981

rules in the U.S. with regard to the marketing of airline services, it is an indicator of the power of the marketplace and demand for comprehensive travel informa-tion that none of the GDSs has to date reinstituted screen display bias: Travel agents and consum-ers demand comprehensive pric-ing information. The Internet has exponentially increased pricing transparency and consumer ac-cess to information, and GDSs that would institute display bias risk alienating travel agent clients and their customers as well as air-lines. Understandably, the latest series of airline-GDS distribution agreements, completed in 2006, made access to all airfares (“full content”) a cornerstone of those commitments, and thus worth the discounted distribution fees charged to the airlines as a result.

Interline tickets (multi-carrier 4. itineraries): In a marketplace as complex, competitive and price-sensitive as air travel, the GDSs and other technology companies have invested heavily in innova-tion to improve shopping and pric-ing capability across the billions of possible flight combinations and airfares. Interline tickets, where a traveler flies on more than one airline within the same itinerary (e.g., a roundtrip where the out-bound is on Delta and the return is on AirTran), represent a sizable portion of air tickets sold.

Interline tickets are more or less unique to online and traditional travel agencies.23 They offer a com-

23 Some airlines offer interline ticketing ca-pability for consumers who book directly, but



pelling competitive advantage to consumers over booking directly with airlines because of the greater number of fare and scheduling op-tions available through multi-car-rier itineraries. Interline tickets are also often less expensive than sin-gle-carrier itineraries (see Figures 21 and 22), and PhoCusWright es-timates that these tickets comprise 18-22% of OTA tickets sold. The GDSs help enable multi-carrier itinerary shopping and the booking and fulfillment of interline tickets across more than 500 airlines for travel agencies and OTAs.

CoRPoRATE IMPACT: CoRPoRATIonS & TMCs

At a global expenditure of some $843 billion24 in 2008, business travel re-mains a major contributor to the global travel economy despite the worldwide recession in 2009 and the consequent downturn in corporate travel. In the U.S., revenues to airlines, hotels and car rental companies from managed corporate travel spend amounted to more than $100 billion –37% of the total U.S. travel market in 2008.25

The market dynamics for corporate travel are quite different from those of the leisure marketplace. While the flight purchase for leisure travelers is driven first by price and second by schedule, the corporate traveler must take other considerations into account. Indeed, the needs of the business traveler, the corporate travel program

this is limited to the codeshare agreements (usually less than a handful) any airline may have.24 Travel & Tourism Economic Impact 2009: Executive Summary (worldwide); WTTC25 PhoCusWright’s U.S. Corporate Travel Dis-tribution Fourth Edition

manager and company controller or CFO place many complex demands on the travel agency or TMC and the required travel shopping, purchasing and fulfillment process. The following is a list of some of the key needs of the corporate travel market that dis-tinguish it from leisure and personal travel.

Corporate contracts and pre-1. ferred suppliers: Corporations negotiate contracts with airlines for volume-based discounts. Such contracts may include other ele-ments such as upgrade privileges, airport lounge access and allow-able checked baggage, providing the business traveler with a higher

level of service or lower out-of-pocket expenses while en route. Greater use of contracted fares also generally benefits the corpo-ration over the long term because of incentives attached to achiev-ing booking volume goals, even if available published fares may sometimes be lower.

Employee productivity and the 2. lowest logical fare: For employees traveling on behalf of a company, schedule is often as important – or more important – than the price of the ticket. Corporate travel programs have policies, usually developed with their TMCs and configured within the booking tool or point-of-sale, that take into

FIGuRe 21 OTA Airfare Search Results Matrix Display and Itinerary Review with Interline and Single-Carrier Options

Source: Expedia.com



account a range of criteria such as schedule, preferred suppliers, fare class policies and price to deter-mine not necessarily the cheapest fare, but the lowest logical fare for that trip. For example, corporate policies may exempt red-eyes or out-of-the-way connections from consideration, or permit a higher class of service for longer interna-tional trips or higher-level execu-tives.

Security and risk:3. An increas-ingly important issue in corporate travel programs is risk manage-ment, whereby companies can track the locations of their em-ployees or ensure that too many critical employees are not traveling together on the same flight.

Expense management and re-4. porting: Companies are becom-ing more sophisticated in their expense management processes,

including capturing more spend detail and integrating purchasing, accounting and reporting systems. In travel, the TMC and even the online self-booking tool provide essential reporting of their corpo-rate clients’ purchasing. Increas-ingly, corporate travel systems are providing data feeds directly to client expense management and accounting systems, depending on the level of integration. This pro-cess improves visibility into travel expenses, reduces the chance that errors might occur with manual reporting and improves employee productivity.

These elements of a successful cor-porate travel program depend heav-ily, however, on capturing the relevant travel and spend data. When an em-ployee uses the sanctioned in-house online corporate booking tool or travel agency, the system or agent can auto-

matically apply the policies to ensure optimal use of negotiated corporate rates, serve up the lowest logical fare to contain cost while ensuring traveler satisfaction, and capture the requisite reservation data to pass into the com-pany systems for expense reporting and other needs.

Booking through an alternative point of purchase, such as an airline or hotel Web site, is not uncommon among corporate travelers. Some sup-pliers have introduced services such as corporate booking portals or data feeds that enable some degree of integration with corporate travel programs. How-ever, rogue channel purchasing does increase the likelihood of travel spend going uncaptured, reducing the effica-cy of the program and adding manual processing time and cost. It also likely detracts from employee productivity (people spend more time searching for travel options on alternative channels) and may incur higher change or can-cellation penalites because the airfare or hotel booking is not covered under the company program.

As corporations become more so-phisticated and strategic in their ap-proach to travel and expense manage-ment, corporate travel agencies have evolved far beyond a simple point of purchase for the business traveler – they have emerged as true TMCs.26 Their strategic consulting services for optimizing corporate travel programs are as important as booking services, if not more so. Travel intermediar-ies – principally TMCs – account for a significant majority of corporate travel spend in the U.S. (see Figure 23). PhoCusWright projects TMC share of the corporate travel market

26 Corporate Travel Distribution: Key Mar-kets, PhoCusWright Inc.

FIGuRe 22 OTA Airfare Search Results Display with Interline and Comparative Lowest Fares via the Same Airline Web Sites

Source: Orbitz, US Airways, Delta Air Lines



will increase 79% by 2011 as compa-nies strive to improve efficiencies and reduce costs by bringing more travel spend under management.

The GDSs account for the major-ity of the nearly $78 billion in corpo-rate travel booked via intermediaries. They are also the preferred booking method of corporate travel agents (see Figure 24). GDSs power most of the air, hotel and car rental content for (now widely adopted) online corpo-rate self-booking tools like Amadeus’ e-Travel Management, Concur’s Cliq-book, Sabre’s GetThere, TRX’s RESX and Travelport’s Traversa, as well as the corporate booking portals of the OTAs.

But the GDSs represent far more than a booking mechanism for corpo-rate travel; they perform other valuable functions across the reservation life cycle of most corporate travel transac-tions and assist with the complex eco-system of technology services among corporate agencies and corporate trav-el departments. They integrate with TMC mid- and back-office processes, including quality control of reserva-tion files, automated services to check policy compliance and availability of better fares or seats, and accounting and reporting.

These functions help optimize travel programs, maximize use of corporate contracts and preferred suppliers, en-sure policy compliance and maximize the amount of spend under manage-ment control. Bookings that fall out-side the GDS have a higher likelihood of going uncaptured or requiring manual intervention to push through mid- and back-office processes. This detracts from efficiency in the corpo-rate travel program and adds cost to the TMC and the corporation.

TRAVEl SuPPlIER IMPACT: buSInESS & lEISuRE

The industry discourse surrounding airlines and the GDSs is often pre-sented in an adversarial context,27 with airlines aggressively seeking to drive direct distribution and lower the cost of selling tickets via intermediaries. However, not all demand is created equal. There are marked differences

27 “Distribution Fragmentation and the Sup-ply Chain: Bracing for 2011 Airline-GDS Talks, Buyers Can Help Pave A New Way,” Travel Procurement, December 2008

in the average transaction value across major distribution channels that in-dicate that GDSs and travel agencies deliver not only a majority of total airline industry revenue, but also a significant share of the higher-yield fares on which many airlines depend for profitability.

Most striking is the difference in the average airfare booked through a travel agency versus an OTA. As shown in Figure 25, the average air ticket booked through a travel agency in the U.S. was $684, almost twice that

FIGuRe 23 U.S. Corporate Travel Market Gross Sales for Air, Hotel and Car Rental; Share by Direct and Intermediaries (Travel Agencies and TMCs), 2008

DirectIntermediary

120

100

80

60

40

20

02008

100.8

23.1

77.7US$B

Source: PhoCusWright’s U.S. Corporate Travel Distribution Fourth Edition

FIGuRe 24 Percentage of Corporate Travel Agents for Whom GDS Is the Usual Booking Channel for Air, Rental Car and Hotel

Air 97%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%100%

96%

94%

Rental Car

Hotel

Source: PhoCusWright’s Travel Agency Distribution Landscape: 2006-2009



of the $363 average ticket through an OTA. This $321 difference reflects the major role travel agencies and TMCs play in business travel; in the corporate travel market, value and efficiency are not judged only by ticket price, but also by the additional benefits and ser-vices included in more expensive fare classes (e.g., refunds and flexibility of travel time) and premium classes of service. It is travel agencies and TMCs that are more likely to sell these fare classes and the airline services associ-ated with them.

By comparison, OTAs attract a much more price-sensitive, primar-ily leisure market. PhoCusWright re-search indicates that the average fare booked through an airline Web site is much closer to the average fare booked through an OTA, although likely a little higher because of airlines’ ability to lure their most loyal and frequent travelers to their Web sites.

A very similar dynamic is at play in the European marketplace. Although the average fares booked through OTAs and travel agencies in Europe’s three largest travel markets are higher than in the U.S., the differences are remarkably similar. The average fare booked through a traditional travel agency was 59% higher in 2007 and 62% higher in 2008, again reflecting the higher fares typically booked by business travelers, who are more likely to book via travel agency or TMC (see Figure 26).

Analysis of non-air transaction data from the GDSs paints a very similar picture. The average combined trans-action value of hotel and rental book-ings via travel agencies in the U.S. was $114 higher than those booked via OTAs in 2008 (see Figure 27). This difference is up from $106 in 2007,

which reflects the corporate travel market’s demand for higher product quality, greater flexibility and better service than the leisure market – and the higher-yielding hotel and rental car rates those expectations generate for suppliers.

The ability of the GDSs to deliver higher-value demand is not limited to the corporate travel market. At 16% of all airline passenger revenue in 2008, online travel agencies also represented a significant portion of leisure travel demand. Although OTAs are often po-sitioned as direct competitors to airline Web sites and airlines continue to seek ways to drive more bookings – espe-cially lower leisure fares – to their own

Web sites, airlines also acknowledge that OTAs serve as valuable marketing vehicles in markets where they may lack brand awareness among travelers. Airlines turn to OTAs to drive busi-ness in “spoke” markets where they may have less market presence.

Furthermore, GDSs enable airlines (through travel agencies) to obtain bookings in markets that they could not reach as efficiently on their own. For example, if a domestic U.S. air-line would like to sell its flights across Asia, it would be forced to create a very expensive marketing infrastruc-ture, whereas the GDS provides such infrastructure for a variable cost. This global reach of the GDSs enables air-

FIGuRe 25 Average Airfares Booked via OTAs and Travel Agencies and Fare Difference in the U.S., 2007-2008

2007

$337

$618

$281

2008

$363

$684

$321

OTATravel AgencyDifference


FIGuRe 26 Average Differences in Airfares Booked via OTAs and Travel Agencies: France, Germany and U.K., 2007-2008

2007

$490

$782

$291

2008

$514

$831

$317

OTATravel AgencyDifference




lines to make their products easily ac-cessible for shopping and purchase by consumers (via travel agencies, online and traditional), who often would be unfamiliar with the offerings of carri-ers that have either newly entered the market or who have less brand vis-ibility (e.g., a U.S. carrier in an Asian country).

The OTAs also offer suppliers a deep discount distribution channel in the form of opaque travel sales and packaging. The former withholds some product details (such as the brand name, exact flight schedule or hotel location) until purchase; the lat-ter shields the discounted price of the product within the total package price. This provides some brand protection for suppliers who want to offload dis-

tressed inventory without alienating existing customers who may have paid a higher price. The volume of travel sold via OTA package channels is siz-

able – $6 billion in 2008 – and two major OTAs, Priceline and Hotwire, are largely focused on the opaque sell-ing model.

FIGuRe 27 Average Hotel/Car Transaction* Value Booked via OTAs and Travel Agencies and Difference in the U.S., 2007-2008

2007

$172

$279

$106

2008

$172

$286

$114

OTA Hotel/CarAgency Hotel/CarDifference

* Combined average value of hotel and/or rental car transactions, where a transaction equals a hotel or car rental booking regardless of the number of room nights, days or guests/passengers.




KEy FInDInGS

Airlines have aggressively grown • their share of direct online distri-bution from less than 3% of all passenger revenue in 1999 to more than 30% in 2008 in the U.S.Full content remains the goal for • travel intermediaries; several air-lines continue to withhold all or some fares from the GDSs.

The GDSs have adapted to airline –direct sales growth and the risk of content fragmentation by in-troducing new financial models for airlines and travel agencies, bringing the cost of distribution down for airlines since 2002.

The rise in a la carte sales and • optional services among airlines threatens to further fragment con-tent and disadvantage downstream intermediaries and points-of-sale by making true “all-in and inclusive” price comparisons for consumers more difficult.The GDSs are implementing emerg-• ing industry standards from ARC and ATPCO and rolling out new technology platforms to support airline optional services.Another risk for consumers, in-• termediaries and GDSs is further penetration of the pay-for-content model, whereby airlines may compel OTAs and travel agencies to pay for access to some or all of their content via the GDS. This could result in significant downstream distribution costs for intermediaries and con-sumers, with consumers ultimately picking up the tab by way of higher all-in prices for air travel.

GDS share of the total travel mar-• ket is projected to increase slightly in 2009 and 2010 because of two main trends: OTAs’ countercycli-cal lift amid the recession and the growing trend by corporate travel buyers and TMCs to drive more travel spend under management and via the GDS.

The GDSs and travel agencies are increasingly challenged on a number of market fronts as airlines accelerate their direct distribution efforts and seek ways to restrict content across some intermediary channels or impose fees on bookings through those chan-nels. This section examines some of the major challenges facing the GDSs and their potential impact on the travel markets in the U.S. and Europe.

THE SuRGE In SuPPlIER DIRECT

For the past decade, airlines have been relentless – and successfully so – in their pursuit of direct bookings. In addition to featuring their Web site URLs across their advertising and marketing communications, airlines have over the past 12 years deployed a range of tactics, from direct incentives such as Web fares and reward mileage bonuses to negative incentives (e.g., added fees for non-preferred booking channels). Several airlines charge fees for some transactions through their call centers; in 2004 Northwest Air-lines attempted to impose fees on GDS bookings for U.S. domestic tickets to offset the cost of segment fees, but soon rescinded the policy.

Airlines also continue to invest heav-ily in their online capabilities, offering more features and convenience for trav-elers via their Web site to differentiate

FIGuRe 28: u .S . AIRLIne, HoTeL AnD CAR RenTAL Web SITe SHARe oF ALL CATeGoRy ReVenue, 1999-2008

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

35%

30%

25%

20%

15%

10%

5%

0%

Airline Web site share of all airline revenueHotel Web site share of all room revenueCar rental Web site share of all revenue

Note: Car rental revenue excludes insurance replacement business.


The Future of the GDSs



from other channels. Tracking, man-aging and redeeming air miles online have become standard functionality, as have online check-in, changes and more. But some carriers have taken interesting, innovative approaches. Alaska Airlines in 2008 introduced Jenna, an online virtual assistant that allows Web site visitors to chat and ask questions. United Airlines introduced Twares in 2009, special offers available only to their followers on the micro-blogging social network Twitter. Per-haps the most successful such example

is still Southwest Airline’s Ding!, an off-browser desktop application that sits in a person’s laptop system tray and offers pop-ups of relevant special offers. Southwest has boasted several million downloads for Ding! since its launch in early 2005.

These tactics have helped spur sales via airline Web sites over the past de-cade, from less than 3% of all pas-senger revenue in 1999 to more than 30% in 2008 (see Figure 28). Hotels and car rental firms have also grown their direct online sales, although less

significantly. Hotel Web site revenue as a percentage of all U.S. room rev-enue has increased from 1% in 1999 to 15% in 2008; car rental Web site revenue has grown more dramatically as a share of all rental revenue, from 2% to 27% over the same period.

In Europe, the GDSs have also wit-nessed a shift toward booking directly online with travel suppliers. All sectors of the European travel market are see-ing gradual increases in the supplier direct online channel, though these in-creases vary greatly by country. Some markets, such as the U.K. and Scan-dinavia, have high direct penetration – approaching one third of the total travel market – while in other markets such as Italy and Spain, the proportion is much lower (see Figure 29).

From the earliest days of online travel, it was the low-cost carriers, or LCCs, that most aggressively sought to build their Web sites as major dis-tribution channels. At Southwest Air-lines, the world’s largest LCC, 78% of revenue came through its Web site in 2008, while JetBlue, the second larg-est in the U.S., reported 77%. Both carriers stand far from the U.S. air-line industry average of just under a third in 2008. There is a similar gap in Europe between traditional airlines and LCCs, which have proliferated there over the past decade: 69% of the nearly €18 billion in air travel sold by LCCs was booked via airline Web sites (see Figure 30). In aggregate, one fifth of all travel in the European market was booked on a supplier Web site in 2008.

Despite a sales strategy that clearly emphasizes driving customers directly to the airline Web site, several major LCCs have made major shifts in their distribution models that acknowledge

FIGuRe 29 Supplier Web Site Share of All Gross Travel Bookings by Country, 2006-2008

2006 2007 2008

35%

30%

25%

20%

15%

10%

5%

0%

U.K.ScandanaviaFranceGermanyItalySpain

Source: PhoCusWright’s European Online Travel Overview Fourth Edition

FIGuRe 30 European Traditional Airline, Low-Cost Carrier, Hotel and Car Rental Web Site Share of All Category Revenue, 2006-2008

2006 2007 2008

80%

70%

60%

50%

40%

30%

20%

10%

0%

LLCsCar RentalTraditional AirlinesHotels

Source: PhoCusWright’s European Online Travel Overview Fourth Edition



how travel agencies and GDSs can as-sist in reaching the higher-yield traf-fic of the corporate travel market in both the U.S. and Europe. In 2007, Southwest, JetBlue and easyJet (the U.K.-based LCC) announced new participation agreements with several GDSs.

Our re-entry into GDSs in 2007 has supported our growth in the corporate market, as business customers are more likely to book through a GDS… the average fare purchased via this channel is at least 17% higher, justify-ing the increased distribution costs. As a result, we now participate in all four major GDSs and four major OTAs. Our distribution mix creates significant cost savings and enables us to build loyalty through increased customer interaction.

– JetBlue 2008 Annual Report

ConTEnT FRAGMEnTATIon

Although several once-stalwart airline proponents of direct selling have initi-ated or increased their participation in the GDS and travel agency chan-nels, access to comprehensive airline content across all intermediary chan-nels remains elusive. The topic, often referred into within the travel industry as “full content,” remains a conten-tious and hotly debated issue.

Web Fares & Full Content

The full content debate between airlines and intermediaries has been around for a decade – ever since sev-eral airlines introduced Web fares that would only be made available to trav-elers who booked directly on an air-line site. This created numerous chal-lenges for downstream distributors, such as travel agencies, tour operators,

TMCs and corporations. When air-line Web fares undercut contracted discount rates provided to bulk resell-ers in both the leisure and corporate markets, intermediaries and corporate buyers found themselves faced with a conundrum:

Unless they were willing to book • the fare on the airline Web site, travel agents and TMCs would be-come less competitive. This, how-ever, added additional indirect cost and inefficiency, because bookings outside the agency GDS would have to be manually searched, booked and re-entered into mid- and back-office systems for accounting and reconciliation. Corporations, seeking to contain • travel costs, wanted their employ-ees to travel via the lowest available fares. However, by permitting the booking of Web fares, they also risked incurring unseen costs and loss of productivity. Fares booked outside their prescribed booking channels created leakage in the travel management programs, re-duced management visibility into corporate purchasing and reduced the benefits of negotiated contracts with suppliers. The booking of Web fares also detracted from employee productivity, as employees spent more time searching for alternative fares.

GDS response: Recognizing the po-tential threat to intermediaries, the GDSs took steps to stem the frag-mentation of content across multiple points-of-sale. In 2002 and 2003, most airlines and GDSs reached new distribution agreements that provided access to full content, which covered

Web fares, for OTAs and travel agen-cies. In return, the GDSs offered dis-counts on supplier segment fees and reduced the incentives they in turn paid to travel agencies. The GDSs and airlines reached broad consensus again in 2006 with a series of distri-bution agreements (primarily in the U.S. market) that led to full content in exchange for significant discounts in the supplier segment fees (and, neces-sarily, a reduction in the inducements) GDSs paid to travel agencies.

Although GDSs have come a long way in closing the content gaps since the proliferation of Web fares, full content remains elusive. Several air-lines, such as Southwest, for example, do not participate fully in all GDSs in all markets, either withholding certain fares or limiting their level of partici-pation so that some GDS users do not have true, real-time access to fares and availability. Other airlines, most no-tably Ryanair – one of Europe’s larg-est carriers – do not participate in the GDS channel at all.

As a result, even though travel agencies prefer the GDSs for book-ing air, most intermediaries must rely on the Internet as well. More than one in three leisure travel agents and one in five corporate travel agents cite the Internet and airline Web sites as usual booking methods in addition to their GDS,28 and over 90% of agencies use the Internet as well as their GDS when sourcing airfares.29 Many travel agencies in the corporate sector have invested in and integrated third-party tools into their mid-office procedures to conduct automated scans of travel

28 PhoCusWright’s Travel Agency Distribution Landscape: 2006-200929 2008 ASTA Travel Agent Usage and Price Sensitivity Study



Web sites to ensure significantly lower fares were not missed during the time when the reservation was originally booked.

optional Services: When Full Isn’t the Same

The debate around full content does not end with schedules and fares. Web site functionality and features, as well as airline optional or a la carte services, raise further questions about exactly how to define full content. The GDSs and travel agencies in many cases do not have access to services that are now commonly available on airline Web sites, such as frequent flier mileage redemption, live access to seat-level availability prior to purchase and much else. If a traveler cannot access all of the same information about a flight from a GDS-powered channel that he or she could via an airline di-rect channel, then is that truly full content?

Of far greater significance is the airline industry’s grand new product and revenue model: the unbundling of products and services, selling each on an a la carte basis and rebundling into groups of products and services to provide a package-like shopping and purchasing experience. Most travelers have already been introduced to this model in the form of fees for checked baggage, in-flight services, and lounge passes. This change in product and marketing for the airline industry represents a fundamental shift in dis-tribution. It will require significant changes in the way airlines display and sell their products, and the reverbera-tions will be felt across the entire travel distribution ecosystem as intermediar-ies and points-of-sale alike endeavor to keep up.

The complex airline distribution landscape has worked so well thus far because of the wide adoption of standards for describing products and their attributes across the various sup-plier, intermediary and point-of-sale systems. The reorganization of each airline’s products and services has the potential to disrupt the distribution ecosystem and affect pricing transpar-ency and purchasing efficiency. For ex-ample, Northwest Airlines introduced preferred seating as an up-sell, as did United Airlines through its Econo-my Plus offering. Southwest and Air Canada, by comparison, are offering branded fare families; each has just a few fare classes with more services or fare attributes for more expensive fares (e.g., Air Canada’s lowest fare class, Tango, does not offer advance seat se-lection, while Tango Plus does).

Implementing and managing these new forms of products and services within their internal inventory and reservations systems is a significant and complex undertaking for airlines – and enabling distribution is even tricker. But not doing so could dimin-ish airfare transparency across airlines and thus compromise consumers’ abil-ity to compare fares. If passengers are not clearly advised of the full price of all options in a convenient way, they may pay more on an all-in basis than they would otherwise because they will overlook what the best fare is on a net basis.

GDS response: The travel distribu-tion industry has not been sitting idly by. To preserve and improve air ticket pricing transparency and distribution efficiency, several entities have begun establishing standards to enable dis-tribution of this new airline product model to intermediaries. The GDSs

are all working on system enhance-ments, including the introduction of new travel agent desktop applications, significant changes to underlying core system functionality and conforming to emergent industry standards from the Air Tariff Publishing Company (ATPCO) and the Airline Reporting Corporation (ARC) for airline op-tional services.30 Some initial GDS airline merchandising products have already been released to the market-place, enabling travel agents to access select optional services and branded fares of several carriers, including Air Canada, Midwest Airlines, Qantas and United Airlines.

However, developing effective methods for selling these unbundled products through the GDSs in ways that meet the needs of business and leisure travelers (and the intermediar-ies that serve them) will require adop-tion of uniform technical standards and, to some degree, the cooperation of airlines and GDSs. Otherwise, air-line optional services will continue to be available only from each individual airline, which will lead to further con-tent fragmentation, limit the ability of intermediaries to efficiently offer these products and services to their clients, and add cost and inefficiency to cor-porate travel procurement.

PAy FoR DISTRIbuTIon, oR PAy FoR ConTEnT?

The economics of the traditional distri-bution model of travel – and indeed of most industries – has been one where the supplier pays for or subsidizes the cost of distribution, either by paying the reseller a commission or allowing

30 PhoCusWright: “Optional Services – the Coming Sea Change in Air Travel Distribu-tion – ATPCO and ARC”



the reseller to mark up the product (albeit with certain restrictions). As airlines have gained more direct con-trol of their distribution, they have reduced or eliminated travel agency commissions and put downward pres-sure on GDS segment fees.

Some airlines have taken the step of shifting more or all of the cost of dis-tribution to intermediaries. The most direct examples are easyJet, Lufthansa and Southwest.

EasyJet • is available through all GDSs; however, agencies must pay fees.Lufthansa • launched its Preferred Fares Program in July 2008, which imposed fees of €4.90 per ticket (ap-proximately $7, based on exchange rates) for travel agencies in Austria, Germany, Lichtenstein and Switzer-land that book through the GDS. Sabre and Travelport have since agreed to contractual arrangements with Lufthansa that avoid those fees for their agencies, while those agen-cies currently using Amadeus are surcharged by Lufthansa. Southwest • is available via Travel-port’s Galileo GDS for a fee.

In cases where airline content is not available in the GDSs at all, travel agencies are in effect subsidizing the cost of distribution by adding work-arounds to accommodate alternative booking methods. While not a direct out-of-pocket expense for the travel agency, this method adds operating cost and cuts into overall margin when a travel agent must go outside the nor-mal workflow to complete a booking and then manually re-enter that data into accounting, profiles and other sys-tems. This introduces inefficiency and

opacity into the distribution system and compels many travel agencies to offset these added costs by charging higher service fees to consumers.

Airlines are watching industry reac-tion to the pay-for-content model and considering a broader implementation. The CEOs of two of the worlds’ largest airlines, Delta and American, specifi-cally and conspicuously speculated in their 1Q09 earnings calls about a fu-ture where intermediaries were paying to access their content.

What If? Hypotheticals on Paying for Content

So, if major network airlines were to follow the model laid out by Lufthansa, for example, and implement a pay-for-content model for their lowest fares, how would that affect travel interme-diaries and their customers’ (consum-ers) ability to access comprehensive travel information? PhoCusWright de-veloped some scenarios to project the hypothetical impact of airlines attach-ing booking fees to their lowest fares when booked through the GDS.

PhoCusWright analyzed a represen-tative subset of GDS reservations gen-erated in the U.S. market (i.e., from a U.S. point-of-sale) for the calendar year 2008. Domestic tickets (U.S. ori-gin and departure) represented 76% of all tickets and 52% of all airline ticket revenue. Of those domestic tickets, at least 54% could be described as coach discount fares (economy class fares sold at a discount and with restrictions).31 Projecting this analysis to the 376.6 million air segments booked via the GDS in the U.S. in 2008, this rep-

31 PhoCusWright analyzed a representative sample of GDS ticket data for 2008, isolating tickets by inventory class codes starting with H, K, L, M, N, Q, S and V.

resents at least 41% of all tickets, or nearly 154 million GDS segments.

If U.S. airlines followed the pay-for-content model and attached a booking fee onto these GDS segments, a signif-icant amount of cost would be pushed onto intermediaries and, ultimately, travelers. Assuming airlines attached a $3.50 per-segment fee to all discount economy fares booked via GDS, this would represent more than $530 million in costs to be shouldered by OTAs, travel agencies and ultimately, consumers. However, channel-based price discrimination would not nec-essarily transfer the full cost directly onto intermediaries, but instead fuel further channel switching. The im-plications for various channels and for travelers would be significant:

Online travel agencies: OTAs could be the most directly affected because their customers are the most price-sen-sitive, and discounted economy fares represent a much higher proportion of their total air sales. They would likely see their market share gain over airline Web sites in 2009; they would be compelled to reintroduce booking fees to offset the cost, putting them at a pricing disadvantage versus air-line Web sites. This has the potential to threaten OTAs’ role of providing enhanced pricing transparency and a better consumer shopping experience within the travel industry.

TMCs: Larger travel agencies serving the corporate market would have to increase or introduce new fees for their corporate customers to cover the cost of booking airlines’ lowest fares.



GDS ouTlooK 2009-2010

With the U.S. and Europe mired in a global economic recession in 2009, travel demand has declined dramati-cally and no segment of the travel in-dustry has gone unscathed. As central hubs to travel distribution, the GDSs have seen transaction volumes fall significantly from previous years, but PhoCusWright projects that GDSs will gain overall share versus supplier direct channels for two important reasons:

OTAs’ recessionary bump:1. On-line travel agencies are experienc-ing a countercyclical lift during the current recessionary environ-

ment. Consumers are traveling less, and when they do travel, they are spending less and increasingly hunting for deals. Suppliers, suf-fering from excessive distressed in-ventory amid such soft demand, are lowering fares and rates and working more aggressively with online intermediaries.

While still suffering overall de-clines, OTAs continue to outper-form – and by a significant margin – the broader travel industry in the recession. According to PhoCus-Wright’s Travel & Finance Outlook 2009-2010, all sectors of the travel industry – airlines, hotels, car rent-

al, cruise lines, tour operators, cor-porate travel, travel agencies – are facing steep, double-digit declines in gross travel bookings through the first half of 2009. OTAs, by comparison, are seeing single-digit drop-offs (see Figure 31). There are three key drivers behind OTAs’ countercyclical lift:

Increased access to better 1. rates and availability – most significantly in the hotel in-dustry – as suppliers turn to OTAs amid the steep decline in demand.

The removal of booking fees on 2. flights, initiated in March by Expedia and quickly matched by Travelocity and Orbitz, and then reinstated by the latter on hotels.

Shifts in traveler behavior that 3. favor OTAs: Frequent, higher-spending travelers, who tend to book directly with suppli-ers or offline, are pulling back on travel the most; the infre-quent leisure traveler, who tends to book with OTAs, is still traveling (or pulling back the least).32

The gap between OTAs and the travel industry overall wid-ened significantly in 2Q09, when booking fee cuts across air tickets and, to some extent, hotels and packages, took full effect. The moves clearly helped spur book-ing volume. Expedia reported a 13% increase in air tickets sold and a remarkable 26% jump in hotel room nights for 2Q, while both of those sectors saw signifi-

32 PhoCusWright’s Consumer Travel Report

FIGuRe 31 2Q09 Sales Performance by Travel Industry Sector

0%

–10%

–20%

–30%–25%

AgencySales

–24%

PassengerRevenue

–17%

RoomRevenue

–17%

CarRental

–13%

CruiseRevenue

–4%

OTABookings

Source: Analyst Briefing: Travel & Finance Outlook 2009-2010, PhoCusWright Inc.

FIGuRe 32 U.S. Total Travel Revenue and GDS Share, 2006-2010

2006

259.2

93.636%

2007

272.5

98.236%

2008

278.7

98.735%

2009

248.0

88.536%

2010

242.8

88.136%

GDS Share Total U.S. Travel Market

300

250

200

150

100

50

0

$B

Note: GDS share reflects total travel value for air, hotel, car rental only; 2009-2010 projected




cant declines in the same period. Booking volumes were also up for Orbitz and Priceline. Travelocity does not release quarterly financial performance.

As a key booking technology be-hind OTAs, the GDSs are likewise benefiting as their OTA channels far outperform their traditional travel agency customers. An at-tempt on the part of suppliers to reduce the share of the OTA chan-nel in 2009 and 2010, either by adding fees on GDS bookings or withholding content, could back-fire in the face of OTAs’ counter-cyclical strength.

Corporate travel and strategic 2. spend management: Corporate travel is suffering more than just about any other segment of the travel industry as companies rein in employee travel and make cuts to travel budgets. This market will decline 15% in 2009, compared to a 3% decline for the online leisure travel market.33 GDSs’ strong po-sition in corporate travel distribu-tion has contributed to a signifi-cant drop-off in GDS transactions in 2009.

However, facing increasing pressure to contain costs and im-prove the efficacy of corporate travel programs, travel managers and TMCs are more focused than ever on strategic spend manage-ment, a central tenet of which is bringing as much travel expense under management as possible by reducing rogue, out-of-policy pur-chases and promoting (or requir-ing) designated booking chan-


nels. This trend will mean fewer supplier-direct corporate bookings and more corporate travel transac-tions via TMCs and GDSs. So, while overall corporate travel is down significantly in 2009 and will decline further in 2010, GDS share of that smaller market will increase.

As a result of these trends, GDS share of the total U.S. travel mar-ket spend is projected to increase slightly from 35% in 2008 to 36% in 2009 and 2010. The total value of all travel booked via a GDS will decline just 10% in 2009, while the total travel market is projected to fall by 11% (see Figure 32).

SuMMARy ConCluSIon

Since 1995, when the first bookable online travel Web sites emerged, dra-matic change has descended upon travel distribution. It has been a boon to some, a death knell to others and a challenge for many. But with half of all travel in the U.S. now booked online34 and continued significant upward trending in both Europe and Asia Pacific, some things are still cer-tain:

Online travel is now a mainstream 1. – if not the mainstream – distribu-tion channel for many parts of the travel industry and many segments of the global traveler population.

The volume and types of travel 2. Web sites – online travel agencies, supplier Web sites, and nontrans-actional sites that provide a range of travel content (traveler reviews, destination information, profes-sional travel guide content, trip


planning, metasearch) – continue to grow and innovate as more travelers do more of their travel planning, shopping and booking online.

The shift to online booking has 3. benefited consumers with sig-nificant improvements in pricing transparency, shopping conve-nience and relevance of content.

Innovation in Web and travel 4. technology will only advance these developments.

As online travel gained market traction and then began growing – quickly – in the late 1990s and the early part of this decade, many in the travel industry forecasted the decline and fall of the GDSs as more travel booking moved online via channels outside of the GDS. But these predic-tions have failed to materialize. While bookings on travel supplier Web sites have indeed grown and GDSs have seen their overall share of travel sales decline incrementally in some mar-kets, GDSs continue to account for a tremendous amount of overall travel volume: nearly $100 billion in the U.S. alone in 2008.

The GDSs have demonstrated their ability to adjust to these new market forces. They adapted to the emergence of new entrants (such as OTAs) with the introduction of new technology services, and in some cases, launched their own OTAs or acquired them. They responded to the evolving fi-nancial dynamics with suppliers by introducing new commercial models that allow travel agencies continued access to expansive travel content. But such change has not been easy, and the



change that will be demanded in the future will not be any more so.

The GDSs today continue to play a major role in both leisure and corpo-rate travel distribution for travel sup-pliers, travel agencies and travelers, but they are also beset by a range of chal-

lenges – from the continued rise on supplier direct bookings to constant changes in airline products (optional services) and distribution pricing mod-els. In an industry that is changing as quickly as travel, the strong position of the GDSs is by no means assured.

But if they continue to innovate and adapt to meet the evolving needs of their various constituencies – travel suppliers, travel distributors, and ulti-mately travelers themselves – they will continue to shape travel distribution for years to come.

Documents

The Role and Value of the Global Distribution Systems in Travel Distribution