REPORT FROM THE U.S.—Industry leaders’ speculations that the global distribution system is dying a slow death have lingered for the last decade, ever since online-travel agencies made their debut in the hotel distribution space.
And those theories are not necessarily unfounded. A study conducted by the American Society of Travel Agents in 2009 found the percentage of member travel agencies that used the GDS channel declined from 98% in 1999 to 79% in 2009.
However, despite the decrease in GDS usage amid the most recent global economic downturn, hotel companies and travelers still find value in the channel, according to sources interviewed for this report.
Sabre Travel Network, for example, saw an increase of more than 7% in its GDS bookings during the first quarter of 2012 over the same period last year, said Nancy St. Pierre, a spokeswoman for Sabre, which is one among several major GDS companies including Abacus, Amadeus, Galileo and Worldspan.
“And it’s a steady trend that’s gone up over the last several years,” St. Pierre added.
Corporate travel demand is primarily responsible for that uptick, she said. “We have seen an increase in business travel. This year it has been very healthy and robust.”
But that does not mean leisure travelers are not using the GDS as well. The GDS channel transfers room inventory to thousands of global distribution partners, including travel agents and OTAs. “If they are shopping online with (the OTAs), then they are using the GDS,” St. Pierre said.
Indeed, overall demand has increased from both leisure and corporate travelers, she said.
The effect on pricing strategies
Many hoteliers are attempting to leverage those increases in demand through dynamic pricing models, which offers clients a percentage off a hotel’s best available rate on each travel date as opposed to a fixed, negotiated rate for the year, according to Elaine Kennedy, senior VP of sales and marketing for Pegasus Solutions, a provider of technology and services to hotels and travel distributors.
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Elaine Kennedy
Pegasus Solutions
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“Hotels that have typically had a negotiated rate for each corporation can actually work better with corporations with dynamic rates, as long as they are able to ensure they are giving that corporation access to whatever the deal of the day is,” Kennedy said.
“There is more flexibility to what the supplier is actually buying,” she added.
The pricing model provides corporations with a lower rate when demand decreases but also gives hoteliers the opportunity to achieve higher rates when demand increases, Kennedy said. “It’s a win-win for both sides.”
One of the trends she is seeing in the GDS channel is the increase of combined business and leisure trips. “People are traveling for business in parts of the world and extending it to stay for leisure.”
This allows for even more dynamic yielding in the hotels’ pricing strategies, she said. “There’s more opportunities for hotels to put promotions, put leisure opportunities on there … It enables hotels to really take value of the GDS.”
More and more, Kennedy is seeing corporate account managers ask: “What would you offer our travelers for their weekend stay if they wanted to stay longer or extend?” “What can you offer for group rates?”
Companies continue to find benefits in the GDS
The GDS is not going away any time soon because of the unique solutions it provides for hotels and travelers alike, according to Robert Cole, founder of hotel marketing firm RockCheetah.
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Robert Cole
RockCheetah
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The distribution channel does a good job at facilitating the online search process, Cole said.
For instance, it is better-suited to handle incredibly large look-to-book ratios, or the percentage of people who visit a travel website compared to those who actually make a purchase. While some of the larger hotel companies can handle the technical issues associated with a ratio of, say, 6,000 to 1, the GDS can shoulder that burden for smaller companies or independent hotels, Cole said.
The GDS also provides enhanced marketing support, St. Pierre said. “Immediately when you use the GDS to put your product, your service, your room, your rate, you’re getting it in front of an audience without using your own marketing budget.”
Although these and other benefits will continue to attract hoteliers’ inventory, Cole said the GDS would provide additional value if distribution costs were lowered. “I think that what hotel companies don’t like about GDS is there’s a relatively high transaction fee.”
Fees tend to run around the $5 range depending on negotiations, Cole said in a follow-up interview.
On the corporate travel side, the sense of security companies feel when using the GDS is a major reason they continue to use it, Kennedy said.
Travel-management companies are coming up with many security reporting and informative ways to show corporations where people are at any point in time, which can be important for insurance purposes, she said.
“Insurance companies are also pushing today that (companies) know where their employees are,” which the GDS facilitates, she said.
