An Excerpt

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 explosion 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 become quite commonplace by the mid-1980s. The technology systems powering electronic travel commerce were then referred to as CRSs, or computerized 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 commercial airline fares and inventory are accessible via the GDSs. However, they also deliver an ever-expanding array of content to online travel agencies 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.

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 transactions accounted for nearly 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 accounted for nearly half of all airline 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 travelers 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 consumers as well as increasing pricing transparency.
• In the U.S., 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 intermediaries. GDS share of traditional 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 significantly higher than the average fare booked via online travel agencies.
• GDSs are the preferred booking method of corporate travel agents, who require not only access 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 challenge of content fragmentation by introducing new financial models for airlines and travel agencies and investing in new technology to support airline merchandising and sales of optional services.

• Should penetration of the pay-for-content model spread, whereby airlines 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 distribution costs for intermediaries and consumers.

• GDS share of the total travel market is projected to increase slightly in 2009 and 2010 because of two main trends: OTAs’ counter cyclical 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 (optional services) and distribution pricing models. But if they continue to innovate and adapt to meet the evolving needs of travel suppliers, distributors, and ultimately travelers themselves, they will continue to shape travel distribution for years to come.

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