GDS limitations for airlines and hotel chains
The relationship between travel suppliers like airlines and hotels and the major GDSs (Amadeus, Sabre, and Travelport) has become increasingly complex, primarily due to several limitations inherent in the GDS model. While GDS offers broad market reach, suppliers are pushing back against the system's high costs and inflexibility. This dynamic has spurred the industry's shift toward direct booking and alternative distribution models.
Outdated technology and infrastructure
One of the most significant constraints of GDS platforms is their reliance on legacy technology. The foundational EDIFACT data exchange standard, developed in the 1980s, is no longer sufficient for modern e-commerce. It is a rigid, text-based system that struggles to handle the rich content—such as images, videos, and detailed descriptions—that today's travelers expect. Furthermore, this outdated infrastructure limits the ability for dynamic, continuous pricing, and the swift addition of new products beyond basic ancillaries. This sluggishness creates a bottleneck for suppliers wanting to innovate and personalize their offerings.
High distribution costs
The fees associated with GDS usage are a major point of contention for travel suppliers. For each segment of a flight booked through a GDS, airlines incur flat-rate fees that can substantially impact their profit margins. These costs are exacerbated by charges for every interaction, including ticketing and refunds, and contribute significantly to overall ticket prices. Smaller providers, such as independent hotels, also feel the strain, as these fees can represent a considerable expense for their limited resources. This cost structure gives suppliers a strong incentive to reduce their dependence on GDS in favor of more cost-effective direct booking channels.
Limited access to customer data
In the GDS-centered ecosystem, GDS acts as an intermediary, collecting and controlling much of the valuable customer booking data. This arrangement means airlines and hotels have limited direct access to critical insights about their customers, such as booking behavior and preferences. Without this data, suppliers struggle to personalize products, build brand loyalty, and create more effective marketing strategies. This lack of data ownership restricts strategic decision-making and hinders a deeper understanding of the customer journey.
Restricted control over inventory and product offers
Suppliers have less control over how their inventory and product offers are presented to travel agents and customers when using GDS. The GDS, not the airline, typically generates the final offer, which limits the carrier's ability to create custom bundles or adjust pricing dynamically. This constraint is particularly problematic for ancillary services, such as seat upgrades, additional baggage, and in-flight meals, which have become a crucial revenue source for airlines. The EDIFACT protocol has limited support for displaying these rich ancillary details, making it difficult for suppliers to merchandise their full range of products effectively.
The shift toward direct booking and NDC
The limitations of GDS have been a primary driver behind the rise of direct booking channels and alternative distribution strategies, such as the International Air Transport Association's (IATA) New Distribution Capability (NDC). NDC uses an XML-based data exchange that allows for rich content, dynamic pricing, and greater control for suppliers over their offers.
GDS vs. Direct/NDC-based Distribution Comparison
| Feature | Traditional GDS Distribution | Direct/NDC-based Distribution |
|---|---|---|
| Technology | Legacy EDIFACT-based; rigid and outdated. | Modern XML/API-based; flexible and robust. |
| Content | Limited to standardized text and basic ancillaries. | Rich multimedia content, including images and videos. |
| Pricing | Static, structured tariffs; limited dynamic capability. | Continuous, dynamic pricing based on real-time data. |
| Cost | High per-segment fees for bookings and interactions. | Lower distribution costs for suppliers; potentially higher for agencies. |
| Control | Limited control for suppliers over product offers and bundles. | Suppliers maintain full control over offers and merchandising. |
| Customer Data | Limited access to customer data for suppliers. | Direct access to valuable customer booking and behavior data. |
Other limitations impacting the ecosystem
Beyond the primary issues faced by suppliers, GDS limitations also affect other players in the travel industry:
- Challenges for niche travel providers: Niche travel products, such as specialized tours or unique ground transportation, are not well-represented in the GDS ecosystem, which focuses on mainstream flight, hotel, and car rental content. These suppliers must find alternative distribution channels, limiting their visibility to corporate travel agents.
- Complex content management for hotels: Independent hotels must manage their inventory and content across multiple channels, including GDS, which can be time-consuming and labor-intensive. The intricacies of loading diverse rates and images into the complex GDS structure can lead to inconsistencies and errors.
- Inconsistent data for travelers: The shift away from GDS by some airlines has led to content fragmentation, meaning travel agencies may have to access multiple sources to provide a comprehensive set of flight options. This can lead to inconsistencies in information, affecting the quality of service for travelers.
- Dependency on the GDS: Smaller travel agencies can become overly dependent on a single GDS provider, leaving their business vulnerable to any system outages or changes in policy. The potential for long-term contracts with penalty clauses can make it difficult for agencies to shift away from GDS when better alternatives arise.
Conclusion
While Global Distribution Systems have been a cornerstone of the travel industry, the limitations of the GDS are becoming increasingly apparent in a digitally-driven world. Outdated technology, high costs, restricted control, and limited data access have driven many suppliers to seek alternative distribution models like NDC. While GDS platforms have shown an ability to adapt by integrating new technology, the slow pace of change and the enduring drawbacks highlight the need for suppliers and travel agents to reassess their distribution strategies to remain competitive in an evolving marketplace. The future of travel distribution will likely involve a blended approach, with modern APIs and direct channels playing a more prominent role alongside the legacy GDS.
