Travel TechnologyMore “creative” incentives being offered to lure agencies.

Agencies benefiting from competition among GDSs

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Agencies benefit from GDS
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Agencies benefit from GDS

Mark Meader, ASTA's senior vice president for industry affairs and education, said, "While GDS incentives are a commercial -- and, therefore, confidential -- matter between individual travel agencies and GDSs, the notion that competitive pressures may have an impact on any change regarding incentives, favorable or otherwise, may have merit."

Thanks to competition among Sabre, Travelport and Amadeus, GDS offers designed to woo travel agencies are "the best I've ever seen" today, said industry lawyer Mark Pestronk.

"It's simply the natural result of good competition among the three vendors," Pestronk said in an interview last week. Pestronk, who is also Travel Weekly's "Legal Briefs" columnist, addressed GDS offers and incentives in a column earlier this month.

Mark Meader, ASTA's senior vice president for industry affairs and education, said, "While GDS incentives are a commercial -- and, therefore, confidential -- matter between individual travel agencies and GDSs, the notion that competitive pressures may have an impact on any change regarding incentives, favorable or otherwise, may have merit."

In his column, Pestronk pointed out that GDS offers to agencies are all structured differently. He compared them by totaling incentives such as signing bonuses and booking segment achievements, then dividing that by the agency's anticipated annual booking total as dictated by its contract with the GDS. 

His example looked at an agency expected to book 80,000 flight, car or hotel segments per year. If that agency received a $20,000 signing bonus and $10,000 per year for reaching 80,000 segments, over a five-year contract, it would average $2.17 per segment. While those numbers are just an example, Pestronk wrote, "The averages have been increasing."

In his experience, Pestronk said, Amadeus offers the best deals, followed by Travelport, followed by Sabre, because of the latter two GDSs' size and presence in the U.S. market.

"But that means all things being equal," he said, "and on average there are lots of exceptions. If you are an Amadeus agency, you'll get a better deal from Sabre or Travelport to convert to them than you would get from Amadeus."

It would be wise for agencies to shop around and get competing offers while GDS offers are so strong, Pestronk said, as it's a phenomenon that likely won't last forever.

In addition to incentives related to signing bonuses and segment achievements, Pestronk is also seeing some more "creative" incentives coming mainly from Travelport; Sabre and Amadeus are following and introducing similar incentives. Pestronk said that, to protect client confidences, he couldn't comment on exactly what those incentives are. But he did say they are aimed at large agencies.

Penalties for using another GDS or aggregator are also getting lower today.

According to Pestronk, agencies usually face contractual terms from one GDS that penalise them for booking through another GDS, though the definition of GDS could also include things like third-party aggregators.

"The penalty is always higher than the incentive that the travel agency would get by going with the other [GDS]," he said.

But recently, Pestronk said, he was surprised to see GDSs willing to lower penalties when larger agencies brought it up in contract negotiations.

Industry lawyer Rose A. Hache said it's important to ask two questions when negotiating a contract: What will change and what won't?

"I believe the best investment opportunity on the GDS's part is to recognise and reward the loyalty of the travel agency community, which is here to stay," she said.

Source: Travel Weekly USA


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