As the travel distribution sector becomes more complex, GDS developers are being led down a path of innovation and IT partnerships in order to aggregate the industry's content. Product differentiation, higher demand and a complex distribution network are just some of the future trends identified in a recent report comissioned by Amadeus. But do these affect GDSs, and do they present any opportunities or threats?
Complex Travel Distribution Network
The traditional distribution network, consisting of travel agents dealing directly with airlines, has been replaced by a more complex network of channels. Following the rise of online retail, the travel distribution network is now comprised of online travel agents (OTAs) and metasearch companies. In addition, channels are blurring as travel companies expand their territories. TripAdvisor recently expanded into the OTA sector by allowing bookings to be made on their website.
It’s this type of complexity that presents GDSs with opportunities, as the industry requires more aggregation to make sense of the growing volume of traveller information.
OTAs and Metasearch Companies Rely on GDSs
Many OTAs use GDSs to supply their content, particularly to gain access to full-service carrier flights and branded hotel chains. OTA reliance on GDSs varies heavily per region. In Latin America and India, direct links between OTAs and airlines are more common, with Indian OTAs only booking a third of all flights through GDSs. By contrast, in more developed regions, such as Europe and North America, even low carriers are now using GDSs to reach business travellers.
Metasearch companies tend to rely on GDSs to provide content, as well as ‘screen scrapping’ information from supplier websites. The report found that this reliance is largely due to their speed and reliability of information. And, similarly to GDS developers, metasearch companies will also benefit from the increasing complexity as they become a vital aggregator of content for the industry.
Product differentiation by airlines, such as more classes and ancillary services, will be difficult to compare and may be subject to different levels of taxation. It’s expected that GDSs will play a vital role in aggregating the influx of information this brings.
“The middleman will always be squeezed. But GDS is an important part of the value chain at scale. To take that disparate data requires significant computing power: that aggregation happens largely with GDS.” - Greg Schulze, Senior Vice President of Commercial Strategy and Services, Expedia
Travel Technology Innovation
Despite the growing importance of GDSs, some industry leaders interviewed in the report believe that current GDSs won’t be ready for the challenge:
“The old GDS business model doesn’t fit the new world – as airlines sell a wider range of products, it will have to change” - Keith Wallis, Director of Global Product Distribution at Air Canada.
It seems that the mounting complexity will force GDSs to develop their product to cope with the incoming content from airlines. This is reinforced by the report, which states that "GDSs and other aggregators will be needed to drive innovation and manage increasingly complex content across the industry".
The aim of this innovation will be to provide airlines with an evolving retail model that enables them to cope with increasing search frequency across multiple devices and channels. The experts interviewed in the report focused on the need for back-end systems to manage the new type of airline content produced by new product offerings. Therefore, the main challenge will be to aggregate the APIs in order to present this content in a simple and efficient format.
The high level of innovation needed by GDSs will most likely encourage partnerships with technology specialists. With the increasing complexity of the travel distribution industry, make sure your GDS is up to the task by discovering our bespoke GDS development.