I always start with a bit of history, because since it repeats itself, not only can we learn from it but ideally, we can avoid repetition of past mistakes. This article will speak to fragmentation – the lack of integrated content that creates confusion and unnecessary costs in managed travel.History Lesson
The original booking platforms (circa 1970s) were provided by the major airlines to their top travel agencies; but each airline “sold” their own system. So, if you had a CRS (Carrier Reservations System) from any of Delta, Eastern, United, American Airlines or TWA, that system only showed that one airline’s flights, both nonstop and connections.
Once the airlines were forced to provide more content, (i.e., routes offered by their competitors) the Host Airline “preferenced” themselves (more correctly known as “biased”) on the displays. The US Government put a stop to that and soon thereafter the CRS rebranded as GDS (Global Distribution Systems) and the bias was deemed to be illegal.
A few years back, the GDS companies made a deal with the major airlines known as “Full Content Agreement.” The summary of that was that the GDS companies agreed to charge the airlines less money to be sold in their systems if the airlines agreed to provide “Full Content” to the GDS. That meant whatever fares/flights were on the airline website, they would equally be displayed and distributed via the GDS.Malcontent with Content
Those agreements recently expired, enabling the airlines to provide content, but hold back certain fares, bundles, amenities – and therefore letters of the alphabet from a yield management standpoint.
Years ago, when I was a global travel manager for a bank, I wrote an article in which I stated I would be willing to pay for “full content” if that meant that all the flights that were on the Solari board (aka those split-flap displays – a technology which dates back to 1725) were also visible to the agents handling our travel. My belief was that having content with credibility was worth paying for, and since we had our own corporate travel department, content was critical.Econ 101: When Content Fragments
That was two decades ago and content fragmentation has increased. As a result, in the process, fragmentation casts doubt on the value of managed travel programs, and the value proposition of paying a TMC fee when their agents do not see the same content on their GDS that a traveler sees on an airline website.
If you and your family are satisfied with basic broadcast channels, your monthly bill to watch TV will be somewhere between zero and only a hundred dollars a year. On the other hand, if you want more content, you sign up for various “premium channels” like HBO, Showtime, and non-traditional channels like NetFlix, Apple TV, Prime Video, Disney Plus, etc. The point of this model is if you want more than minimal content, you have to pay for it. That is probably why my monthly cable bill is almost as high as a car payment.
Now to the GDS model: Unlike cable TV, the “broadcaster” (the GDS) pays the subscriber to use the system! From a TMC perspective that’s great economics – you get to use third party technology and they pay you to use it. The more you book the more cash you get.
The GDS technology is certainly better than the Solari board, but when it comes to content, it has not improved all that much in the last four decades compared to what an airline displays on their own website. Part of that problem is the GDS EDIFACT (Electronic Data Interchange for Administration, Commerce, and Transport) technology dates back 40 years and the users (the TMC’s) have tolerated inefficient technology in exchange for its operating as a cash machine.
Although the TMC’s are “happy” with the current GDS platforms and many have fought the evolution of NDC (New Distribution Capability), their corporate clients have raised more than an eyebrow to hold the TMC accountable for content. After all, the TMC is being paid by the GDS, airlines, hotels, car rental companies, and the client company.
The way the TMCs seem to have solved the challenges of NGC (I made it up, Non-GDS Content) is to charge the clients an additional fee for the TMC to access that content. On the flip-side of that conundrum is that some carriers are surcharging the TMC for using the GDS when NDC content is available.
These challenges have taken us from bad to worse, and the real victim is the corporate client (and the traveler who no longer trusts the OBT or the TMC, and as result, doesn’t trust the Managed Travel Program either).Where’s the Future?
There has been very little competition to the GDS model as well as the TMC model because the barriers to entry are extremely high. To add to the challenges, airlines (and hotels) are scrutinizing “distribution costs” (translated as GDS and TMC payments) in an environment where more than 80 percent of corporate bookings are booked online, and more than 80 percent of those bookings are “touchless.” (Easy math: That’s 2/3 of all bookings that do not require a travel agent to be involved). And yet the dual income stream continues to flow to the benefit of the TMC.
We will continue to witness challenges to the current “system” in the form of new “travel platforms” that market themselves as GDS-agnostic, which I define as not 100 percent dependent on the GDS for content. We also have to keep an eye out for technology-forward companies, focused on the mobile experience, supported by AI, and funded with a huge war chest. And I am not counting out the travel management companies either; in fact, some of the more progressive ones have solved the NGC challenge, while others are holding back, simply hoping that the issue will go away.
President Ronald Reagan had a great expression: “There are three kinds of people in this world: Those that make things happen, those that watch things happen, and those that don’t realize it has already happened.”
My crystal ball has been pretty clear over the years, and now I’m seeing a future where the major airline alliances provide a unique gateway to access all of their member carriers with the same user experience as on their individual airlines’ websites. The result is Full Content would be made available at no additional cost to the corporation. So for the first time, the Solari board at the airport will show the identical flights which the corporate traveler/travel arranger or travel agent is able to view from their desktop.