TravelClick Insights

Travel Pulse - Is the GDS Surcharge Here to Stay?

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The global distribution service (GDS) is more popular than ever with travel agents, but it isn’t as useful a tool for airlines who are charging travel agents to use the booking platform.
 
When Lufthansa began charging agents for booking flights on the GDS in 2015 many wondered how long the surcharge would survive. In fact, many thought that it would be rolled back as the decision was met with outcry.

“This new model will make comparison and transparency more difficult because travelers will now be forced to go to multiple channels to search for the best fares. Ultimately, the industry overall stands to lose from this distribution model,” said GDS provider Amadeus in a statement at the time.
However, more airlines have joined in the surcharge frenzy.

Air France-KLM just announced that it will also begin charging a fee. On April 1, 2018, GDS bookings will incur a surcharge of approximately $13 “in order to adapt to market circumstances and to further improve its efficiency,” noted the airline.

“GDS are a key component of Air France-KLM distribution. However, their model represents higher costs than other options do and comes with more constraints.” read a Third Quarter 2017 Results presentation downloaded from their website. “The Distribution surcharge covers the cost difference created by the GDS model in compared [sic] with corresponding costs of Air France-KLM direct sales.”When Lufthansa began charging agents for booking flights on the GDS in 2015 many wondered how long the surcharge would survive. In fact, many thought that it would be rolled back as the decision was met with outcry.

The Air France-KLM news comes on the heels of an announcement over the summer that British Airways and Iberia would also charge travel agents and travel management companies—the main users of the GDS—for flight purchases.

Those fees just kicked in this month.

Airlines say that the GDS is too expensive a system for them and that the New Distribution Capability (NDC) system launched by IATA is a more cost-effective and streamlined way to do business.

While airlines may prefer new technology, travel agents still like booking with the GDS. In fact, a TravelClick survey released in September found that GDS hotel bookings were on the rise in 2017.

"It’s clear from both the research and our data that global travel agents rely on the GDS as an essential operating system for conducting hotel research and booking reservations,” said John Hach, senior industry analyst, TravelClick.

Travel agents note that the system provides them with rate parity and that is key when trying to find the best deal for clients.

It would be great if the NDC and the GDS could work together providing a smooth, seamless booking experience for agents but experts note that the technology is still too new.

NDC technology has also not been met with open arms in the industry, despite the fact that it was developed with IATA.

"...those who witnessed the launch of NDC in 2013 by the International Air Transport Association (IATA) will recall vividly that the multiple airlines that are the controlling members of IATA designed NDC as a tool to defeat fare transparency," wrote Business Travel Coalition chairman Kevin Mitchell in a recent open letter to British Airways’ parent company, International Airlines Group.

Ultimately, what’s really at stake for U.S. travel agents is whether or not U.S. airlines jump on the surcharge bandwagon.

Read more at Travel Pulse