Etourism – “Global Distribution Systems †Going, Going, Gone”

Global Distribution Systems – Going, Going, Gone? | Table of Contents Introduction:2 Timeline3 Airline Reservation System3 Computer Reservation Systems (CRS)3 Global Distribution Systems (GDS)4 Who uses GDSs? 5 GDS – Through the years:5 The Future of GDS:6 What should they do? 6 What is the role of the global distribution system in today’s travel agencies? 6 The Internet7 Conclusion8 References9 Books:9 Articles:9 Websites:9 Introduction: GDS – Going, going, gone? Well, certainly Global Distribution Systems have been going for a while but are they yet gone?This paper is on the history, present time and the questionable future of Global Distribution System (GDS). Firstly I go through each stage of their timeline: – Airline Reservation Systems began in the 1960s and is a computerized system is designed to control flight inventory, maintain flight schedules, seat assignments and aircraft loading. It’s used to store and retrieve information and c arry out transactions associated to any air travel. The modern airline reservation system is comprehensive suite of products to provide a system that assists with a variety of airline management tasks and ervice customer needs from the time of initial reservation through completion of the flight. – Computer Reservations Systems (CRS) began in the 1970s. These types of systems charge other travel suppliers for the right to market their products and services through these systems. ‘The computer reservation systems are completely keyboard driven and you must learn the formats in order to operate it efficiently. The web based booking engines are the point and click environment. ’ Travel Agent Training Centre, (2011). Global Distribution Systems (GDS) began in the 1980s and refer to the booking tool travel agents use when making an air, hotel, car or other travel service booking. They provide pricing, availability and reservation functionality to many online travel ag encies. There are currently four major GDS systems: 1. Amadeus 2. Galileo 3. Sabre 4. Worldspan Hotel-ICT, (2011) – The Internet has become the main sales channel and customer interface for low-cost airlines because of its efficiency and cost-effectiveness. Timeline The timeline stages of CRS/GDS according to Werthner & Klein (1999), is as follows: ———————————————— Time1965197519851995 SystemAirline ReservationCRSGDS Global Travel & FocusSystem Tourism Information Airline Reservation System Airline Reservation System was one of the earliest modifications to improve on efficiency. It’s a moderately simple standalone system that controls flight inventory, maintains flight schedules, seat assignments and aircraft loading. ‘It provides a system that assists with a variety of airline management tasks and service customer needs from the time of initia l reservation through completion of the flight. Videcom, (2006). ARS contain airline schedules, fare tariffs, passenger reservations and ticket records. Airline Reservations Systems sooner or later evolved into Computer Reservation Systems (CRS). Computer Reservation Systems (CRS) ‘A Computer Reservation System (CRS) is a computerized system for saving and retrieving information when needed related to air travel. CRS were created and used by airlines and at a later point they were finally used in tourism intermediaries like travel agencies. ’ marcelvacek. logspot (2010)   An airline's direct distribution works within their own reservation system, as well as pushing out information to the GDS. The second type of direct distribution channels are consumers who use the internet or mobile applications to make their own reservations. Travel agencies and other indirect distribution channels access the same GDS as those accessed by the airlines' reservation systems Well known CRS operations that book and sell tickets for multiple airlines are known as global distribution systems (GDS).Airlines have separated most of their direct holdings to devoted GDS companies, who make their systems available to consumers through Internet gateways. Modern GDSs naturally allow consumers to book hotel rooms and rental cars as well as airline tickets. As well they provide access to railway reservations in some markets although these are not always integrated with the main system. CRS and GDS seem to have the same functions but the major difference between these two systems is that CRS only provide information about airlines whereas by using GDS you can reserve a ticket, a room in a hotel and also a rental car.This is why they are called Global Distribution Systems because you can use GDS to reserve basically everything. Global Distribution Systems (GDS) ‘The term GDS (Global Distribution System) describes a network of one or more CRS for distributing product offer s and functionalities of the participating networks in different countries of the world. In addition to the airline product also other products such as accommodation, car rentals, cruises, or tour operator products are included. Werthner & Klein (1999) Today the travel marketplace is a global arena with hundreds of thousands of buyers (travel agents) and sellers (hotels, resorts, airlines, car rental companies) working together to reserve and deliver the services to the buyer – the traveller. Increasingly Global Distribution System is known for a Global Electronic System, which connects users and suppliers. GDS offer instant access to the supplier's information (i. e. hotels) with immediate function. Many main web portals are also associated to  GDS, including Expedia. com, Orbitz. om, Travelocity. com and priceline. com to name a few. For many years the GDSs had a dominant position in the travel industry. To bypass the GDS and avoid high GDS fees, airlines have started to distribute flights directly from their websites. Another possibility to bypass the GDS is direct connections to the Travel Agencies. According to ITSA there are currently four main GDS companies in operation, these are Amadeus, Galileo, Sabre and Worldspan. These are by far the most used systems, comprising the vast majority of the global bookings in the GDS industry. The Global Distribution Systems (GDSs), a development from the Computer Reservation Systems (CRSs), were for a long time the most important distribution channel for airlines. They were effectively developed as travel supermarkets in the pre-Internet era and their primary objective was to connect travel agencies with airlines (Buhalis, 2004). GDSs are still a vital element in the light of the huge variety of tariffs to be administered. GDSs are the main link between airlines and intermediaries, such as tour operators and travel agents.They are also empowering Internet transactions by providing the background link be tween electronic travel agencies and airlines. ’ (Egger ;amp; Buhalis, 2008) There is one downside of using GDS and it is the fact that it costs airlines money to go through a GDS process. Airlines complain that the prices are too high and therefore some poorer airlines have decided to post their best offers by using their own websites instead of the global distribution system so that they do not go bankrupt. CRSs (Computer Reservation Systems) and GDSs were the most important facilities of change in the tourism industry before the arrival of the Internet, as they were established as a comprehensive travel marketing and distribution system and were often called travel supermarkets. The need for GDSs arises from both the demand and supply sides as well as from the expansion of the tourism industry in recent decades. ’ (Buhalis,2003. ) Who uses GDSs? A majority of travel agents (worldwide) and travel websites use the Global Distribution System (GDS) to book their air, ho tel and car reservations. There are currently over 600,000 travel agents worldwide who have access to  GDS. On top of that, there are hundreds of thousands of web portals that use  GDS  to provide information on hotels, airlines, car rentals,  etc. ’ According to 1Hotelsolution, (2009). GDS – Through the years: There have been 3 stages of evolution the first reservation system was called an Airline Reservation system, the second a Computer Reservation System (CRS) and the third evolution is today’s Global Distribution System (GDS). The establishment of the Computer Reservation Systems (CRSs) in the 1970s and Global Distribution Systems (GDSs) in the 1980s, followed by the development of the Internet in the late 1990s, have transformed the best operational and strategic practices in the industry dramatically. ’ Buhalis ;amp; Laws (2008) The big winners here are the airlines, followed by the GDSs. The carriers' major concern was to overhaul their di stribution economics and they did that – reducing the fees they pay the GDSs by about 33 per cent per segment.And the airlines, with assistance from the GDSs, did it on the backs of travel agencies. Travel agencies bear about 80 per cent of that reduced airline payment to GDSs through the incentive cuts the agencies agreed to, while the GDSs foot about 20 per cent of the lost revenue themselves. With travel agencies already under financial pressure, the 80-cents incentive cut they agreed to could mean the difference between profit and loss, survival and bankruptcy, according to the article Airlines the big winners in ‘the GDS wars’ Schaal (2006). For the amount of contestable market share is limited given high load factors. Worse this is not going to get any better due to the constraints on supply due to the high price of fuel. If  we look at the market share of the 3 major alliances they now occupy more than 50% of total traffic. When you then remove the Low C ost carriers out of the loop as they don’t participate in the GDSs the amount of neutral traffic unaligned falls significantly. Perhaps for this reason we see traditional unaligned airlines like Virgin Atlantic starting to evaluate their options seriously.   4Hoteliers, (2011). The Future of GDS: Over the last 10 years, the Internet has proved to be a crucially successful platform for selling travel, appealing to a vast group of suppliers. According to Breaking Travel News (2004), the number of travellers booking airline tickets, hotel rooms and other travel services online continues to grow. The GDSs were actually among the first e-commerce companies in the world as early as mid 1970s. Earlier before the beginning of the GDS, travel agents spent huge amounts of time manually entering reservations.The airlines realised that at this point they could make travel agents more productive and essentially re-invent them as an extension of the airlines sales force. It is these orig inal legacy GDSs that provide the strength to the Internet Travel distribution. While online commerce was growing at a fast pace, agents are more and more facing a new reality whereby customers are finding the cheapest fares for themselves on the Internet. The airlines can no longer afford to put fare content through GDSs and are complaining that the prices are too high.The low-cost airlines have added to this pressure, having found an alternative form of distribution that bypasses the GDSs, as stated by Breaking News Travel, (2004). In an attempt to cut their own costs, traditional airlines have started to make their best fares available on their own websites alone. Although GDSs are still a very useful distribution tool, at this stage it is crucial that they reduce their distribution costs in order to restore profitability and ensure the airlines survival (none of the GDSs are now owned by airlines). This is no doubt leading to the volume of the GDS transactions diminishing.What s hould they do? Moving into a de-regulatory environment will change the rules for GDSs, meaning a shift in focus creating new opportunities. They really need to concentrate on value, content and pricing as priorities in moving ahead. They should also re-evaluate their costs and agent incentives. British Airways (BA) has recently negotiated a deal with Amadeus, Sabre and Galileo, which gives them full access to BA’s fares as indicated by Breaking Travel News, (2004). What is the role of the global distribution system in today’s travel agencies?With the dramatic expansion of the Internet and the proliferation of new sources offering bookable travel content, GDSs are still the primary, most comprehensive and reliable platform for travel agencies and their corporate clients to access, shop and book travel. It is also through GDSs and their rich portfolios of travel planning and management tools those agencies and corporations reconcile and manage daily travel business. Due to their range, extent and supplier relationships, GDSs are also fundamental to the supply of travel products to retailers in the online channel according to Travelport, (2011). The InternetThe Internet has become the main sales channel and customer interface for low-cost airlines because of its efficiency and cost-effectiveness. The most recent stage of distribution system increase happened in the mid-1990s and counterparts the fast growth of the Internet and its widespread penetration into households by the end of the decade. The internet gave rise to alternative booking channels. ‘ Instead of going to the travel agent to pick up brochures, customers will request details of holidays over the Internet and watch video pictures of the accommodation before booking with the swipe of a credit card. Morgan, (1996). ‘Airlines have a number of options for Internet distribution including airline-owned websites, alliance sites, electronic intermediaries and other forms of sales i ncluding electronic auctioning of unsold seats. A major advantage of these types of services is the ability to offer 24-hour, 7-days-a-week service that in the near future will include bookings via cellular phones using Wireless Application Protocol (WAP) technology. ’ Buhalis & Laws, (2001). By combining the simple protocol of the Internet with a user-friendly interface it represents the main â€Å"vehicle† for creating a worldwide electronic community, integrating research institutes, private companies, public organizations and, most important, private households. ’ Werthner & Klein, (1999). Conclusion The questions are if there is a concentration of power in the hands of the airlines and the intermediaries, is there really a need for a neutral distribution system? What if there was no GDS? If this were the case – would the prices of the products go down or stay the same?From the research in this paper I believe that GDS today is costing us more . As 4Hoteliers stated previously in the paper, the market share of the 3 major alliances they now occupy more than 50% of total traffic. When the Low Cost carriers are removed out of the loop they don’t take part in the GDSs the amount of neutral traffic not united falls considerably. I would agree that the GDS has over time restrained competition and indeed cost the consumer more. GDS – Going, going, gone? They did indeed lasted many, many years but yes I believe they are on their way out.A new generation of people are coming in with more knowledge about technology than the last. They have more of a grasp about computers and the workings of the Internet therefore they will not need GDS, thus, will not need to use travel agencies who are the main users of GDS to book their air, hotel and car reservations. Once travel agencies are out, Global Distribution Systems will no longer be needed. They are soon to be gone. References Books: * Buhalis, D (2003). eTourism. Harlow , England: Pearson Education Limited. P93-94. * Buhalis, D. & Laws, E. (2001).Tourism Distribution Channels-Practices, Issues & Transformations. Cornwall, UK: TJI Digital. P221 * Egger, R. & Buhalis, D. (2008). eTourism Case Studies. Oxford: Butterworth-Heinemann P264 * Morgan, M. (1996). Marketing for Leisure and Tourism. Hertforshire, UK: Prentice Hall. P263 * Werthner, H. & Klein, S. (1999). Information Technology and Tourism – A Challenging Relationship. Austria: Springer-Verlag Wien. P79 * Werthner, H. & Klein, S. (1999). Information Technology and Tourism – A Challenging Relationship. Austria: Springer-Verlag Wien.P185 * Werthner, H. & Klein, S. (1999). Information Technology and Tourism – A Challenging Relationship. Austria: Springer-Verlag Wien. P188 Articles: * Breaking Travel News (2004) The Future of the GDS. Available from http://www. breakingtravelnews. com/news/article/btn20040216144254916/ [accessed 8th Oct 2011] * Buhalis, D. & Laws, E. (2008) Progress in Tourism Management: Progress in information technology and tourism management: 20 years on and 10 years after the Internet—The state of eTourism research. Available from http://www. sciencedirect. om/science/article/pii/S0261517708000162 [accessed 7th Oct 2011] * Schaal, D. (2006) Airlines the big winners in ‘the GDS wars’ in International News. Available from http://0-web. ebscohost. com. ditlib. dit. ie/ehost/pdfviewer/pdfviewer? vid=5&hid=8&sid=562024d9-8116-4049-8ab3-6bb0295294dd%40sessionmgr13 [Accessed 7th Oct 2011] Websites: * Hotel-ITC, (2011). GDS (Global Distribution System) – Connect to the world. Available from http://hotel-ict. blogspot. com/2011/04/gds-global-distribution-system-connect. html [Accessed 8th Oct 2011] (Image) * ITSA – GDSs and LTDs http://www. nteractivetravel. org/IndustryBackground/Attachments/GDSs_and_LTDs_FAQs. pdf [accessed 8th Oct] * Marcelvacek. blogspot, (2010). Touri sm & Hospitality Business Applications. Available from http://marcelvacek. blogspot. com/2010/10/what-is-crs-and-gds. html [accessed 7th Oct 2011] * Travel Agent Training Centre, (2011). Computer Reservation System Training Available from http://www. travelagenttrainingcenter. com/Computer%20Reservation%20System%20Training. htm [accessed 8 Oct] * Travelport, (2011). What do travel agents