Tuesday, February 10, 2009
It isn't about product or inventory guys
The GDSs are all suffering from an inordinate dependence on airline travelers for their revenues. In most cases, 90+ percent of GDS distribution revenues are from air bookings. And the non-air bookings received are largely sourced from the air traveler needing a hotel, a car or a cruise on arrival at an airport. In my discussions with GDS leadership and the investment community alike, no argument as to these findings.
In the past, this has not been problematic, as the GDSs and agencies received a disproportionate share of these bookings and were able to maintain double digit profits. Over recent years, supplier direct bookings continue to climb as a percentage of total electronic bookings. This channel shift does not appear to be a reversible trend, even though according to ARC, the net profit from online bookings is significantly lower than bookings emanating from the travel agency marketplace (see my post on the BEAT Blog).
Recently I saw an article about Amadeus and Transhotel forming a strategic partnership to expand their hotel inventory to include consolidator inventory. Amadeus isn't alone in focusing efforts on expanding its non-air product and its inventory sources. Travelport and Sabre have had similar announcements.
But the problem isn't really product or inventory. It is the percentage of hotels that are currently booked by the GDS/agency community as a percentage of total bookings.
The reason that hotels are not being booked in greater numbers on the GDS is that 85% of all Americans drive when they travel and 52% of all business travelers. So reaching them with a "do you want fries with that" type of a transaction as an adjunct to air, doesn't work as a marketing ploy. If they are driving and you are not offering them a way to plot out their trip, start to finish by car, including what hotels they will need along the way (and for leisure, what to see and do and where to eat and shop), then you won't likely capture the hotel bookings.
It's that simple and it's that hard.
The technology exists. It is available. Don't wait until the oxygen mask drops down and you are gasping for breath to put the mask over your face.
You know how to reach me.
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