GDS Contracts: ‘No-Minimum’ Pricing Trend Continues

The trend toward “no-minimum” GDS contracts continued last year, according to ASTA’s newly released 2010 GDS Report.

Among travel agency respondents who use a GDS, 41% said their contracts are not on a minimum-segment pricing plan, compared to 40% last year and 25% in 2005.

The report said 31% of the agencies had productivity pricing contracts, and 21% paid a fixed monthly amount.

ASTA noted that even those agencies that don’t have a no-minimum contract are not necessarily obliged to meet minimum usage levels.

Among agencies with productivity or fixed monthly pricing contracts, only 39% said they must meet minimum levels.

The report also said 63% of GDS users who do not have a no-minimum contract receive a credit or incentive if they book more segments than required by the contract.

The overwhelming majority of respondents – 87% – said they only use one GDS, up from 85.7% in 2009.

Ups and downs
About a third of the participating agencies said the number of segments booked last year decreased, while another third said they increased.

The percentage of respondents using a GDS has dropped 22 percentage points since 1999, when the commission cuts were in full swing and agencies no longer could count on airline bookings as a stable source of income.

In 1999, 98% said they used a GDS; in 2010, 76% said they used one.

The broader context
It is tempting to draw various conclusions and comparisons from the ASTA report and apply them to the lawsuits filed by American Airlines against Travelport and by US Airways against Sabre.

For example, American’s complaint states that “if the travel agent does not meet the minimum volumes, it must compensate the GDS for the shortfall in booking fees.”  

The decline in the number of agencies that have access to more than one GDS also would seem to bolster the airlines’ claims that they cannot substitute participation in one GDS for another if they wish to reach a particular GDS’s subscribers and, ultimately, their customers. (See Under Pressure: Justice Department Investigates the GDS Industry.)

But although ASTA has taken pains to ensure that its “research family” of agencies is representative of ASTA members, it should be noted that ASTA members are not always representative of the overall agency community.

Smaller, leisure agency focus
For example, the typical research family agency is largely leisure-focused and tends to be small, with sales of less than $5 million a year.

On average, the agencies said GDS incentives represented only 6% of their total revenue. That figure is likely to be higher among large, high-volume corporate agencies.

Amadeus had a 25% share of the research family; it has about 10% of the overall North American market. Amadeus has systematically targeted ASTA agencies over the last several years.