E-Business Strategies and Solutions - Distribution Systems Computer Reservation Systems and Global Distribution Systems

E-Business Strategies and Solutions - Distribution Systems Computer Reservation Systems and Global Distribution Systems

Global Distribution System is a new kind of e-commerce network which developed fast in recent 10 years. It represents the combined system that including international technology and internet service, and aims to providing the distribution service to agents of airlines and tourism products. It is the mature system of Central Reserving System which has been playing important role in the tourist operation. The rapid development of the internet and e-commerce not only brings challenge to the GDS of tourism but also expose some problems of GDS. In this paper, we will briefly talk about the development history of GDS and relative systems, and then give a SWOT analysis of GDS in deeply to see how it goes in the future.

Key words: GDS, tourism, SWOT, future

Table of Contents
Four main systems of GDS
Airline Reservation System
Computer Reservation System6
Global Distribution System
Main functions of GDS
SWOT Analysis
Future of GDS

GDS is short for Global Distribution System, also for Global Agent Distribution System, which is a mainframe computer system dealing with the all information of travel industry. Such a system is used for reservation and sales of international airlines and tourism products. Through GDS, tourism organizations all over the world can obtain plenty of travel associated information from airlines, hotels, car rental companies and tourism companies. Thus they can offer customers faster, convenient and reliable service. For example, travel agency gains the right of distribution by connecting GDS terminal, then travel buyers can book or purchase travel products in GDS from travel agency.

GDS and CRS seem to have the same functions. Actually, GDS is formerly known as CRS - Computer reservation system. A Computer Reservation System 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. Now the name changes to GDS because of function change, airline reservations to all travel services. 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.

GDS is established by America Sabre incorporated company in 1960. Sabre is directly belonging to Airline Company. GDS is used to help travel agents to book air travels. And before the Internet comes out, GDS is the earliest system that using the computer to book tickets and hotels.

Four main systems of GDS
Amadeus, whose major market is in Europe, is expanding globally and focusing on providing country specific e-commerce solutions for corporations and travel agencies.
Calileo/Apollo, the major global GDS, offers wireless options and many GUI products. And the TravelGalileo.com allows agencies to create a branded web portal from which their customers can book online.
Sabre, major market is in U.S. It offers a variety of products, such as GUI, web-based products for suppliers, corporate travelers and agencies.
Worldspan, major U.S. GDS, is for Global e-commerce. It has variety of products, web-based options, and working on iTV, additional e-commerce products.
These four reservation systems offer GDS system application for 45 countries all over the world, almost 500 thousand travel companies have become the members of GDS. And the number is still increasing.

We can summarize the development schedule as follows:
Originally Lazy Susans: Request and report; And/or sell and report
50’s Airline Reservation Centers get first terminals
60’s First CRS Terminals in Travel Agencies
70’s Dumb Terminals become CRS
80’s CRS become GDS
90’s Ownership Change; Airlines divest their GDS
90’s Rise of direct sales through Internet
00’s GDS facing new entrants; Airlines reclaim the ownership of the channel; Low Cost Carriers; New business models…
There have 3 stages of evolution of GDS. 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).

Airline Reservation System
At the initial stage of Airline Company, sales department spend lots of time to deal with and storage the reservation information. At the later stage of 1950’s, along with the increasing reservation, higher efficiency is extremely urgent. Therefore, AA and IBM established a computer system for using only inside AA, and this is the ancestor of GDS – the first airline control system in the world, Sabre.
At this stage, each agent has to set up different terminal for tickets agency of different airlines. And airlines also found their own agents thereby emerging lots of reduplicate construction and redundancy. For agents, larger the scale of reservation system, more profit while more investment. They are looking for a solution of decreasing investment and maintain the income, then CRS emerges as the times require.

Computer Reservation System
At the initial stage of 1970’s, realizing the productivity can be improved through reservation automatically, which can extend marketing of airlines and enhance their sales ability, Sabre and Apollo firstly externalize their interior reservation system for agents. Since then, CRS formed.
During this stage, airlines align the interior reservation system and assemble the resource in CRS, establish the multiple consumers system, connect with airlines having reservation system and provide the CRS service for those airlines which have no. The efficiency and sales ability are improved and consumers receive more convenience service.

Global Distribution System
At later period of 1980’s, CRS completes its development of agents market in the North America, and sells the system to obtain the stock in Europe.
Along with the process of economic globalization, CRS goes through the development, merge and recombination, improves its functions and evolves into GDS finally.

Main functions of GDS
1. Reservations: PNR (passenger name record = booking file containing all relevant reservation data).
2. Back-office integration
3. Management information: yield management, market information data transfer (MITD).
4. Request from agency is relayed via GDS to airlines, which sends a message back.
5. Request is channeled through GDS direct into airline’s own system and seat is allocated at end of transaction.
6. Request is channeled through GDS direct into airline’s system and seat is allocated immediately. The higher the level, the more the vendor has to pay the GDS.

So we can summarize from the development of GDS that it is a system branching from airlines reservation system which faces to travel service due to the fast growth of tourism. Nowadays, except the existing airline transportation industry, hotels, car rental, Travel Company and Railway Company join to GDS in succession. According to the continuous development of GDS, it has capable to offer prompt, accurate and comprehensive information service, and satisfy all aspects requirements of consumers including transportation, lodging, entertainment, payment and other succeed service. Due to the design of airlines, GDS is still holding by western main airlines, while the system itself proceed the market operation as an enterprise, and expand the network for more profit.

GDS is the first reservation system that used all over the world, and also the main system. So it occupies about 50% market share of the hotel reservations, joining into GDS means signing contract of room reservation cooperation with more than 500 thousand travel agents directly.

SWOT Analysis
GDS system has grown maturely nowadays; however there is one downside of using GDS in recent years. What cause this phenomenon? Let have a look at the SWOT analysis of GDS.

GDS, develop from CRS. Today’s GDS not only combine numerous main airlines’ databases, sell their tickets, but also expand the business from airline reservation to travel reservation. Compared with simplex travel reservation system, GDS has obvious strengths. Firstly are the complete functions, the products they provide including all tourism product styles, travelers can book the special products they want. Besides, the network covers all over the world, there are plentiful information and the service is fast and convenience. The integration offers final consumers the most transparent information, most extensive range of choice, strongest ability to negotiate price and the lowest purchase costs.

In essence, GDS is a leap of CRS in distribution scope, distribution depth, information quality and distribution forms. From the scope, GDS provides integration service globally. From the depth, GDS offers professional advices for travelers and information management consulting service for suppliers, all these value-added services bring huge benefit for clients and itself. From the information quality, fast developing IT and enhanced customers service concept encourage GDS to offer more prompt, accurate, comprehensive and transparent information, system’s respond is faster, which increase consumers’ time value. From the styles, GDS can serve customers through telephone, internet, electron ticket, vending machine, e-commerce and kinds of styles.

One weakness is that to some extent, GDS is sacrificing guest service, compared with travel agents, it is not hommization. Also, there has erroneous data entry of using GDS, such as double bookings and incorrect arrival dates.

And the main problem is the fact that it costs airlines money to go through a GDS process. Until the end of 80’s, GDS realize that by offering enormous value for suppliers and distributors, they have more control on them. Thus GDS charge higher price for both sides. This action arouses dissatisfaction of suppliers and distributors. 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.

Due to the price increase action of GDS, airlines begin to uprising. What is sarcasm, AA is the first airline revolting GDS and asking for direct connection. At this is because of three reasons.
1. Increasing fees of GDS reservation system.
2. Supreme improvement of technical skills makes it possible of establishing direct connection between travel agents and airlines, which is impossible 30 years ago.
3. And maybe the most important reason is the focusing on travel sellers in recent years, they satisfy consumers; requirements through some large-scale websites, instead the role of traditional travel agents as usual tourism reservation channel has been weaken.

In my opinion, there have three main opportunities for GDS.
1. The potential of tourism developing is huge with a broad prospects, it will keep continued faster development. As a professional technology for tourism, GDS definitely will share the developing market of tourism.
2. GDS has stretched its system into many different industries to make them integration. Also GDS can include more industries to extend its market and gain profit.
3. Also, GDS only build its foundation in western countries, as I know; China is still a potential market waiting for development of GDS application.

For many years, these GDS companies as distribution intermediary between airlines and business client, travel agents, online air ticket agents, operate about 85% ticket reservation. It forecasts that, among 10 hundred million sales tickets, more than 60% is indirectly. And GDS control this market. Based on calculations, for each selling ticket, airlines should pay GDS distributor $12, if there have 6 hundred million tickets, this fees is as high as 70 hundred million dollars. GDS distributors will take out part of these fees as the reward of travel agents. However airlines are unwillingness to bear this cost.

Airlines increasingly believe that they can do better with the following strategies:
1. Increase carrier direct online distribution: enhance features/content/functionality at carrier web site; offer functionality competitive with third party online distributors; use online marketing to direct traffic to carrier web site.
2. Decrease booking fees paid to GDSs: charge agencies for excessive billable actions; renegotiate full content agreements to more broadly address flawed business model.
3. Discontinue distribution via high cost/low return channels.
4. Expand booking distribution to alternative electronic solutions and encourage agency/corporate adoption: GDS alternates; direct connect options.

If airlines sell ticket through their own website, the selling cost for every ticket only has 2 to 3 dollars. Analyst in the industry indicates that, and if do so, each deal can save almost 80% costs. And Bob McAdoo, airline analyst of AvonDale Partners says, “GDS has token a back seat, lots of work they used to do won’t be needed anymore.” Also business travel buyers are increasingly looking at newer opportunities to cut travel costs. The Global Business Travel Association forecasts that the business travel growth is expected to slow in 2012. And business-travel growth will outpace anticipated GDP growth, despite uncertainties in the economy. Also the rate negotiation process is getting increasingly tougher. With a declining market demand, hotels try hard to remain profitable, and have toughened the rate negotiations with buyers. Many are exploring alternative strategies to generate savings from their hotel programs. Some buyers are considering alternative negotiating strategies to derive savings. Due to the demand for wider range of rates to aid policy compliance, corporates are looking for a better value proposition in using hotel aggregators. Nowadays, hotel aggregation has offered key value proposition. The latest versions of HotelHub indicate that hotel aggregation offers a major advantage in corporate hotel reservation process. GDS firms and non-GDS are realizing the gap, and aggregation makes Travel Managers save lot of time and cost in servicing booking requests.

Future of GDS
Along with continuous emerging of new technology solutions, such as Farelogix and GDSx, it is getting stronger of information aggregation. Tourism companies want their information shown on GDS by all means of manner to make it more convenience for customers’ usage. One of the most obvious cases is that ITA Software obtains data from GDS and makes it easier usage for travel agents. GDS will continue cover new industries, such as car rental

There are many suppliers consider some new systems of GDS, which are easier, faster, and with reasonable price. Even though their technique is not mature, and need a reliable environment, with constant developing they will become main stream technique soon. They can offer more service, make consumers gain information faster and more choices. However this system has pressure that everyone in the process wants lower price and lower costs. So they do their best to decrease the costs which is a big challenge for GDS. It is because of that we invest more in the technique, more in the system, and more in the implement and humans, there also includes global competition which will snatch the your market share.

In order to adapt the changing and developing of environment, GDS should increase the tax, improve the productivity of travel consultation companies, decrease the operation costs and enhance the customers’ service level. Chang recent operation ways of GDS will lead to ticket price drop and make this industry more reasonable, it is beneficial for travelers in long-term view.

No doubt, GDS plays a most important role in the tourism supply chain. We can not abandon it completely. However, suggestion of applying low-cost technology and modern commerce model to decrease cost is valid. So long as GDS still provides value for its cooperative partner, the suppliers and distributors, instead of running amuck rely on its catbird seat, GDS will remain exist.

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