GDS (Global Distribution System)

A modern distribution system designed to meet the demands of newly globalised markets was necessary for the development of mass tourism. Thus, the hotel industry and air transport, were early and active users of industrial ideas through intensive distribution strategies.

This transformation of distribution channels has been greatly facilitated by network and information technologies. These technologies radically modified the “tourism sector” (Clergeau and Maghrobi, 2016).  This transformation also resulted in greater consumer choice and increased competition among distribution stakeholders (O’Connor & Frew, 2002; Buhalis & O’Connor, 2005; Granados et al., 2008; Longhi, 2008). GDSs must therefore be considered and studied within this historical context.

In the tourism and hospitality sectors, a GDS (Global Distribution System) refers to a computerised reservations system that connects multiple tourism and leisure service providers with end consumers and travel agencies, enabling direct bookings (Pan, 2015). One specific feature of a GDS is that it is directly accessible to tourism professionals. Therefore, they should not be considered distribution channels but rather facilitators that enable interconnectivity between service providers and travel distributors (Buhalis & Licata, 2002). For Shatskaya (2018), the introduction of GDSs improved and accelerated the system of interaction between travel services providers and consumers. The automation of verification procedures. In general, GDSs have enabled travel professionals to automate the process of accessing inventory information and market liquidity, generating productivity gains for all intermediaries involved (Berné et al., 2015).

As shown in Figure 1 below, GDS’s play a central role in international tourism, as a result of their privileged long-standing relationship with airlines, a key player in the tourism ecosystem through the early integration of their software into the terminals of tourism industry professionals.

GDS - EN

Fig.1. The traditional tourism system Suppliers – GDS (source: Longhi, 2004

Since the 1980s, this oligopolistic market (Granados et al., 2008) has been dominated by the same players, namely Amadeus, Sabre, and Travelport (which integrated the Galileo and Worldspan GDS in 2007). The respective market share claimed by these three competitors is relatively balanced. Amadeus has a slight lead over its competitors, particularly in the European market, and has an estimated global market share of about 40%, according to futuremarketinsights.com. Sabre (founded by American Airlines with the support of IBM) dominates the North American market. As the global leader, Amadeus remains the preferred GDS of global online travel groups such as Booking Holdings and Expedia (Peltier, 2019). GDS systems are extremely reliable, managing very high transaction volumes, and bring together a vast network of travel agencies, airlines, maritime and rail operators, hotels, sightseeing tour operators, entertainment providers, and car rental companies. For example, Sabre is connected to more than 210,000 terminals worldwide. As a result, despite the changes brought about by the Internet, most tourism professionals still use GDSs as their primary source of comprehensive travel content (Gholami et al., 2017).

Origins and evolution

GDSs started as computerised reservation systems (CRS) created by airlines (Buhalis, 1998; Buhalis & Licata, 2002) or by airline alliances. With these GDSs, travel agencies could track flight schedules, seat availability, and ticket prices. However, with GDSs, airlines mainly wanting to strengthen their dominant and structuring position in a rapidly expanding global tourism market by adopting a vertical integration strategy. Thus, airlines such as Air France, Swissair, Lufthansa, and SAS sought to control this sector through their respective hotel chains (Le Méridien, Swissôtel, Kempinski, and SAS International Hotels) before withdrawing in the 1980s to focus on their core business. GDSs gradually expanded their service offerings to include hotel rooms, car rentals, rail and maritime transport, and a wide range of travel and leisure services; thus, their emergence streamlined and accelerated interactions between travel service providers and consumers. GDSs also enabled travel agencies to reduce costs and increase productivity greatly (Malone et al., cited in McCubbrey, 1999). One of the main advantages of GDS platforms for travel agencies is their ability to offer a comprehensive travel experience by integrating the various components of the tourist journey, including flights, hotels, car rentals, etc. GDSs also ensure the real-time availability of information throughout the booking process.

Until the late 1990s, the traditional tourism distribution system comprised consumers, traditional travel agencies, tour operators, and GDSs, destination gateways, destination management organisations (DMOs), and service providers. According to Granados et al. (2008), the main GDS held significant power in an oligopolistic distribution market until technological advances, particularly the Internet, reduced entry barriers and enabled the emergence of alternative distribution channels.

From the mid-1990s onward, the proliferation of Internet use, combined with strategic decisions by airlines, hotels, and other tourism players aimed at reducing distribution costs, challenged the central role of GDSs and traditional travel agencies. Many airlines cut commissions paid to travel agencies and introduced administrative fees to encourage consumers to purchase their airline tickets directly from suppliers (Buhalis & Moldavska, 2021). But, above all, web technologies resulted in a structural shift which moved power to a new intermediary: the search engine. Early automated search engines (or metasearch engines) appeared at this time and enabled the indexing of entire web pages (Pinkerton, 1994; 2000), paving the way for Google’s role as intermediary providing search services, now the leading search engine. In air transport, new models, such as low-cost carriers and direct-connect distribution, also challenged traditional GDS models (Gholami et al., 2017).

Facing the threat of disintermediation, GDSs adopted a new strategy to survive in an increasingly competitive environment. GDSs reduced their access fees and commissions, improved interfaces and the user experience, expanded content and services, and learned how to exploit data and technology to provide customers with more information, analyses, and recommendations. They also offered end customers and intermediaries more automation, personalisation, and integration (Longhi, 2008; Loureiro, 2016). In response to the decline in bookings, GDSs created the first online travel agencies (OTAs), such as Travelocity (created by the Sabre GDS) and Expedia (created by the Worldspan GDS) (Smith et al., 2007), before later selling them. GDSs now had a direct access to end customers, which suggested a degree of “convergence” among tourism players (Violier, 2013). However, the subsequent withdrawal of GDSs from the online travel agency (OTA) sector modified the relationship between these two players in favour of the latter. Today, GDSs continue to dominate the distribution market for tourism products, although direct distribution channels have become increasingly important in the airline industry (Isler & D’Souza, 2009).

Competition and current challenges

The arrival of the internet has altered end consumers’ behaviour, triggering major changes across the sector (Buhalis & Law, 2008; Quaglione et al., 2020), including adjustments in how tourism products are distributed. Digital intermediaries, such as online travel agencies (OTAs), have become key players in the distribution process (García & Ruiz, 2022a), often completing and, in some cases, even replacing traditional channels.  The challenges posed by disintermediation and the emergence of low-cost carriers (LCCs) remain significant. At present, GDSs have reached compromises with airlines to reduce their distribution costs through these GDSs; the threat of substitute products to GDSs remains limited, and they continue to be an essential player for the majority of providers within the tourism ecosystem. The entry of new direct competitors is also difficult and unlikely, owing to the particularly high costs and the pressure exerted by existing GDSs, which have invested significant resources in developing and promoting their platforms and have built strong relationships with players in the tourism and hospitality industry. GDSs also face the challenge posed by new competitors, particularly metasearch engines or the NDC standards (Ziegler et al. 2017) created by the IATA for airlines. However, these technological innovations are not yet sufficiently mature or widespread (Bingemer, 2018) to compete with GDSs in distribution. GDSs are constantly searching for new solutions to support the development of the tourism industry through the exchange of provider-customer or final provider-intermediary information (Falko, 2016), and adapting continuously by expanding their services and integrating more advanced technologies, such as predictive analytics.

Outlook

The outlook for growth in the GDS market depends on its capacity to adapt and innovate technologically. The players must face new technological challenges related to the complexity and personalisation requirements of customer journeys. They must develop technologies capable of responding to both the evolution of airline retailing models and changing consumer habits, as consumers increasingly conduct searches across multiple devices and channels. GDSs will have to aggregate more complex content. The integration of artificial intelligence (AI) could improve their customers’ productivity.  Furthermore, the deployment of Large Language Models (LLMs) – one of the applications of AI – raises important questions about data privacy, the ethical use of AI, and the need for transparent and responsible practices in the field of AI.

Finally, the Chinese market remains closed to foreign reservation systems (CRSs), despite the introduction of new provisional CRS regulations in 2011 (Jorgensen & Christensen, 2022). The Chinese National Tourism Administration must license travel agencies, while almost all Chinese airlines sell their fares through TravelSky, the state-owned GDS approved by the China Air Transport Association. Therefore, GDSs must either negotiate alliances with this state player or establish partnerships with other Chinese tourism stakeholders.

Abdenour-Karim KHELIFI

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