cgtp section 2 a cgtp09082009

CERTIFIED GOVERNMENT TRAVEL PROFESSIONAL TRAINING COURSE

S EC T I O N 2 A G L O B A L D I S T R I B U T I O N SY S T E M S , Y I E L D M A N AG E M E N T, C O D E S H A R I N G A N D R E P O R T I N G

SGTP 9/8/2009

IntroductionSection 2a.1 Global Distribution Systems

SGTP 9/8/2009

About Global Distribution Systems

The first airline created Computer Reservation Systems (CRS) appeared in the 1950’s and 1960’s as a method of airline seat inventory management and distribution.

American Airlines Sabre, United Airlines Apollo, Eastern Airlines System One, Delta’s Datas II, and TWA’s PARS were the most widely used systems in the 1970’s.

The systems evolved to include multiple airlines with widespread use in travel agency offices. By the early 1980’s travel agents used the CRS to sell the majority of all airline tickets. The systems added rental car, hotel, tour and cruise search and reservation components.

SGTP 9/8/2009

Section 2a.1 GDS

Government Regulation of the GDS

Because of early ownership and interdependency by the airlines, the CRS were regulated by the Department of Transportation to assure that travel agents and their customers received accurate information on pricing, availability and schedules without bias in each of the systems.

These regulations, as an example, prevented the airline owned CRS from showing preference for one carrier over another in any given route.

The regulation of the CRS ended on January 31, 2004 because of the absence of airline ownership of the CRS. Rules prohibiting certain contract clauses and display bias ended on July 31, 2004.

Congress authorized DOT to issue CRS rules only to prevent antitrust violations and deceptive practices. The DOT still issues rules regarding certain consumer protection practices of airlines and travel agencies.

SGTP 9/8/2009

Computer Reservation Systems (CRS) to GDS

Section 2a.1 GDS

The CRS served as an important yield management or live inventory management tool for the airlines in the constant race to achieve market share.

Continued innovation and expansion created the current day Global Distribution Systems (GDS) owned by companies largely independent of the airlines that generate tens of millions of transactions a day for all aspects of travel services.

The interactive travel systems available to the public are the latest iteration of the GDS. GDS system usage is not mandatory for airlines or other travel suppliers.

Some airlines do not participate with the GDS while others participate at different levels which might include full access, reservations only, search capabilities only or special contracted service levels between the airline and GDS.

SGTP 9/8/2009

The GDS’ have developed technology that offers reservations, ticketing, extensive reporting, and a menu of management tools for everything from seat selection to crew management. These comprehensive, highly complex systems provide a wide variety of travel services designed to serve the most complicated travel requirements. Some of the common features typical of the GDS in the early 21st Century include both Travel Reservation & Search Capability.

Travel Reservation & Search Capability

•Fare search capabilities including the GSA City Pair Contract fares•Comparative fare, route and schedule searches•Itinerary changes to even the most complex routings•Seat Assignments•Electronic ticketing•Frequent flyer support•One way and round trip airline tickets•Hotel reservations•Rental car reservations•Rail, bus and ferry tickets•Insurance

Section 2a.2 GDS Capabilities

SGTP 9/8/2009


Other GDS Capabilities

•Worldwide travel distribution network•Systems are available and accessible 99% of the time•System processes nearly 20,000 messages per second during peak times•Advanced enterprise systems architecture•Response times of a fraction of a second•Email and fax through the systems•Store millions of passenger name records (PNR)•Access to over a billion fare combinations, and

95% of seats worldwide750 airlines50,000 + hotel properties400 tour operators30,000 car rental locations

•Reporting capabilities•Secure payment interfaces

SGTP 9/8/2009


•Extensive resources for efficient travel agency operations, such asScript/editing toolsFare managementPNR storageTrainingTelecommunicationsEquipment & maintenanceCall center support

Other GDS Capabilities

GDS System Fees

Airlines, hotels, rental car companies and other suppliers participating in a system pay fees to the system for each booking transaction transmitted through the system. These fees generate over half of the systems’ total revenues. In statements to the DOT, the airlines average booking fee is $2 to $4 per segment with the average per ticket fee of $11. These fees are in a state of flux and are determined by the individual airline contract, individual hotel or other travel supplier contract with a specific GDS.

SGTP 9/8/2009


Travel Agency Contracts

The contracts will specify what equipment the GDS vendor will provide (computers, software, data lines, terminal addresses, etc.) and at what cost.

There are charges incurred by the travel agency for using the GDS – each time a system is accessed for reservations or searching (called GDS hits), a charge can be incurred by the travel agency.

The contracts will often specify what volume of business is expected to be generated and whether the travel agency will receive a signing bonus if switching from one system to another or a segment booking fee for using the system. The segment booking fee is an amount paid to the travel agency each time a segment (air leg, hotel, car or other reservation) is booked.

SGTP 9/8/2009


Travel Agency Systems

Travel agencies continue to use one or more of the major systems which include the following: Sabre, Travelport (formerly Worldspan, Galileo/Apollo) and Amadeus.

Each system provides information and booking capabilities on airlines that participate in the GDS. Participation is determined by contracts between the airlines and the system to carry the airline data to make their services are salable through the system.

Travel agencies contract with one or more GDS vendors to provide the equipment to make reservations. While some travel agencies, primarily the larger companies do have multiple GDS contracts, only one GDS system is used for any one client.

SGTP 9/8/2009

Section 2a.2 GDS CapabilitiesGDS Technology Pricing

$$ The GDS vendors are now shifting the airline transaction fee burden to the travel agents. Simple travel agency economics force the travel agencies to pass the transaction fee charges to the clients.

$$ Travel agents share of GDS bookings has declined from an estimated 90% in 1999 to recent figures of 60%, largely due to internet bookings through interactive systems run either by the GDS or directly by the airline.

$$ Technology once so prohibitive in price is now available to a new generation of booking options using commercial software and direct connections to travel suppliers’ reservation inventory.

$$ The use of these systems has been created for corporate offices, travel agencies and direct traveler usage.

SGTP 9/8/2009


GDS & Distribution

The systems display comprehensive information and booking capabilities of airlines and other travel suppliers.

The airline schedules, routes and pricing are accessible in a variety of formats to offer comparisons for travel agents and travelers.

The systems allow seat selection, ticketing (either electronic or paper) and other supplemental information including meal selection, handicap services or other special needs.

The GDS play a major role in the distribution of air sales because of the efficiency they provide travel agents and the interactive web sites like Travelocity (using Sabre), Expedia and Orbitz (both using Worldspan).

Orbitz and Expedia are also developing direct connections with airline’s internal reservations bypassing the GDS.

SGTP 9/8/2009


Alternatives to the GDS

Beginning in 2004 several companies began developing GDS-like alternatives, advertising lower fees and greater flexibility.

These systems have found some success in corporate travel departments and the future of the systems is unknown.

Early entrants in this market were ITA Software, G2 Switchworks, Farelogix and Innovative Network Systems.

SGTP 9/8/2009

Major Systems

There are currently three Major GDS Systems.

SABRE

Amadeus

Travelport (formerly Galileo & Worldspan)

Section 2a.4 Yield ManagementSection 2a.3 Major GDS Systems

IntroductionSection 2a.4 Yield Management

SGTP 9/8/2009

Yield management systems have been used by airlines since the 1960’s when first offered by Sabre Airline Solutions and more widely utilized by the industry since the 1980’s.

Yield management, also known as revenue management, is the process of responding to consumer activity to maximize revenue.

These sophisticated computerized systems allow travel industry suppliers, airlines, hotels and rental car companies, to analyze information for services already supplied for patterns that will reflect and influence future sales.

The objective is to forecast total demand by market segment and price to maximize revenue.

The Importance of Yield Management

Yield management has become an essential tool for businesses operating in the highly competitive travel industry to protect profits and corporate viability.

SGTP 9/8/2009

Section 2a.4 Yield Management

Airline Pricing Departments & Yield Management

The airline pricing departments determine the number of seats that can be sold at a certain dollar amount for advance purchase, vacation travel, business travel, etc. and as the number of seats diminishes closer to flight time the fare may increase or decrease depending on the available inventory.

Government City Pair Contract fares, except for lower price capacity controlled fares, are exempt from pricing variations because the government contracts with the airline for market segments are based, in part, on past usage of those routes by government travelers

Yield Management Success & Aircraft Load FactorsThe traveling environment of today demonstrates the success of the highly complex and finely tuned yield management systems with aircraft enjoying load factors exceeding 85% and more.

Hotels determine seasonal rates and plan for occupancy variations based on these models. Car rental companies move inventory to accommodate fluctuations in rentals from market to market.

SGTP 9/8/2009

Section 2a.4 Yield Management

Traveler Frustrations due to Pricing

A common frustration of travelers flying from one point to another, in a deregulated airline environment, is to know that there are dozens of different fares paid by travelers on the same flight.

The commodity – the airline seat – is perishable. As soon as the aircraft door closes any empty seat represents missed revenue for the airline.

IntroductionSection 2a.5 Airline Code Sharing & Reporting

SGTP 9/8/2009

Code sharing among airlines offers a more integrated service for travelers.

Airlines have created alliances with other carriers in complimentary markets to provide origin-to-destination service.

This offers a competitive advantage to carriers that show service between two points even if part of the trip will be on another carrier.

Code Sharing Difficulties & The Fly America Act

The GDS determines the number of listings a flight will receive in their system.

For instance Sabre and Amadeus list the codes of no more than two airlines for one flight. Difficulty arises with international flights originating in the U.S. on a U.S. flag carrier with transfer(s) to foreign flag carriers at other than the furthest interchange point as required by the Fly America Act.

SGTP 9/8/2009

Section 2a.5 Code Sharing & Reporting

Code Share Notices

The GDS display the code shares as a flight number on an U.S. flag carrier with a notice that the flight is operated by another carrier (such as a foreign carrier).

These displays are provided in each of ETS and DTS systems. DOT regulations require travel agencies to inform callers about code sharing.

Reporting

~~ Because of the vast amount of data stored in the GDS, the travel vendors need to analyze certain aspects of that data.

~~ Ultimately in order to satisfy the traveler requirements for reporting, for audit, payment, and accountability of travel information, GDS vendors devised various reporting techniques. ~~ When the airlines owned the GDS they had direct access to the data for analysis purposes.

SGTP 9/8/2009

Section 2a.5 Code Sharing & Reporting

Reporting (con’t)

~~ Now the airlines may elect to purchase information from the GDS for their own analysis for route development purposes, marketing research, and to make pricing and revenue management determinations. The information sold by the systems does not include fare amounts or information identifying individual passengers.

~~ Travel agencies use booking data to generate reports for clients by configuring the information into useful formats. The reports, covered in greater detail in another section, provide clients with travel information including, costs, destinations, travel patterns, etc.

~~ Future Global Distribution Systems could offer virtually anything that is electronically possible at the time.

~~ Their future innovations will be dependent on travelers, travel agencies, corporate travel departments and government travelers demanding widespread accessibility to all routes and fares throughout the world.

SGTP 9/8/2009

Questions Concerning the Course:Questions concerning the course should be directed to either Travel Management Consultants, Inc., the current contractor for course delivery,

Travel Management Consultants, Inc.1710 Kendall AvenueMadison, WI [email protected]

or to The Society of Government Travel Professionals

SGTP4938 Hampden Lane Box 332Bethesda, MD 20814202-363-SGTP (7487) Fax:202-379-1775 [email protected]

mailto:[email protected]

mailto:[email protected]