What Happens When TMCs Become GDSs?

It must happen to a greater or lesser extent if American Airlines creates a model that succeeds and then gets rolled out across the industry. The only way that travel management companies will be able to give their customers what they want will be to direct connect with every key supplier and, as such, become mini specialist global distribution system in their own right. It will cost them a lot in time, resource and money despite what some AA loyalists say and you can bet your bottom dollar they will want it back with interest.
So how will such an event impact the balance of power in the travel supply chain? I think it will affect it significantly. Obviously the GDSs will not simply sit back and let it happen and I am sure there is intense discussion and negotiation going on as I write.

However, let us just pause for a minute and reflect on the following statements:

1) Despite airlines best efforts the TMC world still has considerable value to their corporate clients and will be hard to dislodge unless they do all the things TMCs do.
2) TMCs have been preparing their own strategies by building their own booking platforms that can be directed to be very specific on what choices they offer.
3) If airlines direct connect to these platforms they may be stepping out of the frying pan and into the fire as far as power balance is concerned.

The GDSs are too darn expensive and working with a defunct, unjustifiable pricing model. I think many of us believe that and I can see why airlines are getting sick of paying sector fees even for cancellations and suchlike. The only thing is that GDS have a value to them and this value may be provided by TMCs in future. If you receive a value you can expect it to cost you as the TMCs will not give such distribution capability away for nothing. On top of that they will have their own platforms overlaying it which will allow dynamic pricing and availability control.

My message to airlines is to look at the broader implications of their actions. Remember how some thought GDSs were great to own once. And how ownership, encouragement and support of online travel agencies were expected to reduce not increase cost. Not a great track record so far so look at your next step very carefully!
This post was republished with permission from the blog of former managing director of HRG UK Mike Platt.