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  1. The GDS War

    Need a vacation? Those days, you rely on a travel agent to book your tickets, set your itinerary and make arrangement on hotels and tours. In reality, there are several types of travel agents and in Malaysia the most common are ticketing agents, tour based agents and umrah agents.
    You have probably heard a lot about Andalusia Travel, Apple Vacations or Rayhar Travel. Well, the fact is that they are umrah and tour based agents which deals directly with consumers. However, a big chunk of the travel agents are ticketing agents. They do seat bookings mainly for corporate clients and government agencies. And the system to check seat availability and book tickets are called Global Distribution System or GDS. There are 3 main players in Malaysia namely Sabre, Amadeus and Travelport.
    Back then, Sabre or was then called Abacus was the monopoly and charge travel agents for the service of hardware and software in a form of monthly rental but since 2002, as both Amadeus and Travelport enter the market, the monthly rental has been waived (or so it seems) and agents got to use them for free with certain condition.
    Competition has changed the whole landscape of the GDS structure as extensive price war and contract negotiation often dictates the travel agents contracts with GDS. Therefore, before a travel agent enter into a contract or renewal with a GDS, there are a few key points that they need to be considered.
    Firstly, GDS gain revenue from airlines, and different GDS charge airlines differently based on their international contract. These revenues are shared with travel agents based on TA’s performance or booking segments. A booking segment is a one way sector for passenger and often a booking is consists of 2 return segments.
    Over the years, GDS has introduced Sign on Bonus or Loyalty Bonus which is a one off payment at the start of the contract. Calculation on how GDS define an amount of a sign on bonus varies significantly. A rough calculation, if your travel agency yearly booking segments are about 40,000 and all of them are domestic bookings, GDS probably will earn about USD 1.50 for domestic segments from airline (some GDS charge even higher), that is about RM 250,000 x 5 years : RM 1,200,000. Your agency will probably be offered the 1st year revenue ranging from RM 100,000 to RM 200,000. But the sign on bonus changes substantially if all of the travel agency 40,000 bookings are International segments, as GDS charge about USD 6 to USD 7 or RM 24 per segment. Your agency could earn a whopping RM 1 million sign on bonus.
    Segments incentive was introduced to encourage agents to book more and earn more segments incentive. GDS usually pay agents around RM 0.50 for Domestic segments while around RM 1.50 – RM 4.00 for International segments. For top performing agents, there are also special bonuses or segment tiering incremental if they hit more than their targeted segments. Certain GDS pay the segments incentives on monthly basis but some practice quarterly payment.
    Those days, GDSs provide PCs to travel agents and charge monthly rental, but since the software is now through Cloud, GDS charge software rental. And if your travel agency is on the Incentive Scheme, the software charges are waived as long as you achieved the minimum yearly segments bookings. Some GDS will offer the software for free to new travel agents as long as you achieved the minimum bookings per software. Therefore, before signing the contract, you must ensure that all of the software needed have been counted for as getting an additional software after the contract has been signed would be difficult.

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