GDS System: How They Work, Why We Need Them, and How to Choose Right

We shouldn’t raise eyebrows, learning that a person who may have traveled to 100+ countries has not the slightest clue of any GDS system and their existence. Provided, of course, that such a person does not come from a travel tech company and does not follow travel news for the technology sector.

To a non-expert’s eye, it would be hard to believe that travelling today would be way more challenging without Global Distributions Systems (GDS). Yet for airlines and travel agencies who have been using GDSs for over 30 years, these systems are an indispensable part of their daily business. To understand how the travel industry moves, we need to understand how GDSs connect the world. That is exactly what we are going to do in this article. In addition, we’ll make a brief comparison of frontier GDSs and provide guidelines how to select the best GDS system to cater to your travel business.

* This material was created in close collaboration with Yana Brilevskaya, Business Analyst at GP Travel Hub, who shed her expert light on the latest developments for the global distribution market.

GDS. Origins

How do regular travelers purchase their flights? Basically, there are three major options for us to grab a seat on a plane:

• We go to our chosen air company’s website and book a flight there for the date we need;
• We use air ticket aggregators like Kayak, Skyscanner, or Expedia and search through air offers there, picking the best option for the selected date;
• Or we contact a travel agent to do the work for us (or they will do it themselves if we purchase a package tour with them).

To distribute their tickets through all these options AND worldwide, it’s not enough for airlines to have a website — they need a strong tech provider and distributor who will deliver their offers to online travel agencies (OTA) around the globe. That when GDSs so eagerly stepped in.

Now we see the reason. But how did it all begin?

It all started back in the 1960s in the USA, when American Airlines and IBM laid the foundation for automatic flight distribution. Its then cutting-edge mainframe IBM 7090 computer was located in New York and stored all the flight information. The machine was connected to around 5,000 American Airlines’ terminals around the country. Your travel agent back then would contact the airline by phone to make a reservation for you. The system was known as the Semi-Automatic Business Research Environment, or SABRE.

Later, similar machines were popping up around the globe, with Sabre at the forefront of air distribution. In the 1970s, terminals were extended to travel agent offices to free up manpower at airlines. And the rest is history.

What Is a GDS System?

A Global Distribution System, or GDS, is an online platform exclusively for companies within the travel industry. It all started with air distribution as we briefly mentioned above, but with time GDSs were able to connect travel agencies with other service providers such as cruise lines, hotels, car rentals, etc. If some new type of travel emerges in the future, like space travel, we bet GDSs will add them to their inventory asap.

What Key Features Does Any GDS Booking System Have?

However multilayered, a competitive GDS should have its must-have pack of salient features that contribute to effective travel management:

• Real-time availability and inventory management: One of the primary functionality for any GDS is its ability to communicate real-time flight, hotel, and car rental availability. Thus, by connecting to a GDS, your travel company can view available seats on a plane or vacant rooms in a hotel straight away. It cuts down chances of overbooking or miscommunication between software systems to a minimum.
• Advanced search options: To offer the most attractive options to their customers, travel agencies must have access to the powerful search and filter capabilities. The ability to make comparisons based on price, class, schedule, or any other available parameter is at the heart of the effective booking engine.
• Booking consolidation: Multi-segment GDSs bring together bookings across multiple travel segments, which helps fill in the blanks in a travel itinerary from start to finish — flights, hotels, car rentals — in one place and even in one transaction. This functionality is especially appreciated by businesses that offer complex multi-segment itineraries.
• Integration with other systems: Being a tech-heavy solution, GDS systems can offer the option of seamless integration with accounting software, as well as CRM and ERP platforms.

How Does a GDS System Work?

Simply put, a GDS takes content from suppliers and makes it available to distributors (travel agencies, tour operators).

Let’s take an airline (supplier) and a travel agency (distributor) as an example. GDSs are normally connected directly to an airline’s sales system — a central reservation system — software holding information about seat availability. However, apart from seat availability, we also need to know fares and schedules, which are stored in different systems supplied by third-parties — ATPCo and Innovata/OAG respectively. It would be close to impossible for travel agents to obtain that lines of information on their own, so that’s where powerful GDSs come into play, retract that info from all necessary information system, and share it with online travel agencies for a fee.

The GDS obtains access to this data through a contract. After that, the GDS grants the access to this data to the travel agency. For instance, as a traveler, you book your flight at an agency close to your residence home. The GDS’s job here is to ensure that all the booking details are communicated to your airline’s system instantaneously. This helps avoid overbooking or inventory discrepancies — one of the major GDS features we talked about above.

Just like in an airline example, the GDS has access to many other suppliers. If you need to fly from Atlanta to Capetown, your travel agent will access hundreds of hotel, car rental, and flight options. The GDS filters all these options to give the travel agent the best set. Using the same GDS, the travel agent then books flights and reserves cars and hotel rooms. Because of the access to this vast pool of options, end users (leisure and business travelers) have access to a far richer selection of options than if they tried to do it by themselves.

Significance for Airlines, Hotels, and Travel Agencies

GDS systems have reimagined the evolving landscape of travel distribution by aggregating travel service providers’ inventory into a central database, accessible in real-time. As more suppliers and distributors pop up, the need for access to the expanding network continues to grow.

When connecting to the content consolidated by GDS platforms, travel agencies and OTAs gain access to a refined view of services and inventory, with no need to engage multiple systems. GDS software monitors its availability, pricing, and rules (such as booking and cancellation policies) creating a promising avenue for travel agents to compare options and finalize bookings for their clients.

No less important are they for suppliers (airlines, hotels, and car rental companies) as they create and maintain a global, multi-channel distribution network, with live updates and synchronizing bookings made across multiple systems. When offering travel services, their provider will want to maximize their visibility and revenue.

GDS vs. Direct Booking Channels

First off, we need to clarify what direct bookings are. These are bookings made on airlines’  (Ryanair, Wizz Air, Lufthansa, etc.) or hotels’ (Marriot, Hyatt, or other) own websites. This option maintains a direct communication channel between a traveler and a service provider.

A GDS reservation system, on the other hand, adds scalability and breadth to the game and enables multi-segment booking options for agencies that would cover flights, hotels, cars, and even rail services — all from a single entry point. In the end, complex travel itineraries are designed through a more efficient booking process.

Are There Any Cons to GDS-Centered Distribution?

Nothing is perfect, and the partnership with a GDS comes at a certain cost.

1. Lack of valuable customer data. GDSs process bookings, so most of the information remains in the hands of middlemen, which doesn’t allow airlines or other service suppliers to track their customers and eventually adapt their preferences.
2. Limited ancillary support. Airlines receive very thin margin in the sale of their core services. The main source of profits is ancillaries — seat selection, baggage upgrades, priority boarding, on-board meal plans, etc. Yet, GDS APIs usually transport only limited ancillaries to OTAs.

No full control of their marketing strategy and no choice of a distribution channel. Offers are basically built within GDSs, when you cannot clearly see the market dynamics and traveler behavior to adapt.

Types of GDS Systems

Not all GDS systems pursue the same goal or even operate in the same segment, although those may overlap. Travel businesses may choose from several types of GDS systems, as their focus dictates. We offer up a breakdown of primary GDS categories (although the borders between them are sometimes fairly vague).

How Much Does a GDS System Cost?

The cost structure of using a GDS system is complex and involves several components:

• Setup and integration costs: A GDS reservation system normally charges a fee when agencies proceed to the initial setup and integration into its platform. The final price tag will depend on the integration complexity and can be anything from $10,000 to $50,000.
• Commission structure: GDS systems earn their money with commissions and transaction fees. When, for instance, you as a travel business book a flight via GDS, the airline will pay a commission to the GDS, which can vary from $3 to $12 per booking.
• Ongoing subscription or licensing fees: $200 to $1,000 per month is a fee your travel agency would pay for the access to the GDS content. The payment may be year- or month-based and depends on the size of the travel agency and the amount of transactions.

The final pricing is dependent on several factors such as your agency’s size, which services you access, and the booking volume.

How to Get a GDS System

Your travel business can gain access to GDSs in several ways:

• Direct partnership with a GDS travel system: Large travel businesses often opt to enter into a direct agreement with GDSs. This model of cooperation is far from being easy, as, apart from higher costs, OTAs and travel agencies should take care of contract negotiations, commission structure agreements, and adherence to the provider’s technical and legal requirements.
• Through third-party solutions: If you operate on a smaller scale, then your most probable choice would be to work with GDS content via third-party tech provider with integrated GDS functionality. This option comes with adjustable pricing and reduced costs.

Requirements: For the proper use of a GDS system and the content that comes with it, agencies need booking terminals and internet connectivity (technical infrastructure) and go through special training. In addition, they must attain IATA or ARC certifications if they plan to access and manage air bookings.

What Are the Alternatives?

If the above methods are a no-go for you, but you still need access to travel services and products, you can consider several alternative ways:

• Third-party travel APIs;
• Travel aggregators like Expedia or Skyscanner allow you to connect via a commission-based model;
• Affiliate programs, when large booking platforms offer options to earn commissions if you book their services for your customers;
• Direct partnership with suppliers;
• White-label travel solutions or custom booking engines.

What Are the Major GDS Systems? Comparison of Amadeus, Sabre, and Travelport

To get a better view of complex processes and functionalities GDSs can offer, let’s explore the key differences among the three dominant GDS players.

Pros and Cons of Each GDS

Nothing is perfect, however elaborately it may be designed. We have compiled a brief summary of the strong and weak sides for each of the major GDS.

How to Use a GDS System and Which GDS to Choose?

Which partner will be the best GDS system for your particular travel company largely depends on several parameters:

• Business size
• Type of services you offer
• Target market
• Future tech developments

We’ve compiled a breakdown guide to make your path towards the right choice a bit easier.

Business Size

• Large agencies: World-scale distributors (Sabre, Amadeus, or Travelport) are a frequent choice for large OTAs. They boast wide global reach, expansive networks, multiple booking management tools, ERP and CRM integrations, and, of course, fully-fledged booking opportunities. The number of bookings via a large agency’s environment allows it to absorb higher transaction fees and initial setup spendings.
• Small agencies: Services of a major GDS may challenge a smaller agency’s or a startup’s budget. To get the most of GDS data and not to overpay for it, such businesses resort to third-party solutions that have already integrated GDS services. Overhead costs are considerably lower for such scenarios. For instance, Travelport, may be a source of flexible options for smaller-scale companies.

Type of Travel Services Offered

• Air-focused services: If you are the one into air travel, your practical choices would be Amadeus and Sabre. No other GDS is more dominant in the air travel sector than these two.
• Multi-segment services: Need air, car, and hotel content in one place? Consider Travelport with its particular emphasis on parallel bookings for multiple segments.
• Niche services: First of all, what are niche markets? In travel, these can be rail travel services, corporate travel, or luxury tours. The choice for you here largely depends on the budget you are ready to spend. Available options can be found on the Amadeus or Travelport platforms that have been developing tools for these segments.

Geographic Region

• Amadeus is primarily influential in Europe and broadening its reach in Asia-Pacific.
• Sabre dominates in North America and the broader Americas.
• Travelport does business in multiple regions, and can be characterized as a balanced global player​.

Future-Proofing

If you aim to play the long game, it would be wise partnering with a tech provider that is eagerly investing in technological advances for its business. The competition now is more about smarter technologies than ever before.

• Amadeus is a rock-solid innovator, especially in the AI and NDC domain. The adoption of the NDC standard will allow more airlines to distribute their rich content and personalized packaged directly via the Amadeus network.
• Sabre is among the leaders in NDC adoption and is also embracing blockchain for secure transactions to enhance supply chain transparency and reduce fraud risks​.
• Travelport puts an emphasis on mobile capabilities and digital transformation. This approach makes the GDS to a strong alternative for agencies that are in need of top-of-the-line mobile booking solutions and a simpler user experience.

What’s Next for GDSs?

Market Size of the Global Distribution System (GDS) Industry

Source: Statista.

For now, the GDS market looks fairly promising. As travel is reviving after the pandemic days, we expect to witness further growth in GDS bookings.

However, there are certain restraints or challenges currently in effect in the distribution system market that we need to take into account to see a greater picture.

Global Distribution System Market Restraints

1. Lack of flexibility and dependence on traditional infrastructure: Historically, GDS systems were legacy-based environments, as they had to distribute airline content, and airlines’ systems are even more legacy-reliant. To switch the decades of good old software to more adaptable systems may give a hard time for global distribution systems. The more conventional their underlying infrastructure is, the more reluctant they may be to quickly adapt to consumer demands.
2. High implementation and maintenance expenses: Using several examples of GDS systems, we’ve already explained that implementing GDS technology require investments, both during the initial setup and as ongoing costs. This may deter SMEs from embracing GDS content and impact their further adoption.
3. Competition from OTAs: GDSs are not the only ones who can offer direct-to-consumer exchange of information. Although their role in global distribution cannot be disputed, OTAs are also capable of exchanging the information between travel agents and travel services suppliers, and some businesses may choose OTAs before GDS routes.
4. Resistance to change: The tourism landscape is versatile and very diverse, with travel-related businesses boasting different resources. Sabre’s or Lufthansa’s budget may dwarf a regional provider’s budget who recently invested in its software and partners’ network and is now reluctant to invest even more, so the pace of technology adoption may differ across the industry. The other case is that established companies are often used to manual procedures or a certain way of doing business and may approach the global digital transformation trend rather reluctantly, which, in its turn, impedes the expansion of GDSs. 
5. Unpredictable global events: However smart and fast predictive analytics may be, there are events that go beyond its capabilities. Geopolitical conflicts, global pandemics, local or regional natural disasters, and other events that no one can normally predict have an immense power to shut the travel industry down and negatively effect the operations of GDSs with it.
6. New tech: The travel landscape churning out new technologies by the week. We may witness the rise of alternative distribution channels, e.g., decentralized apps or blockchain-based systems. These are significant disruptors to the traditional business of GDSs, as they offer lower expenditures, decentralized management, and increased transparency. Lufthansa and some other airlines try to encourage travelers to buy directly from their website by surcharging bookings made via GDS. Ryanair, alternatively, tries to avoid GDSs at all, disconnecting its contract with Amadeus in 2017.
7. Last but not lest in the distribution landscape was NDC that has been making waves since 2015, when IATA introduced this new API standard for airlines. NDC empowers airlines to build their own APIs to connect to GDSs or bypass them entirely and connect directly to OTAs. For more on the issue of NDC, we strongly recommend checking our latest article.

It Always Depends

Even though airlines, hotels, and other local service providers seek to avoid third-parties and distribute their product directly, they will look for a reliable booking platform with the richest selection of options. Victory in the competition will get to the one that can book faster and better for their end customers — travelers.

At the moment, connecting to GDS content is one of the wisest choices for many travel agencies. Yet, the choice strongly depends on your particular business, so tread with caution. Or you can always resort to GP Solutions for tech consulting and implementation.