Channel Shock: The Future of Travel Distribution
The travel industry is always fixated on what’s new and sexy.
Whether it’s booking a hotel using Amazon Alexa, or checking your Priceline booking from your Apple Watch, we tend to focus on incremental improvements to how consumers book and experience their travel. Yet, the main system that sits underneath the snazzy interfaces, which actually connects hotels and airlines with online booking sites and travel agents, has its roots in a handful companies originally founded by U.S. and European airlines.
If you’re not deeply entrenched in the fields of travel distribution and technology, you may not know that the same type of technology has been used since the 1960s to handle transactions between travel providers like airlines and the companies that purchase travel for travelers.
After general aviation began to surge following World War II, orders for air tickets were placed by phone. Digital tools were developed to automate how airlines track and sell their inventory beginning in the 1960s.
These systems, commonly known as the global distribution systems (GDS), have done much to determine the shape of the global travel marketplace and continue to shape it to this day.
This technology completely transformed how people traveled beginning in the late 1970s, once travel agent terminals were rolled out to allow direct access to these systems; travel agents could place remote bookings from their offices, streamlining the booking process as global air travel began to expand.
Things have changed in the last two decades. As the Internet democratized travel booking, allowing consumers to search online, travel agents have been marginalized when it comes to leisure travel in the U.S. Travel agents still play a stronger role in other parts of the world. But online travel agencies and travel management companies still place bookings using GDS platforms, since they offer the most comprehensive collection of travel inventory across the globe.
Likewise, most travel providers need to remain part of a global distribution system for consumers and business travelers to easily find and book their products.
Today, four companies dominate the travel distribution landscape: Amadeus, Travelport, China’s TravelSky, and Sabre, the original company to develop this technology when it was a division of American Airlines.
Could this change one day? Do new technologies, like direct connections between airlines and travel agencies or consumers, pose a threat to the dominant role played by global distribution system providers in the travel ecosystem?