"A GDS gives impetus to an LCC's aggressive growth plans"
Published: 09 Jun 2008
Travel Distribution Special
As start-ups, LCCs generally attract a lot of local, direct support. But once they ramp up for growth, they need bigger pools of potential customers.
And that's where the GDS shines, according to Hans Belle, Vice President, Sabre Travel Network, Asia Pacific.
Belle, a speaker during EyeforTravel's Travel Distribution Summit Asia 2008 conference held in Singapore earlier this year, said LCCs are recognising the benefits of GDS participation by signing up.
"A GDS gives impetus to an LCC's aggressive growth plans which necessarily involve more complex distribution. For instance, the Sabre GDS offers an LCC 'growing room' when it starts to codeshare or interline. It offers visibility in vast markets throughout this competitive world. And a key point for any airline or supplier is that the GDS offers a window to higher yields—often through access to the corporate market. The Sabre GDS provides a very cost effective way to achieve these goals and many more through the breadth of our distribution content," he said.
Belle referred to one of the news reports as per which JetBlue CEO David Barger said the airline was enjoying a "$35 to $40 net fare premium" on bookings made through a GDS such as Sabre Travel Network.
"Direct distribution will continue to play a significant role in most LCCs distribution strategies. However, many LCCs are starting to see the tremendous value they can receive from the working with the travel agency network via the GDS. One reason is that is that it is very difficult for most LCCs to generate sustainable profits with leisure travellers alone—so it's not surprising that most LCCs come to us to increase their share of corporate travellers," he said.
"In our experience, as LCCs evolve they face the challenge of finding new ways to maintain continuous growth and yield improvement. In order to accomplish this, LCCs are driven into a wider variety of markets and market segments. Inevitably, by tapping these new markets and markets segments, such as corporate and high yield travellers, means closer alignment with the travel agency & GDS communities," added Belle.
In an interview with EyeforTravel.com's Ritesh Gupta, Belle spoke about the role of GDSs going forward and much more. Excerpts:
Ritesh Gupta: How do you envision the role of GDS going forward?
Hans Belle: Sabre is the industry leader in GDS content. As we continue growing the most efficient and extensive marketplace, we continue to expand the role of the GDS and thus increases the value of our marketplace for suppliers, travel agencies, and travellers.
Travellers have the fastest, most advanced shopping options at their finger tips and it will only get more intense from here. Sabre remains focused on developing game-changing tools to navigate this vast shopping network. Sabre Travel Network was the first to provide airlines with the ability to unbundle and bundle their products and services under a brand umbrella in the GDS. One of the most sophisticated airlines in the industry, Qantas, launched Sabre Branded Fares to differentiate itself from competitors while also providing consumers greater choice in creating their travel experience. Using Sabre Branded Fares provides Qantas the ability to increase margins and improve customer service.
While progressive, efficient shopping tools are critical, the heart of the GDS' success is expansive, diverse content: Content such as a choice of 80,000 hotel properties and hundreds of airlines of all descriptions. To meet the high-speed travel shopping demands, Sabre continues to develop platforms that deliver the ability to access travel content in the multi-media channels travellers are using – mobile phones, social networks and many others. But we also recognize the importance of continually making agency operations efficient and we're always investing and working to deliver on that.
Ritesh Gupta: Do you think complexities in Asia as a market make comprehensive coverage expensive and risky, which in turn enhances GDS's value as a distribution channel?
Hans Belle: Sabre has a deep history in Asia and the Pacific. We are gratified that travel agents and suppliers have long grasped the pivotal link that a GDS such as Sabre brings in the face of the complex and fragmented Asian and sub-continent markets. A long-standing presence in the region has allowed us to tailor products to meet local needs and cater for a lot of this market complexity.
This, coupled with the fact that offline sales still comprise the bulk of travel sales in the region, means suppliers know they must carefully gauge their channel activities. Sabre thrives in this unique environment because the breadth of our industry leading technology and content continues to provide Sabre and its agency network with competitive advantage. We are confident that travel agencies and GDSs will continue to serve as the primary distribution channel throughout the region.
Ritesh Gupta: A GDS states that one important way GDS distribution adds value for traditional airlines is providing them with extensive reach beyond their own national boundaries and it is difficult for airlines to duplicate this rapidly by adopting a direct to market model. What's your viewpoint regarding the same?
Hans Belle: Sabre provides suppliers such as airlines with exposure to hundreds of thousands of travel agents and tens of millions of travellers with the flip of a switch. On Sabre, the airline brand crosses borders, currencies, languages and cultural divides with ease.
What's more, Sabre helps airlines quickly implement this access to millions of travellers/buyers in a very cost effective manner. So yes, Sabre agrees!
It takes deep pockets to launch an airline or even a new route. Gaining brand awareness in a new market requires significant investments to implement and maintain a direct-only distribution strategy that successfully attracts consumers and keeps them there. These costs are in large part fixed and need to be spread across a fairly small number of available seats. Compare this model to the GDS model, where the airline's distribution cost structure is variable with the number of tickets sold. The unit cost on GDS distribution will undoubtedly be much lower than on direct distribution. And yields will be higher. By using GDSs, airlines also reach a variety of traveller types, which helps the airline attain its load factor goals much more quickly. What other venue allows airlines to efficiently put their product in front of millions of qualified consumers around the world—consumers who are in the active buying stage?
Ritesh Gupta: Considering that the major cost items are incentives and commissions, do you believe that GDS pricing strategies need to change and are they showing flexibility?
Hans Belle: In calculating any bottom line, costs are merely a part of the equation. At Sabre, we keep a close eye on costs—and even more importantly, on how we improve value. The GDS continues to provide tremendous value for airlines by providing the most efficient, accessible marketplace with high-value consumers.
Sabre started the distribution revolution when it developed the world's first GDS. Since then, we've kept evolving to ensure the needs of suppliers, agencies, corporations and travellers are addressed and the travel industry prospers.
Our success today is testament to the fact that we've made flexibility an integral part of our mission as we continue developing the world's most efficient travel marketplace.
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