Marriott Challenges GDS Economics

News from Travel Technology Update: Distribution has become
"a very significant strategic issue for us," Shafiq Khan, senior vice
president of e-commerce for Marriott International, said.

that airlines have addressed their distribution costs through new deals
with the GDSs and by eliminating travel agency commissions, hotels
"have become the biggest payer of commissions and a big revenue source
for the GDSs," Khan said. "We need to get to "more rational economics"
with the GDS companies.

Khan fired the shot across the GDS
industry’s bow at EyeforTravel’s Travel Distribution Summit in Chicago,
just as the major U.S. airlines had concluded a round of GDS contract
negotiations that locked down their distribution costs for at least
five years.

Like the airlines, hotels view the GDS economic model as "very odd," Khan said.

Hotels pay GDSs for bookings and GDSs pass some of that money on to their subscribers, the travel management companies.

Hotels also pay those same subscribers commissions for those bookings, which often are passed on to agencies’ customers.

"Byzantine is a nice word for it," Khan said.

Khan also was critical of third-party online distributors.

agencies do a lot of things we can’t do for our corporate customers,"
he said. "There is value added. It’s questionable whether value is
being added on the other side — yet."

An exception, he said, is
Priceline, which "provides value rather than leverage. It has been less
an intermediary than a partner."

He also challenged the prevailing folk wisdom that third-party sites have leveled the playing field for independent hotels.

"Independents are dropping like flies," he said. "For independents, the economics of online travel agencies is abysmal."

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