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Distribution Cost and GDS Abuse: 4 steps to control them

One cannot overlook the rise of indirect sales channels. It is, and will continue to remain, one of the main sources of revenue for you. However, more channels involve more partners such as the travel agencies and the Global Distribution Systems (GDSs) and therefore, higher complexities in revenue management.

Where might you be losing money in your booking cycle?

Firstly, travel agents often make unrequired bookings, or bookings that are not ticketed, and this can adversely impact your ability to carry out effective revenue management. In addition, you could also incur unnecessary booking costs due to such practices.  This can add up to 4% of your GDS bill, in addition to the larger impact on revenue that comes from loss of opportunity.

What are some of these bookings?

  • Churning and duplicate bookings significantly reduce the ability of your revenue management team to maximize the revenue of a flight. Reduction of available inventory results in you not selling all available seats, or selling below the best price, which is exactly what the revenue integrity robots (RI) try to prevent. Unfortunately, while RI robots do the prevention, it does not deter the agents who can repeat these bookings.
  • Inactive segments, fictitious bookings and invalid bookings increase your GDS bill, with costs that do not contribute to the generation of new revenue and in some cases, the inventory continues to remain blocked while these are not removed.

Secondly, GDS cost is amongst the top costs that you would incur and because these costs are a result of the agents using the GDS, these are not under your direct control.

Where do the GDS costs come from?

  • Airlines often face potential leakages because of incorrect billing by the GDS for the use of its services. These discrepancies could be attributed to large amounts of data and complex contracts which are misfiled, out of date or simply misinterpreted.
  • With a vast network of routes, flights, countries & agents, it is extremely difficult to identify the exact source of GDS cost or leakage. The sheer size of the data, and limitations in having actionable intelligence, means that the analysis falls short in achieving the objectives that you may have set out for an effective distribution strategy.

Can you control these costs?

The answer is, yes. Revenue Integrity and BIDT Audit go hand in hand in controlling your distribution cost and improving your distribution strategy.

You need to look at a holistic approach that addresses your leakages in the booking, inventory abuse, and also complements well your Revenue Integrity and Revenue Managements systems, so that you can optimize your revenue.

To achieve this, we recommend a 4-way approach:

  1. Cost Transparency: Understand your GDS invoices and match them with the BIDT data to learn about the cost discrepancies.
  2. Cost Accountability: Get the right intelligence at the right time, to know how efficient your distribution cost usage is.
  3. Cost Empowerment: Identify which agents are not following the policies, educating them on corrective measures and the consequences of not complying with those measures.
  4. Leakage Recovery: Raise ADMs (Agency debit memos) for the booking discrepancies when the airline policy is not complied with.

Many airlines today partner with experts to perform regular audits and take actions. They generally notice the following benefits within 6 – 12 months of implementing a robust RI and Audit strategy:

  • Booking abuses go down by 50%, leading to cleaner bookings and, consequently, effective revenue management, which though not quantifiable, has a huge impact on book-to-sell ratio.
  • Dispute levels drop to just 2% of what they start with.
  • Savings on the GDS costs of up to 2%.

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