Much like the financial industry, the hospitality sector is rather fond of an acronym or two, despite widespread confusion as to what any of them actually stand for. ‘Global distribution system’, for example, is more typically known as ‘GDS’, even if its purpose is often misunderstood.
One of the most common misconceptions about the GDS is that it is far too big, cumbersome and expensive for smaller hotels.
We think that’s a little wide of the mark.
When utilised correctly, the GDS is a fantastic source of new business for hotels of all sizes, and can result in some very healthy customer relationships that offer plenty of repeat - and direct - bookings in the future.
Consider this blog post our mini guide to getting the most out of the global distribution system if you run a small hotel.
What is the GDS?
Ah, yes. Let’s start here.
It’s best to think of the GDS as a facilitator - a middle-man of sorts. Its main job is to connect hotels to a huge network of travel agencies. Much like working with an online travel agencies (OTA) such as Booking.com, hotels give the GDS provider their availability and rates, set a few rules about how it should all be distributed and leave the GDS to liaise with the travel agents.
The travel agents sell the hotel’s rooms based on the availability and rates supplied by the GDS and pass any confirmed bookings back to the hotel, via the GDS.
Another common misconception about the GDS is that it is primarily geared towards corporate travellers, but due to its links with airlines, car rental companies and various other leisure activity bookings, hotels can expect a fair amount of holidaying guests arriving via this channel, too.
There are a number of GDS providers, but the ones to take note of are:
- Travelport (which now incorporates Galileo and Worldspan - two previously standalone GDS providers)
However, one look at the websites above, and you’d be forgiven for assuming that the GDS really is only intended for large chain and corporate hotel use.
Allow us to dig deeper, because there are three ways you can use the global distribution system, and one of them might just catch your eye:
1. The ‘secret hotel’
Sometimes referred to as the ‘opaque’ GDS model, this is a process whereby guests find out which hotel they’ve booked after they’ve made the booking. Sound bonkers? Not necessarily. Consider Priceline, which uses a bidding system for hotel bookings. Similarly, Hotwire allows guests to place last minute bookings based on discounted rates, but without knowing the exact property they’re choosing.
This hospitality gamble on behalf of the guest can work well for hotels looking to fill empty rooms at short notice, and provides an added sense of adventure for the person making the booking. The downside for the hotelier is having to rely on heavily discounted rates, which can sometimes be as much as 45% lower than advertised elsewhere.
2. The merchant model
Chances are, if you’re working with OTAs such as Booking.com, you will be doing so directly, but GDS service providers offer another way to work with travel agents by once again playing the role of middle man.
As you’d expect, this can get very costly, due to the fact that, as the hotelier, you’ll pay both the OTA and the GDS service provider for providing the booking. The latter can charge as much as $12 per reservation in addition to the agency commission.
The upsides? Assuming we haven’t put you off already, the merchant model does offer a couple of benefits. Firstly, the service provider will take the hassle out of dealing with the OTAs, which may free up a significant amount of administrative time at the hotel. Secondly, the provider might offer additional services such as revenue management - again providing a professional service which will give you back time and provide a tangible business benefit.
The answer to whether or not the merchant model will work for you very much depends on any additional cost savings they’ll offer through service provision. Tread carefully here and do your research; out of the three models we’re listing today, this is likely the least appropriate for a small hotel.
3. Traditional GDS
The most common method for operating with a GDS as a hotelier is near identical to the OTA model:
- the hotel’s rooms are sold through multiple channels that are connected to the GDS;
- the website or agency that sells the room first earns a standard commission;
- the guest pays the hotel, then the hotel pays the agent.
This is the default, traditional method for working with a global distribution system and is by far the most appropriate for smaller hotels.
There’s no doubting that the GDS is a bit of a beast when viewed from afar, but its benefits are compelling, even for smaller hotels.
Thankfully, most service providers offer contracts that don’t tie you in, therefore trialling the GDS is a great option if you want to spread your wings a little wider online and see what effect its considerable reach could have on your room sales.