Worldspan, the leader in global reservation systems and e-commerce for the travel industry, has announced plans to restructure its pricing model to better reflect the value of the global distribution system (GDS) and its distribution partners and to disseminate more equitably the costs of distribution.
Current GDS pricing models require travel suppliers to bear virtually the entire cost of electronic distribution. Worldspan
is evaluating possible alternatives to this design.
“The system is clearly broken,” said Paul J. Blackney, president and chief executive officer for Worldspan. “Today`s business model has suppliers paying ever-increasing booking fees-due in large measure to ever-increasing incentives to distributors. This situation is driving many suppliers to consider developing alternative distribution systems, incurring a burdensome cost and diverting their focus from their core business. We need to find a solution for them.
“It is our obligation to our customers - both suppliers and distributors, to our shareholders, and to our industry - to find and implement a solution that will benefit all these constituents.”
The goal of Worldspan`s new pricing model initiative is to ensure that suppliers and others involved in the distribution process receive clear and recognizable value for their purchase of GDS services.
“Whether it is fact or perception, if customers believe they are not getting appropriate value for their expenditures, they have a powerful incentive to find an alternative,” said Blackney. “We cannot afford to push suppliers, travel agencies and other distributors to alternative solutions. We will deliver a win-win-win solution for suppliers, distributors and Worldspan.”
Other GDSs have announced short-term plans supposedly designed to assist travel agencies, but Blackney contends these would-be solutions “don`t deal with the basic problem”.
“We are preparing a strategic, long-term response that promotes the viability of all forms of travel distribution-including traditional travel agencies` going forward. Traditional travel agencies will continue to add value in that long-term solution. The current business model tends to conceal any distributor`s value from suppliers and consumers. By restructuring the business model, we will enable the value of all forms of distribution to be recognized by all beneficiaries.”
Effective immediately, Jesse Liebman, senior vice president and general manager Worldwide Travel Supplier Services for Worldspan, is taking the newly created position senior vice president -Strategic Projects. He is leading a Worldspan team dedicated to developing and implementing an alternative pricing model.
“This is about realigning the value proposition for all constituents in the distribution process,” Liebman said. “Today, that value proposition is distorted. When suppliers believe that they have an incentive to bypass GDSs, travel agencies or other distributors, it`s a sign that the conventional system doesn`t work.
“By engaging in this new effort to restructure a broken business model, Worldspan is again out in front in the drive to reduce distribution costs for airlines and other travel suppliers. Worldspan Corporate Online, a program that leverages the efficiencies of Internet booking solutions to lower distribution costs, and Worldspan Web AirFare, technology that delivers to distributors the broadest possible access to Internet fares at no cost to airlines, are just two recent Worldspan initiatives in this area.
“In addition, Worldspan has developed and implemented several other programs designed to reduce supplier distribution costs in the e-commerce channel.”
Technology is not the issue, Liebman said. “Worldspan has powerful, leading-edge technology that enables the multi-brand shopping experience that consumers demand and distributors want to provide,” he noted. “The issue is developing a business model that, when viewed in its wider context, recognizes and fairly compensates all the participants in the distribution process for the value they contribute, without unfairly burdening any one industry participant. We need to focus on the financial model that governs the way we do business.”
Worldspan has identified a number of pricing model options, Liebman explained, and will continue to explore additional solutions. “We want to build that list of options to be as comprehensive as possible, then solicit feedback from customers-both distributors and suppliers-to help assess the strengths of one option over another. In developing this new business model, our plan is to be fully engaged with suppliers and distributors of all types, including e-commerce and traditional travel agencies and others. This will be a collaborative effort with all stakeholders.”
Worldspan expects to announce details of its new pricing model later this year. Jesse Liebman`s successor to lead Worldspan`s Worldwide Travel Supplier Services will be announced shortly.
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