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CEO insight: Evolution of the GDN

February 15, 2017

In our world of fast moving technology, we take for granted how easy it is to plan and book travel itineraries for flights, hotels, and more. It’s illuminating to reflect on how far our industry has come in just a few years. Ted Zhang, CEO and cofounder of DerbySoft gives his views on the evolution of the GDN.

Legacy technology

Global Distribution Systems were originally developed by the airlines to make it easier for travel agents to book flights, and later they added the big hotel groups via a switch.

Even now, Global Distribution Systems remain integral to travel distribution, especially for agencies and business travel. GDSs were designed for communication between two classes of clearly segregated groups: suppliers like hotels and airlines on one side, and travel agents on the other. However, in my view, the great limitation of GDSs is found in the word “System” and what it really means in terms of travel distribution.

Each GDS is, by definition, a centralised system, and as a result, these GDSs lack flexibility and require partners to bend or conform to the system’s requirements. Also, these systems cannot easily adapt to new business models or new types of distribution channels, nor can they easily support smaller players at a viable cost structure.

First step: supplier-distributor connectivity

In 2007, DerbySoft introduced our connectivity service, providing an alternative to GDSs that was also more flexible and cost-efficient than true direct connections. Our focus was on making it easier for large hotel chains to have very flexible, high performance connections with each of their distributors.
These were custom solutions for large hotel groups like Hilton and Marriott and online travel agencies (OTAs) like booking.com and Expedia.com.

Even though custom integration meant a more involved implementation process for the partners and high upfront costs incurred by DerbySoft, each of these hotels and OTAs needed just one connection to us to reach multiple business partners, and the volumes of bookings were high enough to justify such customisation.

Second step: expanded coverage

Over time, we expanded our list of supplier partners, and now we have all of the top 10 global hotel groups and many others integrated with a total of over 100,000 properties. Similarly, we work with all of the largest OTAs, wholesalers, and other distributors around the world that provide the booking traffic for all these properties.

Supporting large, global, suppliers with more and more booking traffic meant that the connectivity service had to be global and able to accommodate any player wishing to do business with any other player in any part of the world, but these companies also worked with some partners directly or through other means.

What was emerging was a true global network with DerbySoft playing a large role. At this stage, however, the traffic was still focused on rates, availability, and booking data between suppliers and distributors, and hence this could be best described as an open Global Distribution Network (GDN), a big contrast to the closed Global Distribution Systems created decades ago. This GDN was not (and could not be) owned any single company. As a network, it was comprised of the independent systems of all the players involved.

Third step: players of more types…

In recent years, other types of travel players have become part of the ecosystem. Travel metasearch sites that enable consumers to compare prices continue to grow in importance and are now prevalent in most markets.

Mobile apps like HotelTonight serve niche markets, regionally-focused OTAs have appeared, and other providers that offer various B2B services such as payments, or B2C services such as guest reviews, now partner with suppliers or distributors or, in some cases, both. As these companies connect, the network expands.

Even social media is becoming more prominent in travel, with WeChat offering booking capabilities and Facebook’s Dynamic Ads for Travel displaying highly accurate, dynamic rates.

…and players of different sizes

While at first glance it may seem like the large global hotel groups represent, in aggregate, the bulk of properties around the world, in reality they represent less than 10% of the world’s hotels.

The same principle applies to the large OTAs—they may seem like they dominate distribution, but between smaller OTAs, destination marketing organisations, wholesalers, mobile apps, and other emerging channels, the big OTAs generate only a fraction of demand for most hotels. However, the lower booking volumes of these long-tail suppliers and distributors has meant that building costly, custom connectivity was not justified or commercially viable.

We at DerbySoft recognised this conundrum and have recently developed a line of products that cater to players of all sizes.

One is the product that provides an all-in-one capability for independent hoteliers to join the GDN. Go is the answer for smaller distributors or smaller hotel groups to get connected quickly to many of their counterparts. Click is the vehicle for suppliers of all sizes to manage working with metasearch engines and other dynamic data marketing ventures.

With these innovations, all travel players can participate in the GDN.

The future: Global Data Network

With the adoption of Big Data and associated data science in the hospitality industry as well as various new players that are neither suppliers nor strictly distributors but are those that offer specialised services, the GDN continues to extend beyond just rates and availability.

As providers of content services, ARI data caching services, billing and settlement services, and others join the GDN and expand the types of data that fly across the network, its utility and value to all participants increases. In this context, we at DerbySoft continue to embrace the acronym GDN, but we now consider it to be the shorthand for Global Data Network.