What costs should you expect when using GDS? And how are these costs incurred? Find out more about the cost structure here and whether GDS are worthwhile for your hotel.
Every distribution channel involves costs.
OTAs charge approximately 12-22% commission for each reservation.
Metasearch sites offer different payment models, e.g., cost-per-click and cost-per-stay.
Although no commission is involved when booking directly, the web-booking-engine, the website set-up and advertising all involve costs.
GDS also charge for providing your hotel with coverage and guests
We will now take a closer look at what costs you should expect here and how you can decide whether working with GDS is worthwhile for you.
GDS costs for your hotel
Costs for GDS reservations are composed of various elements and can be somewhat more difficult to reconstruct at the first glance than “simple" OTA commission.
We have compiled a list of the most important cost items here to provide you with an overview:
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Listing fee: This amount is either paid monthly, semi-annually or annually. It differs from GDS to GDS. For example, Travelport charges EUR 60 per year.
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GDS commission and transaction fees: These vary depending on the GDS and your distribution platform. You may work exclusively with a commission model, pay a fixed fee per reservation, or apply a combination of both. Ensure you clarify this when signing the contract to avoid any surprises.
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Commission for distribution partners: On GDS, you can set how much commission to pay travel agents who distribute your rooms. This is usually amounts to between 8% and 10%, however, the choice is yours. This allows you to simultaneously manage your costs and demand, as higher commission makes your hotel a more attractive choice. You can also choose to waive commission for travel agents altogether. This reduces the possibility of travel agents booking your hotel, as they will no longer have any incentive to do so.
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Paid advertising programs for greater coverage: In a similar manner to Google, on GDS you can choose from various ad formats to provide your hotel with even more exposure. You can also pay to have your hotel appear higher up the search results. This can provide you with more reservations, however, it can also increase your costs. Try the various options to see what works best for your hotel.
Additionally to the above-mentioned items, you may also be charged one-off integration and setup fees. The summary of these fees results in the distribution costs for your GDS.
The total percentage depends on how many bookings you obtain. A larger number of short reservations at low rates usually result in increased transaction fees, which then consume a larger proportion of the revenue. If you have more bookings for longer stays, transaction fees often include some type of "bulk discount" and the costs are proportionally lower.
Commission-free corporate bookings
Negotiated corporate rates do not include commission for distribution partners, as no travel agencies are involved. In this case, you merely pay GDS transaction costs. It seems fantastic right away, right? However, bear in mind that these corporate rates are often lower than your public prices.
Nevertheless, it is still possible to achieve a good deal with these special prices. These types of offers on GDS often represent the only way to reach out to certain major customers, as they book their business trips exclusively via GDS. GDS provides you with access to corporate customers who book a certain monthly contingent and may generate additional sales by applying additional services, e.g., F&B, which compensates for the lower rates.
Pay commissions swiftly and correctly
It is possible to work with many different partners via GDS. This can result in a long list of commission payments which need to be performed monthly.
Payment is not performed automatically via GDS itself and you will also not receive an invoice. Therefore, you need to manage this yourself and ensure everything is paid correctly and on time. Your GDS profile may be blocked if you fail to do so.
The easiest approach is to automate this step on your distribution platform, ensuring that payments are always paid on time. This is included in the service provided by most providers nowadays. Hotel-Spider, for example, handles everything automatically for you.
If you are working with another partner or are looking for a new one, inquire about this, as well as any involved additional costs, to be on the safe side.
As you can see, there is no one-size-fits-all estimate of how much using GDS will cost your hotel. However, with the help of this article, you can now gain a more accurate overview of the costs and benefits of selling via GDS for your hotel. And in turn, this will enable you to make an informed decision as to whether your presence on GDS would be worthwhile for you.
