What do financial institutions and European regulators have in common? Both appear to be key groups of people impacting on the lives of anyone in the GDS community.

Financial institutions are being blamed in part for the temporary collapse of Travelport’s much lauded road to an IPO, having reacted less than favourably during the investor roadshows in recent weeks.

But it is actually the airline alliances that could actually prove to be the bigger threat to the likes of Travelport, Amadeus and Sabre than the suits of London’s Square Mile, New York’s Wall Street or Madrid.

Little known to the outside world, but quietly over the past 12 months the European Union has started to acknowledge that may possibly be a threat to competition and negotiating power of airlines when it comes to the GDSs.

There is growing speculation – evident among some of the higher profile figures at this week’s Travel Technology Europe event in London – that both the OneWorld and Star collectives are now under intensive scrutiny, as the original remit widens.

Until now it has was only a number of the airlines within the groups that attracted the attention of the European regulators – officially, when the original investigation launched in April 2009, it concerned “certain members”: British Airways, American Airlines and Iberia for OneWorld and United, Continental, Air Canada and Lufthansa for Star.

The investigation initially promised to examine pricing, revenue management and scheduling on transatlantic routes, similar to efforts by the Department of Transportation in the US.

An EU official confirms only what is in the publicly available documents and the commission’s stated objectives.

It is becoming increasingly well known in GDS circles and the lobbying community in Brussels that a significant part of the investigation will focus on how the alliances as a group – rather than as individual airlines – may attempt to squeeze the GDSs at the negotiating table when distribution contracts come up for renewal.

There is growing concern that the alliances will attempt to take over the contracting on behalf of all airlines in their portfolios if anti-trust immunity is passed.

Unsurprisingly, GDSs are worried that their always delicately balanced bargaining hand with an individual airline will be diluted if negotiations are carried out an alliance level.

The European Technology and Travel Services Association, which has online travel agencies and all the GDSs as members, says it is watching the situation closely and will assist with the investigation if called on.

EU officials will not give any indication as to the expected time of the next update from the investigating panel.

Read the headline again… That’s right, the UK’s official body which represents the interests of travel organisations and consumers has a rather interesting idea.

But first, some background: two key distribution models are emerging in consumer-facing online travel.

Firstly, there is the distributed transaction model – supplier places product, price and availability information into some form of distribution system, consumer buys from an agent (online or off), the transaction details are transmitted to the supplier.

Secondly, media models are coming to the fore. Awareness of the product (including perhaps price/availability) is on a 3rd party website, but ultimately the consumer books with the supplier directly.

Media models are simply a form of advertising with rich data. It is a marketing process, not a sales process.

With flights, hotels and other commodity products distributed transactions work well.

Most leading OTAs sell flights/hotels and consumers are happy enough to book these products via OTAs.

One reason is that collectively we as an industry have worked out what product information the consumer needs in order to make a purchase decision on a 3rd party website.

For flights/hotels the hot news is the media model websites (including meta search, trip planning sites etc).

For escorted tours, activities and some ground arrangements the story is quite the opposite. Take the example of a customer looking to book a white water rafting holiday.

The consumer will want to communicate with the supplier prior to booking. It is the nature of the product. Hence for these products distributed transaction websites have never really taken off and, I argue, are unlikely to.

Instead of automation tour companies focus on efficiency. You know you are going to have human-to-human contact as part of the sales and booking process – how can that be made efficient?

For these kinds of products the media models are king as ultimately it ensures consumer-to-supplier communication takes place directly.

The hot news is where you see distributed transaction models being given a go.

Trouble ahead

In the UK at least, distributed transactions are a core part of what a travel agent does. In flight/hotel sales the travel agents are competing not only against strong online distributed transaction players but with media model sites that don’t need any complex technology nor any consumer protection mechanisms. Is that fair?

Seems the agents don’t believe so and they want to even up the playing field.

What we may have here is the start of a proxy war between the smaller agents who want to maintain the distributed transaction model and the media model people.

However the media model people haven’t really woken up to it yet (probably because the trade press tend to write from a travel agent perspective!).

The proxy war will be fought within the new Package Travel Directive (a European-wide proposal that is under consultation at the moment).

From an ABTA statement this week:

“The ABTA submission to the European consultation advocates that the scope of customer protection should be extended to include all linked leisure travel arrangements, including “click-through” arrangements bought on the internet.”

Now I am not quite sure what this means yet. Does it mean that if you are a travel website and you have an affiliate banner to sell a hotel – and an affiliate banner to sell a flight – you need to be offering consumer protection?

That would be troubling. It would also be troubling to all non-travel websites who have travel advertisers and, if finally incorporated into the new directive, break the media model at least in Europe.

ABTA asked their members the following question:

If a new Package Travel Directive were introduced, indicate which of the following travel-related products or arrangements you think should be within the scope (tick all that apply).

One of the answers was:

• Accommodation, transport andor other tourist services purchased on the internet from different sites which are clearly linked on their web pages.

105 out of the 141 responses (74%) ticked that this should be in scope.

I am somewhat surprised by this position taken by ABTA. Last year when the ABTA chairman was being elected there was a great discussion on the Musings blog about this very topic. John McEwan (now ABTA chairman) stated:

“My view is that ABTA is best placed to represent the industry as a whole and that should include non transactional companies such as Cheapflights, Google etc. The methods of purchasing travel have evolved and ABTA needs to evolve accordingly.”

The European Union is still accepting responses to the open consultation (until 7th February 2010). Consultation website.

If you believe that websites should be able to link to travel companies without taking responsibility for consumer protection then make your voice heard!

NB: I am taking part in a debate about these two models in tour distribution as part of Travel Technology Europe (London, February 9th 2010). Seminar A1. I will be debating these two models with Deepak Jha from Isango.

Just as consumers – and the travel trade itself – thought regulation and insurance issues around bundled online holidays couldn’t get any more of a mess, European regulators today stepped into the furore to launch their own new set of guidelines.

In a statement released late this afternoon, officials in Brussels (headquarters of the European Union) said the existing Package Travel Directive would be extended to include dynamically packaged holidays created over the internet.

The original guidelines, created in 1990 and pre the explosion in online travel, did not include “liability for sub-standard services and protection for insolvency” for holidays.

The EU is now looking to include bundled holidays as part of the legislation – a decision it says was accelerated following the spate of recent travel company failures over the past 18 months (such as XL and Zoom).

In a statement, EU consumer commissioner Meglena Kuneva says:

“We need tough protection that gives all consumers booking a package holiday the peace of mind they deserve, and we need a level playing field so businesses compete on equal terms.

“I am particularly concerned about the issue of insolvency. Anyone who saw the TV pictures of thousands of holidaymakers stranded at airports after bankruptcies from Sky Europe to XL, Futura and Zoom, knows that now is the right time to ask tough questions about extending basic insolvency protection to consumers across the board.”

The move follows recent localised challenges to existing package holiday regulations, such as the TravelRepublic vs CAA saga in the UK.

The EU’s decision to take up the baton will be seen by some as a typically late entry into the debate.

Officials today said around 40% of all holidays booked in the EU are package holidays, with around 33% dynamically packaged and 25% classed as other arrangements.

Nevertheless, around 56% of all travel is booked independently and therefore not protected by EU directives in the case of a travel provider going under or airline insolvency.

The EU says it plans to introduce “concrete” proposals to review the Package Travel Directive by the Autumn of 2010. The official consultation process kicks off today and ends in early-February 2010.