Morningstar | Travelport's solid payments and international growth continues to support its network advantage.
We expect Travelport’s global distribution system, or GDS, revenue share to remain stable at around 30% the next several years, driven by a solid position in fast-growing areas (payment, hotel, air merchandising, mobile, international traffic) fostered by a strong technology platform. However, the company is not focused on providing IT services like inventory and reservation management, which are more capital-intensive than the distribution business but also offer higher margins and growth opportunities, in addition to switching cost barriers.Travelport was the first GDS company to move from the legacy green screen technology to more innovative technologies, which has allowed it to offer modern content (airline merchandising) and services (hotel content, payment, mobile) on its platform.Travelport’s distribution platform enjoys a network advantage, as increased supplier content encourages more travel agents to use the platform, and as more travel agents use the platform, suppliers offer more content. The firm aims to solidify this network advantage with continued development of its leading technology and product offerings.Replicating the company’s GDS platform would entail aggregating and connecting content from several hundred airlines to a platform that is also connected to travel agents, which requires significant costs and time. As a result of these barriers, three operators (Travelport, Amadeus, and Sabre) control 98% of the GDS market, and we see these players enjoying efficient scale.One key risk to Travelport and the industry is disintermediation--customers booking directly on airline websites. Although carriers have had success here, we expect this headwind to stabilize over the next several years. Other key risks are incentives paid to travel agents and online travel booking growth, both of which we expect to continue increasing.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
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