The future role of the global distribution system could be a lot different than it is today. Amadeus is investing to ensure it maintains its place in that future.
Amadeus is on track to spend more than ever this year on research and development as the company looks toward the future of the industry.
The Spain-based company primarily operates the world’s largest global distribution system, which provides information that travel agents and others use to provide booking services to customers. Amadeus also offers software for travel agents, hotels, airlines, and other travel companies.
Amadeus said it has increased R&D spend 20.2% for the first half of 2023 compared to the same period in 2022. It spent $1.1 billion (€988.4 million) on R&D in all of 2022, according to a company report.
“R&D investment in the period was mainly focused on the implementation of [new distribution capability] contracts on the airline and travel agency side, as well as the evolution of our portfolio for airlines, travel sellers, and cooperations,” said Amadeus chief financial officer Till Streichert during an earnings call Friday morning.
New distribution capability (NDC) services are a next-generation distribution system that’s meant to enhance communications between airlines and travel agents without the traditional global distribution system intermediary.
As Luis Maroto, president and CEO of Amadeus has stated previously, that business is small right now compared to the traditional distribution methods, but it’s a strategic focus for Amadeus and other companies.
The company has signed 40 customers for NDC services already, and 20 have been implemented, Maroto said during the call. Clients that have signed contracts include Lufthansa, Air Canada, Virgin Atlantic, American Express Global Business Travel, and more.
“We continue to advance with our NDC strategy to expand our customer base and upsell technology for a number of our airline, travel agency, and corporate customers,” Maroto said.
Another key investment focus for Amadeus is on its hospitality and payments software, particularly its central reservation system for hotels. The company is continuing to work with Marriott on its transition to the system that was announced in 2021.
“We keep being optimistic about the future of the CRS, and hopefully, we will be able to really get attraction and sign additional customers,” Maroto said.
“There will be solutions in the market that would compete with us, definitely yes, but we feel what we have developed is a state-of-the-art system with a lot of capabilities to compete.”
Amadeus is also focused on its partnership with Microsoft, which includes its ongoing transition to the cloud and application of artificial intelligence and machine learning.
Total revenue for the first half of the year increased 28.2% to €2.7 billion ($2.97 billion). EBITDA grew 41.3% to €1 billion ($1.2 billion).
Revenue for air IT products has increased 26.2% to €902.4 million ($995.4 million), and revenue for hospitality and other products increased 23.6% to €429.2 million ($473.4 million).
The company said it distributed dividends earlier this month totaling €333.4 million ($367.8 million), which is half of the profit reported for 2022. The company also started a share repurchase program of up to €433.3 million ($478 million) in the second quarter. The stock price is up some 40% this year.
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Photo credit: Lufthansa is one of the airlines that has signed an NDC contract with Amadeus. Oliver Roesler / Lufthansa Group