Will Marriott move make 7% the new agency commission norm?

World
Will Marriott move make 7% the new agency commission norm?

As of 31 March 2018 Marriott is to reduce, in North America, the third-party commission rate it pays for group bookings to 7%, down from 10%.

The move has been greeted by outrage by agents and meeting planners and, understandably, by glee from some competitor suppliers. True, some evenprofs think the move is a canny one by the hotel group, with some claiming Marriott will have weighed up losing some agency support with the advantages of attracting and growing more direct business.

A letter sent to travel partners from Marriott said in part: “Marriott’s group distribution costs are growing faster than our group revenue; these costs are limiting our ability to invest in meeting products, experiences, and innovation… Changing economics in this segment, plus these growing costs, required us to reevaluate our intermediary compensation model. We are introducing a new strategy that will result in a more sustainable way of partnering with intermediaries.”

The commission change is to be piloted in North America before being rolled out to the rest of the world.

David Bruce, of CMP Meeting Services has formed a Meeting Planners Unite group on LinkedIn in response to the Marriott’s move.

Another US planner, Karin Hanson, events and programme manager at GENIVI Alliance, described Marriott’s strategy as “a slap in the face to all meeting planners…so much for loyalty in business.”

Maike Dörrenberg, director of travel and event management at Zentrale GmbH MICE & More in Germany, also noted on LinkedIn: “Seems they are begging us to take our business to other hotels. Guess I’ll do them a favour and will take it elsewhere.”

Josue Torres Reyes, posted that he was with the Hilton brand in Tampa and said they were still offering the standard 10% rate.

Not all, it seems, are reacting negatively, with Adrian Segar, a conference designer from Vermont, describing third-party commissions as ‘corrosive’ and urging the industry’s trade associations to stand up for intermediaries more.

When the mega hotel chains began to merge new super-mega hospitality groups have emerged with power to put more pressure on revenues and rates.

So, what can planners do in this situation? Well, they need to make a contingency plan considering how much they stand to lose. The chances are, commissions are going to disappear, as they did in the airlines sector.

Industry expert and ex-Lanyon VP Kevin Iwamoto has noted that business travel has accelerated along the road to transactional costs and management fees and, now it seems, he believes it is the turn of meeting and events to move towards that model.

Contacted by CMW, UK industry association the HBAA commented: “Our agency members are of course disappointed to see this latest move from Marriott, and will in turn will make their own commercial decisions on what is best for their businesses and for their clients. We are aware that whilst commission paid by Marriott properties in the US and Canada is being reduced, it remains untouched for meetings and events in their properties elsewhere.”

Former booking agency chief and MD of Mac-D Consulting, Des Mclaughlin, told CMW: “It’s not the first time Marriott have reduced commission. They tried this several years ago with their Ritz Carlton brand where they reduced commission payments to 5% for agents. One presumes this must have negatively impacted Ritz Carlton business though as gradually the hotels returned to paying the accepted industry amount of 10%. 

“Agents will, of course, now avoid booking Marriott where possible and I think it’s a risky strategy despite Marriott’s position as the largest hotel group worldwide. However should Hilton, IHG and the other major groups follow Marriott’s lead then agents will have little choice but to accept 7% commission as the new norm.”

Managing Editor, Conference News & Conference & Meetings World. Write Paul an E-mail