then we’ve also been watching the pace of revenue growth and the pace of
commissions, and they’re just not commensurate with each other.”
The policy change, while sudden, didn’t shock too many in the meet-
ings and events space. Fears that commissions would change have been
growing the past three to four years, particularly in light of industry mega-
mergers. “I am not surprised,” said strategic meetings consultant Betsy
Bondurant, president of Bondurant Consulting. “It makes sense that the
world’s largest hotel chain would be the one to lead.” Bondurant, a mem-
ber of GBTA’s meetings committee, pointed to an article the group pub-
lished in July 2017 in Corporate & Incentive Travel that warned meetings
professionals to prepare for an elimination of commissions.
One consultant, speaking on background prior to any Marriott news, suggested the company had the power to do away with group and meetings
commissions entirely. King, however, said that was never a consideration.
“We’re very, very committed to intermediaries and our partners; we’re committed to our customers; and we’re committed to our hotel owners,” he
said. “It’s a three legged-stool, and we are trying to strike the right balance
that we can appropriately take care of each of those audiences, invest in the
hotels appropriately so those customers can have experiences that they desire, which will drive demand to our partners.” But that consideration also
had to make good economic sense for Marriott, he added.
Partnership Travel Consulting chairman and CEO Andrew Menkes
said the bigger picture is that paying commissions is a holdover from a
decades-old way of doing business. “If Marriott or any other hotel chain
says the time has come to change the model going forward, they have a
right to do it as much as the airlines had a right to initially eliminate air-
line commissions here in the U.S. and minimize overrides compared to
what they were before,” Menkes said. “You can’t rely on former models
to sustain your revenue model going forward because times are changing
and commissions should be tied to performance.”
Indeed, Marriott’s decision comes as the rest of the hotel industry is
waking up to dysfunction in the group and meetings space and how
much it’s costing lodging companies. During the Americas Lodging In-
vestment Summit in January, hotel benchmarking company Kalibri Labs
released early figures from a report it and PwC will publish soon. Kalibri
estimates that 40 percent to 60 percent of group business is intermediat-
ed at the point of sourcing and at other points prior to execution. It also
found that 2017 group room revenue totaled $30 billion in the U.S. and
that the cost of intermediaries accounted for an estimated $1.3 billion.
That’s based on 43 percent of group room revenue being intermediated
at a commission rate of 10 percent. When adding in other aspects like e-
channel advertising, group block reservations processing and other tech-
nology costs, that figure is closer to $3.4 billion or $4 billion. On a single
booking, costs to the hotel for commissions and those other technology
costs can reach upward of 35 percent.
“Everyone knows that the system needs improvement,” said Kalibri
co-founder and CEO Cindy Estis Green. “What happened was that, on
the digital side, instead of making it more efficient, companies like Cvent
or Lanyon picked off one element of the process like the RFP part of the
process and automated it. But by automating it, that doesn’t make the
whole thing efficient. It just put a spike in the complication factor.”
Some Are Getting a Pass
While Marriott’s commission policy takes effect March 31, the commission cut has been kicked into the future for some large firms. Maritz Global Events president David Peckinpaugh said it and Maritz-owned Experi-ent have received a “temporary exemption” but declined to say when that
exemption will end, deferring to Marriott to do so. A Marriott spokesperson told BTN the company could not share details of specific contracts.
“There’s still a lot to be figured out,” Peckinpaugh said. “Marriott,
obviously, is a big brand. They have a lot of inventory in the U.S. and
Canada, but they’re not 100 percent;
there are a lot of other properties.
We’re a global company. We do busi-
ness all around the world, and while
this is important in a key market for
us, it’s not the only market. Will it
have an impact? For sure. How big of
an impact is still to be determined.”
Menkes said Marriott has the
right to reward its best supporters.
The move, though, could hurt small
meetings management professionals,
many of whom rely on commissions
to make their programs financially
viable. “All of my SMM colleagues
are scrambling, putting together re-
vised cost/benefit analyses on their
meetings programs that had previ-
ously been funded by commissions,
now wondering where the money will
come from for their headcount and
technologies,” SMMP expert Debi
Scholar wrote in an online post titled
Marriott’s Disparity and the Impact
on Strategic Meetings Management.
“Further inequity, in this insensitive
decision, is the decision by Marriott to
exclude four sourcing organizations
from the reduction from 10 percent
to 7 percent commissions. Marriott
has elected to temporarily continue to
give 10 percent [to some. SMMPs] are
at risk with these decisions.” Scholar
said some meetings leaders are con-
sidering Airbnb as an alternative.
Marjan Ghaffari, Informatica senior
procurement analyst for meetings and
events, has built her company’s meetings program to be cost neutral to the
meeting owner and to the company,
using commissions to achieve that.
Now, she said, she’ll have to “reset
and rethink,” using the words of Marriott’s King. Nevertheless, she understands the policy change. “The relationship is not working for them. ...
There’s not an equilibrium for [Mar-riott]. With this, they’ll be able to
make improvements on their end on
the technology side and just make it
easier for sourcing agents to do their
job,” she said.
Marriott will continue to honor a
10 percent commission on any contracts signed prior to March 31.
MEETINGS EDITOR ELIZABETH WEST Meetings
CONTINUED FROM FRONT PAGE
of Commissions to
• Group room revenue
totaled $30 billion in 2017,
according to Kalibri Labs &
PwC, which offered the following example of what commissions could cost hotels.
• If, say, 43% of group business was intermediated,
that’s $12.9 billion that was
subject to commission.
• A 10% commission to
intermediaries would put the
cost to hotels at $1.29 billion.
• Add in other technology
costs related to group
bookings, & the total cost
to hotels of intermediation
could be closer to $3.4 billion
or $4 billion.
“What led us to the decision was trying to balance
[intermediaries, customers and owners] and make
sure that we make a decision that made good
sense for all. … And frankly, it also had to make
good economic sense for the business overall.”
—MARRIOTT INTERNATIONAL’S BRIAN KING
Marriott Commission Cut