How Will Hoteliers Respond Following Marriott’s Cut to Group Booking Commissions?

Marriott International set the industry abuzz last week when the hotel company announced it would be reducing commissions on group bookings from 10 percent to 7 percent for hotels in the U.S. and Canada.

The new policy, beginning Mar. 31, impacts third-party intermediaries, reportedly including meeting and event planners, DMCs, and travel agents, on bookings of 10 rooms or more. Existing contracts, and properties outside of North America, will remain unaffected. In addition, large third-party meeting planners HelmsBriscoe, HPN Global, ConferenceDirect and Maritz Global Events are reportedly exempt from the cut.

The question that now stands is whether other hotel companies will support the travel agent community or follow suit. 

Several lodging companies, such as Omni Hotels & Resorts, have come out in support of their industry partners, reaffirming they have no plans to change their relationship with intermediaries.

“We value the relationships that we have with our partners and see them as an extension of our team. We also appreciate their knowledge of the industry and the business they bring to our hotels and resorts throughout the year,” said Dan Surette, vice president of sales, Omni Hotels and Resorts.

Wyndham, too, said it will continue to offer 10 percent commission on room revenues, “with no plans to adjust in the near future,” highlighting the value it places on its partnership with all group intermediaries and travel agents.

Preferred Hotels & Resorts went the extra step, launching a 60-day promotion called “We Appreciate You.” Clients will receive 150,000 I Prefer Reward Points and an additional 1 percent commission for any programs that exceed $100,000 in room revenue sold by Apr. 1 with contracts closed by July 30 for most North American properties. 

“We are maintaining our standard 10 percent commission level and staying true to all of our clients — especially the smaller independent planners, who we value highly,” said Elaine Macy, Preferred Hotels executive vice president of global group sales. “It will allow us to be more visible in the industry, allow us to attract business we may never have had the opportunity to bid on before; help planners get to know Preferred Hotels & Resorts as a brand and help us develop long-term relationships with our clients – small- and large-size agencies – on behalf of our brand and member hotels.”

While Hilton emailed trade partners confirming its commitment to a 10 percent rate, according to a source, the company declined to comment.

At press time, Hyatt also declined to comment.

As the driving force behind the commission cut, Marriott cited rising costs for its North American hotels and owners, growing at a faster pace than group revenue. The new policy was essential “to strike a balance and ensure the long-term health of our business,” a company spokesperson said.

Preferred Hotels & Resorts’ Macy commented: “While it is unfortunate and doesn’t have any heart, I do see the business sense for these large chains as they try to take in pure volume based on the number of hotels they have and cut out the smaller independent planners,” adding that the trend from larger hotel chains will provide an opening for its independent members and smaller hotel companies.

Travel advisors expressed everything from disappointment to outrage at Marriott’s decision. Several said the decrease would force them to move share to other hoteliers, while others said they would be forced to markup rates to compensate.

Tracey Smith, executive director of Senior Planners Industry Network (SPIN), said for many of its meeting planners “the immediate reduction of commissions after Mar. 31 will be a serious blow to their revenues this year.”

“We are simply asking Marriott to reconsider this deadline and make it the same as what they are doing for the big four intermediary companies. These members and the responders to the petition are also planning to look at other brands before considering Marriott, which could give a strong message to that brand. We do have a choice in many cases,” she told TMR.

In times of crisis, hoteliers rely on agents
The strength in partnership between meeting planners and hotels was proven nearly a decade ago.

During the recession in 2009, the meetings industry revenue was at an historic low point. Following the government bailout, banks were more scrutinized for their lavish spending, leading Goldman Sachs to call off its million-dollar hedge fund conference at the Fairmont Turnberry Island Resort & Club in Miami. It started a trend, and other banks and companies followed suit in fear of public backlash, canceling in-person meetings and conferences left and right.

It was a huge hit to the meeting and events business at hotels across the board, and they reached out to the agency community to help increase group space bookings and move share.

The meeting and event industry contributed about $330 billion annually to the economy in the U.S. in 2016, according to Meetings Mean Business, a U.S.-based coalition. There were 1.9 million meetings nationwide in 2016, representing 10 percent growth relative to 2012.