Marriott International informed its travel agent partners Wednesday it will be lowering their commissions for group bookings at hotels in the U.S. and Canada.
The new policy will take effect Mar. 31, dropping commission rates from 10 to 7 percent – a significant decrease for many agents. Contracts that were signed prior to Mar. 31, however, will remain eligible for 10 percent commission. Commissions for properties outside of North America will also remain at the original rate.
In a memo, Marriott said “distribution costs are growing faster than our group revenue; these costs are limiting our ability to invest in meeting products, experiences, and innovations," adding that the new strategy “will result in a more sustainable way of partnering with our intermediaries.”
“While group intermediaries play an important role in the marketplace, costs for our North American hotels and owners are growing at a faster pace than group revenue, which impacts hotel profitability. To strike a balance and ensure the long-term health of our business, we will reduce commissions,” a Marriott spokesperson told TMR.
Travel agents sound off
Travel agents said the move was not surprising, as is with businesses that operate a large share of the market. When Marriott acquired Starwood Hotels & Resorts in September 2016, it became one of the largest hotel groups in the world, and now operates nearly 6,000 hotels.
“I’m not pleased, but I’m not surprised," said Donna Gladbach, of Seminars International Travel in Valencia, California. "When Marriott merged with Starwood, I said we have an airline situation here."
Agents, like Jay Johnson, president of Coastline Travel Advisors, said it’s frustrating, as they now need to recoup the percentage that their businesses depend on.
“This is the problem when companies get too big and they start to dominate the market,” Johnson told TMR. “Assuming the other big companies don’t match it, we will shift our business,” adding his agency will likely be forced to markup Marriott fares to cover the loss in commission. If it’s higher than other major players like Hyatt or Hilton, his corporate clients will begin changing brands.
Gladbach, on the other hand, thinks she’ll have to charge clients a higher service fee, “because we can’t work for free, somehow we have to get paid.”
“Do we tell the customer they have to pay more money if they want to go to a Marriott or an Autograph or a Ritz-Carlton? Couldn’t they have increased the [overall] price a few dollars, and still pay the agents a fair wage? Unfortunately, we’re a forgotten sliver in the hospitality industry,” she continued.
Lynda Phillippi, of Renaissance Travel and Events in McMinnville, Oregon, hopes "to find mutually compatible solutions," as group travel is a big part of her agency’s overall revenue.
The ramifications could already be in motion for Marriott. Johnson has two large bookings in the pipeline with Marriott, and “it’s putting both of them in jeopardy.”
However, because of Marriott’s dominance in the market, operating a whopping 30 brands, agents looking for other properties may be limiting their choices. “If we send a client five properties, three are bound to be Marriott,” Johnson noted.
Another airline situation in the making
While Hilton reassured its agent partners it will still provide 10 percent commission, many are concerned other major hotel chains will follow suit, similar to practices of the airline industry over the past decade, when a series of mergers consolidated airlines from 10 to four mega-carriers that dominate the market. After Marriott acquired Starwood, Gladbach was left wondering if the same will happen to the hotel industry.
“How long do you think it’ll take before other large groups will match them? Like the airlines, as soon as someone went down to eight or four or zero, everyone did the same thing. They’ve had a lot of reliability, so I’m disappointed they would fall prey to the same tactics as the airlines did,” Gladbach said.
In the end, Johnson is confident the market will play out. “We will find a way to survive – we’re very resourceful.”
“It used to really be a partnership,” Gladbach said. “Maybe all of a sudden, they’ll realize they’ll need those hard-working agents.”