In our last article about working with the hospitality industry, I discussed how to manage relationships with hotels when prospecting for meeting or group space. Today, I explore the thornier question of how to secure commissions that have been earned but that the hotel declines to pay.
This issue is as old as the business itself. Despite the engagement of sophisticated, modern hotel managements and state-of-the-art technology, travel advisors are still denied earned income for clients delivered to hotels. It is pointless to theorize about why some hotels think such conduct is a good business strategy in an age in which travel advisors have at their disposal the communication power of the internet. The problem exists, so let’s address it.
The core principle is that an agent is entitled to the supplier’s announced commission when she delivers a customer ready, willing and able to take up the supplier’s offer as made. So, in its simplest form, if the hotel advertises a room for $200 and has a published ten percent commission policy and you book a client at that rate, the commission is earned.
If the hotel walks the client, you are still entitled to the commission. If the hotel rebooks the client at the front desk so that it appears as a direct hotel booking, you are still entitled to your commission. The supplier cannot defeat your right to be paid by post-booking conduct, unless, of course, the client fails to show. However, “no show” is not the same as “rebooking at the desk.” A no-show defeats the “ready, willing and able” idea; a rebooking is deliberate supplier conduct intended to defeat your commission. The latter maneuver is improper because your commission was earned when the client stepped to the desk and said, “I’m here for the room I reserved.”
Will you book non-paying properties?
With that principle in mind, the next consideration is: do you continue to book a property that has failed to pay commission on prior bookings? If yes, I suggest you should rethink your practice. Continuing to serve a non-paying hotel simply encourages its bad behavior. The property has no incentive to change its conduct if treating you badly still gets them your business.
Then, do you keep meticulous and efficient records of your sales and the related commission policies? I know this can be hard, especially since the commission amounts are often small. Nevertheless, you should be able to determine, with a minimal amount of work, how much you are owed, by whom and how long the obligation has been outstanding.
If you have commission collection issues regularly, prepare in advance for an efficient dunning process. Create form letters, as many variations as you think you need, so you can quickly react to a non-payment situation. Having to create new dunning letters from scratch for each event creates a disincentive to act and, in effect, gives away money to which you are entitled.
Be polite but firm
Next, and this is important: Be polite but firm. Don’t go ballistic at the outset just because a commission payment has been missed or even if the first dunning letter has been ignored. On the other hand, don’t waste your time chasing the wrong solution. If the hotel’s accounting people have ignored your dunning letter, I recommend immediately going up a level to management. Explain the situation fully and provide documentation to establish that you made the booking and, if you have it, any evidence that the client actually arrived to take the room.
If the first outreach to management doesn’t work within a reasonable time, go up a level and, if necessary, keep going up a level until you get a response. Remain professional at all times. But be clear you intend to be paid.
But, what do you do if the hotel claims the client was a no-show? This raises a related issue of how you follow-up with your clients. I believe that a personal service business like a travel advisor should routinely reach out to clients to ask how their trip went and what could we have done together, as advisor and traveler, to have made the experience even better? Many clients won’t want to be bothered, but many will answer. A response, even if it contains a complaint, will give you the ammunition you need to call out the hotel on their false claim that the client did not show.
Then, if you want to stop this from happening again, take the time to write to management and tell them what happened. Explain, if it’s true, that you have provided them with multiple clients in the past and, if true, have always spoken well about them at industry gatherings. Then, calmly, ask them: What evidence is there that you should continue singing their praises and sending future travelers to them?
I put it that way, rather than suggesting telling them off, because asking a question provides an invitation for the hotel to do the right thing. A question can communicate just as effectively as a declarative statement without immediately putting the other side on the defensive. If you hear nothing or just get a form letter saying, “Sorry about that, but you can trust us in the future,” politely tell the management you will be directing your clients to competitors going forward because this property or brand has shown it cannot be trusted to treat you professionally and thus has not earned your business.
And then do it. Send future clients elsewhere when the client’s interests can be served as well that way. If it makes you feel better, when you do that, communicate to the management of the now-abandoned brand or property. Tell them you have, in fact, sent a client elsewhere and why. As they said in the movie, “The Godfather”: “It’s not personal; it’s just good business.”
Of course, a realistic view of the business world tells us some managements will dig in and not care what you do. Maybe, in their view, your business is too small to matter much. It will nonetheless pay you in the long run to stop doing business with such companies and direct your clients to other properties that can meet their needs.
What about a lawsuit?
Inevitably, someone will ask: Should I sue the hotel for my unpaid commissions? My answer is to discuss the costs and other implications with your attorney. Generally, the amounts in dispute, the problems of proof, and the unavoidable time and distraction argue against such drastic steps, but there may be rare cases where litigation is justified. Remember, the race doesn’t always go to the fastest. It goes to the relentless.
Final point: if you belong to a consortium or are associated with a host agency and are selling preferred suppliers, you may be able to get help. These issues probably won’t arise much in that context, but sometimes individual properties can go rogue and your affiliation may be helpful in those cases.