Marriott moved first, slashing the traditional 10 percent commission for group business to 7 percent, effective for bookings made after March 31. Just a week prior to Marriott’s effective date, Hilton announced the same, with an Oct. 1 start date. While Marriott accommodated a handful of temporary carve-outs for large meetings sourcing companies and agencies, Hilton took the equal-opportunity route, making a clean cut for all group bookings, according to a Hilton spokesperson. The moves from two majors left meetings professionals in an uproar and waiting for the next round of bad news from hotel partners. IHG followed this month.
AccorHotels has pushed to raise awareness of its North American properties among meetings professionals and told BTN in February it would definitely not be the second to slice commissions but left the possibility open. Acquis Consulting head of strategic meetings management Shimon Avish said even before IHG's announcement that the trend is likely to continue without much resistance: “[Hotels] and hotel management companies—they see a revenue opportunity on the table. A couple of big chains say [they are reducing] commissions, and they’ve already seen that there isn’t much of a consequence. There’s an outcry from meeting planners, but corporations aren’t saying anything. Why wouldn’t other hoteliers do it now that Marriott and Hilton have paved the way and shown it won’t be painful?”
GoldSpring senior consultant Kevin Iwamoto believes the downward pressure on commissions won’t end until hoteliers reach zero commissions, at least for meetings in the U.S. “All the big chains are inevitable,” he said. “It is too much of a financial benefit. The money goes straight to the bottom line for innovations or projects that hoteliers have put off. When I speak to suppliers, they say, ‘[Meetings and technology partners] are fixed costs that the clients have, and we are subsidizing them.’ It is the same justification airlines used on the corporate travel side when they cut agency commissions decades ago.”
The Truth of the Matter
Truth be told, hotels are subsidizing meetings programs through commissions payments. Big sourcing firms like ConferenceDirect and HelmsBriscoe openly promote no-cost models to their clients, though a source who preferred to remain anonymous told BTN these firms are already adjusting this model. Agencies like American Express GBT Meetings & Events, BCD Meetings & Events and Maritz negotiate financial terms with clients knowing that commissions revenue can flow back into the equation. It’s a widely accepted model for meetings management programs, especially in the beginning when meetings leaders can initiate technology purchases, fund an outsourcing partner or even a headcount without asking corporate executives for budget.
Numerous meetings professionals at BTN’s Strategic Meetings Summit said they were partially, if not totally, funding their programs through commissions revenues. That was true for midsize companies with programs in their early stages up to meetings-heavy pharmaceutical companies with global programs.
Veteran meetings consultant Betsy Bondurant said the lack of transparency in operating costs for meetings has helped short-term goals like program initiation but that deeper objectives and the perceived value of SMM have suffered: “We’ve done ourselves a disservice by pitching our programs as self-funding because it fails to show what SMM is really worth it. It makes it look like our programs are worth nothing.” One meetings buyer in attendance admitted, “It’s hard to go back to your leadership three years on and ask for $2 million to fund your agency partnership. You better have that value proposition together.”
Changing the SMM Conversation
Even with Marriott, Hilton and IHG making headlines on 3 percent commissions cuts, it’s not as if all commissions are careening to their deaths today. Indeed, smaller hotel chains, as well as some of the large gaming hotels in Las Vegas like the MGM properties, have vowed to keep group commissions at 10 percent, and there’s a chance they’ll win more business because of it. With these first salvos, however, meetings managers need to set the stage for harder conversations that are likely as additional hotel chains cut back.
World Bank senior program manager Sabrina Capannola instituted a global meetings program as part of a savings initiative for the organization. She’s been meticulous about keeping program costs, program savings and revenue streams—aka commissions—separate in her data and reporting. It’s a strategy that is serving her well as the conversation changes around the value of the program.
“The genesis of my program was a savings initiative, but that was only for the first year,” she said. Savings “is now the third of our top three reasons to have the meetings program. If you want to talk about the real value of the meetings program, you actually have to get away from the savings conversation. There are so many other benefits: saving man hours, mitigating reputational risk, attendee security. As commissions erode, you still have all those objectives. It’s wonderful that we can be self funded for a few years, but not being able to do that going forward doesn’t wipe away all the other benefits that meetings management has brought to the table.”
Shire global meetings and events head Monica Dickenson added the European Union’s General Data Protection Regulation go-forward requirements to that list: “As privacy issues and personal data management enters the picture, the need for strategic management becomes even more obvious.”
Measuring & Articulating the Value of Managing Meetings
Avish offered the following summary for meetings professionals re-evaluating the benefits of their programs. Each category excerpted below documents ways to generate and measure the achievement of goals. Read the full article here.
Procurement Savings: Savings are created through a combination of meetings policy; standardized sourcing and planning processes; the implementation of savings and demand management initiatives; and preferred supplier programs for venues, A/V and ground transportation.
Regulatory Compliance: Not every company is subject to regulatory compliance, but most in life sciences or financial services are, as are those that have facilities and employees outside the U.S. who interact with foreign government representatives. Creating policy, processes and procedures to prevent regulatory violations—plus reporting to document potential violations and remedies—can mitigate the risks of noncompliance. It is becoming even more essential to ensure compliance as the GDPR go-live date of May 25 approaches. Penalties under GDPR legislation are truly prohibitive.
Logistics Enhancements: One goal for meetings is to provide a positive experience for participants, whether internal employees or paying customers. Frictionless travel to events, seamless registration and sign-in and an enjoyable event flow significantly contribute to attendees’ perception of the event. Measuring how logistics contribute to the program can be accomplished through surveys, especially in real time through event apps.
Risk Mitigation: Meetings management provides numerous risk-mitigation components: it prevents duty of care lapses, ensures safety and security of event attendees and protects the corporate’s intellectual property and attendees’ personal data. Meetings management also mitigates fiduciary breaches like misappropriation of company funds and signature authority breaches. Each of these requires proactive prevention strategies, and some require additional back-end processes like audits.
Customer Satisfaction: Whether an event is attended by internal employees or external customers, participant satisfaction is crucial. For employees, event satisfaction can have a positive correlation with lower employee attrition and can reduce the costs of onboarding and training replacement staff. For external customers, event satisfaction directly contributes to deepening relationships, brand loyalty and sales. New technologies like event apps, second screen technologies, smart badges and beacons are emerging to enhance a participant’s event experience and capture engagement and satisfaction data.
Strategic Value: This value category documents whether organizations are holding the right events, whether those events are achieving goals and producing ROI. Historically, meetings management programs have not clearly articulated ROI because of the difficulty in measuring whether the event goals have been achieved. New technology is making it easier to document participant engagement and satisfaction, session attendance and feedback, lead capture, and overall event health. To document event or strategic-level ROI, goals must be clearly defined, metrics must be delineated to demonstrate that the goals were achieved and tools like attendee registration apps, event apps, second screen technologies, smart badges and beacons must be put in place to collect, consolidate, analyze and report on the data.