Marriott International is reducing the commissions it pays
to group intermediaries from 10 percent to 7 percent beginning March 31, 2018.
The policy change will be a brand standard that will take effect at all managed
and franchised properties in the U.S. and Canada.
Marriott global officer of digital, distribution, revenue management
and global sales Brian King said the change is a "reset and rethink"
moment for the company. "We've been looking at the demand that we're
receiving from our customers and the amount of innovation that needs to take
place in the group space from an end-user perspective, and 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 may not come as a surprise to many in the
meetings and events space, as fears that commissions would change have been
growing the past three to four years, particularly in light of industry
megamergers. One consultant speaking on background earlier this month, 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.
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.
Hotel benchmarking company Kalibri Labs on Tuesday released
early figures from a report it intends to publish within the next month,
compiled in collaboration with PwC. Kalibri estimates that 40 percent to 60
percent of group business is intermediated 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 technology costs, that figure is closer to $3.4 billion to $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."
Estis Green said the report is intended to provide a fuller
picture to all sides of the meetings and events industry so stakeholders can
make the booking process easier, faster and more convenient and reduce costs so
suppliers, meeting planners and consumers can all benefit.
While Marriott is reducing commissions, King said, the
company also has been investing to improve groups and meetings. He pointed to
initiatives like its online meetings training program, Meetings Excellence, as
well as its centralized group commissions and group intermediary website, which
launched in 2008.
Those improvements and the promise of more, however, may
come as little comfort to strategic meetings professionals who see commissions
as critical to making their programs financially viable. Many SMMPs rely on
commissions to pay for technology licensing or internal meeting planners.
Similarly, businesses banking on commissions to support their economic models,
such as ConferenceDirect and HelmsBriscoe, will take a direct hit.
While Marriott's commission policy takes effect March 31,
Marriott will still pay a 10 percent commission on any contracts signed prior
to that date.