Hubert Joly, CEO of Carlson Wagonlit Travel (No. 2 on the Travel Weekly Power List), wrapped up several important tasks in 2006. His GDS strategies coalesced. He acquired Navigant, one of his largest competitors. He finalized the design for a state-of-the-art desktop for his corporate customers.

So, with these tasks completed, what has risen to the top of his to-do list?


"Compliance is less than 50%," he told me, meaning that fewer than half of the hotel reservations made through CWT are for properties with negotiated discounts. With room rates rising, he views hotels as a category in which he can help save money for his customers, but only if they stay focused on negotiated rates.

If that's the top priority for a corporate agency executive, what's on the mind of leisure travel agents?


Steve Tracas, president of, the largest collection of leisure agencies, has made hospitality his primary focus. Earlier this year, V-com signed up Marriott as the group's first-ever preferred hotel supplier and then made Radius' hotel program available to its membership.

Corporate agencies focus on hotels to save money. Leisure agencies focus on hotels to make money. Why all this sudden interest in hotels? Or perhaps more to the point, why now and not 10 years ago?

Rising room rates are certainly making hotels more attractive, but travel agencies have historically been wary of hotels, in part because they wondered if they were going to be paid honestly. Well into the 1990s, hoteliers were notorious for stiffing agents on commissions. I recall my own agent calling me on a few occasions to ask if I had actually stayed where he booked me. The properties had reported that I was a no-show.

I was told by a source who did not want to be named that American Express once sent letters to major hotel brands demanding millions of dollars in back commissions, purely on spec. I was further told that all of the hotel companies but one negotiated payments with American Express rather than submitting themselves to an audit.

By now most hotels have cleaned up their acts and reliably pay commissions. And many leisure travel agents have come to understand that hotels today are a far better source of commission income than airlines were when they were paying 10% base commission. Consider this: According to the American Express 2006 Business Travel Monitor, the average domestic booked hotel rate -- not the rack rate -- rose 9% last year. Average air fares, on the other hand, have fallen 11% over the past six years.

The average rate for one night in a hotel room in the fourth quarter of 2006 was $200. The average roundtrip domestic air fare paid in 2006 was $231. An agent booking a traveler into a hotel room for two or more nights can tap into a revenue stream that's far richer than air commissions were in their heyday.

And one need not pray for a client who wants to spend a week in Manhattan (average room rate: $304) to take advantage of sizeable hotel commissions. The difference between the average price of a deluxe room (the top of America Express' five-tier scale) and a budget room (at the bottom) was only $54 a night ($179 vs. $233).

Common wisdom holds that the degradation and ultimate elimination of base commissions on air between 1995 and 2002 was the largest contributing factor to the falloff of about a third of ARC-appointed travel agencies during that time period. Many of these agents who closed shop, characterized in some circles as order takers, were fatally challenged by the loss of air commissions and could not survive the rise of automated order takers (Internet-based mega-agencies) and the drop in travel after 9/11.

The emergence of hotel commissions as a robust source of revenue could conceivably provide the monetary cushion that air used to provide to even near-catatonic agents.

But just as airlines decided to cap commissions when they were enjoying their highest levels of profitability, hotels, too, are likely to want to keep as much of the higher rates they're getting as they possibly can. It would not surprise me to see changes in the compensation model. Already, hotels in the corporate space are pushing for negotiated percentage discounts rather than negotiated flat rates.

Agencies might do well to hold onto a bit of their wariness and view hotel commissions as terrific incremental revenue well worth pursuing, but not make them an integral part of their economic foundation. If fat hotel commissions were to lead to a second Era of the Order Takers, it's not likely that era would last long.


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