Hilton will cut commissions paid on North American group bookings across its brands from 10% to 7% in October, following a similar move by Marriott International in January. It's an additional blow to agents specializing in meetings and groups.

Hilton, the second-largest U.S. hotel company by revenue after Marriott, cited rising costs associated with distribution and meetings facilities and the need to free more capital to improve those facilities as the reasons for the commission reduction.

"The one thing we all want is outstanding services and guest facilities," said Danny Hughes, senior vice president and commercial director of Hilton's Americas region. "All of these things require investment and time. We're hopefully creating the opportunity for owners to invest in all of those things for a better guest experience. It'll be a more sustainable business."

The policy could be particularly challenging for agents because Hilton operates many of North America's largest hotels, which tend to specialize in hosting groups. Specifically, Hilton oversees the largest hotel in both New York (the New York Hilton Midtown) and San Francisco (the Hilton San Francisco Union Square) as well as Chicago's second- and third-largest hotels (the Palmer House Hilton and Hilton Chicago) and Los Angeles' second-biggest hotel (the Hilton LAX Airport).

ASTA called Hilton's commission cut "disappointing."

"At a time when consumer usage of travel agents and advisors is on the rise and awareness of the irreplaceable role that agents play in the travel industry is growing, it is disappointing to see supplier partners moving in the opposite direction and devaluing their relationship with our members," ASTA CEO Zane Kerby said in a statement.

With Marriott's decision to reduce its group commission rates at the end of this month, Hilton's policy widens the swath of U.S. hotels that will no longer offer 10% commissions on group bookings. As of the end of last year, Hilton and Marriott oversaw U.S. hotels with more than 1.4 million rooms, or almost 30% of the total U.S. inventory of about 5 million rooms.

Additionally, the reductions impact a groups and meetings sector that accounts for about 15% of U.S. room nights across all hotels and can account for more than a third of room bookings at full-service hotels, hotel benchmarking company Kalibri Labs said in a report earlier this year.

In fact, groups and meetings account for about $30 billion in annual U.S. room bookings and another $110 billion in food and beverage, audiovisual services, ground transportation and other ancillary services performed by hotels, the firm said.

As a result, Hilton's decision could set the stage for pushback from the agent community, which largely voiced displeasure with Marriott upon its January announcement. ASTA CEO Zane Kerby, in a February interview discussing that company's decision, questioned Marriott's assertion that costs associated with group bookings were rising faster than revenue and argued that group bookings are often the most profitable for hotels because of ancillary revenue streams such as food and beverage, as well as guaranteed room rates.

"Personally, I think it's window dressing," said Jennifer Wilson-Buttigieg, co-president and co-owner of Valerie Wilson Travel, in a February interview responding to Marriott's claim of rising group costs. "When we make investments in new technology or talent, we don't go out to our partners and say, 'Our costs are rising.'"

Whether other large hotel companies, such as Hyatt or InterContinental Hotels Group, follow suit remains in question, though at least one competing hotel group indicated upon Marriott's announcement that lower group commissions would become the norm.

"I think decreased commissions will be the wave of the future for the larger chains," Elaine Macy, executive vice president, global group sales at Preferred Hotels & Resorts, said in February. "Looking ahead, I believe we will see that most large franchise brands will reduce commissions across the board and then have some type of back-end volume bonus for the major third-party planners to reimburse them for lost commission. It is unfortunate and doesn't have any heart, but I do see the business sense for these large chains as they try to take in pure volume based on the number of hotels they have and cut out the smaller independent planners."

Hughes declined to specify what percentage of Hilton's North America business was through groups, but he did say it was "significant" and "growing." He also said the group bookings commission reduction would be across the board and that there would be no exemptions.


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