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
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
"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.