Some see Marriott rate cut as step toward tiered commissions

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In the wake of Marriott International announcing cuts to its group commissions, some hotel industry analysts and agents are suggesting that the lower commissions might not be ironclad and that there could be a tiered-commission structure in the works for group bookings.

Last month, Marriott said that beginning March 31, it would reduce its commission rate on group bookings to 7% from 10%.

Chekitan Dev, professor of marketing and branding at Cornell University's School of Hotel Administration in the SC Johnson College of Business, said Marriott might be resurrecting the strategy it employed with its Hotel Excellence training program. Marriott launched the program in 1999 with a commission-rate cut but gave agents a chance to earn back commission points.

Wyndham Hotel Group spokeswoman Gabriella Chiera confirmed last week that the company had no plans to alter its 10% commission rate "in the near future." And while representatives of Hilton and InterContinental Hotels Group (IHG) declined comment on the policy change, no other major hotel group, as of last week, had indicated it would follow Marriott's lead, according to both ASTA CEO Zane Kerby and Jennifer Wilson-Buttigieg, co-president and co-owner of Valerie Wilson Travel.

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With Marriott International announcing its commission rate cuts for group bookings, ASTA CEO Zane Kerby has been busy, talking with hotel companies and travel agents about the policy’s potential ramifications. Read More

In fact, on Thursday, Preferred Hotels & Resorts, which pays a standard 10% commission, debuted a 90-day promotion whereby agents and planners who book more than $100,000 in room revenue will get an 11% commission.

"It's a smart move," Dev said of Marriott's rate cut. "It doesn't make sense to give 10% for some one-off group versus someone more dedicated with more [sales] volume. The downside is that it's very ham-handed."

Elaine Macy, executive vice president of global group sales at Preferred Hotels & Resorts, said, "I think decreased commissions will be the wave of the future for the larger chains. 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."

A Marriott spokesperson declined to comment.

Marriott acquired Starwood Hotels & Resorts in 2016, making it the world's largest hotel company and giving it control over more than 6,400 hotels totaling more than 1.2 million rooms globally.

Because of Marriott's size, the decision to cut group commissions has some in the industry comparing it to the airlines' decision to reduce commissions in the mid-1990s, with some agents saying they would try to tweak their sales strategy away from Marriott brands.

"Travel management companies are for-profit businesses," Wilson-Buttigieg said. "While we have the obligation to always put the customers' needs first, we really have to decide who our preferred partners are, based on consistent compensation."

As many as four major meetings firms, including HelmsBriscoe, HPN Global and sister companies Experient and Maritz Travel, will retain their old commission rates, according to Maritz Global Events president David Peckinpaugh and HPN Global CEO Bill Kilburg. Both executives were quoted in a report in Travel Weekly's sister publication Successful Meetings shortly after Marriott confirmed the rate cut.

Those deals appear to be temporary, however. Brian King, Marriott's global officer of digital, distribution, revenue management and global sales, said that Marriott wasn't exempting any companies but was honoring existing contracts.

Kerby said last week that ASTA had held "several" discussions with Marriott to get further clarity on the commission reduction. And while he said he found it "slightly encouraging" that Marriott said commissions for family-group bookings through a GDS would remain at 10%, Kerby said he was given no indication that Marriott might soften its stance.

Still, he disputed the theory that Marriott's decision was analogous to the type of commission cuts imposed by the airlines two decades ago. Unlike airlines, Kerby said, most U.S. hotels are independently owned and managed.

"If I was a franchise owner here in Washington, D.C., and I was negotiating against the Hiltons and Hyatts and other Marriott franchisees, I would take a hard look before telling travel agencies that I was going to pay 7% while the others pay 10%," Kerby said.

How larger group-booking agencies and consortia might adjust their booking policies remains in question. Representatives with Andavo, Corporate Travel Management, Frosch and Travel Leaders Group all declined to comment last week.

"Travel agents work with a very slim margin, and to roll out a 30% cut seems severe," said Suzanne Hall, senior director at Ensemble Travel Group, who added that she'd reached out to Marriott representatives to ask the company to reconsider the rate cut. "While it was explained to me the reason to make this move, it was the wrong thing to do."

Whether attempts by travel agencies to tilt group sales away from Marriott would make a dent in the hotelier's bottom line is another question altogether. While Kerby estimated that travel agents account for about 25% of U.S. room bookings, it's unclear what share of group bookings come from agents.

And while Marriott estimates that its group bookings are growing at about 2% a year, the company does not disclose what percentage of its bookings are for groups and meetings.

"We can't tell an independent contractor what to do, but they do eat what they kill," said Wilson-Buttigieg. "If they have an opportunity to make more money, they're going to be very savvy about it."

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