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.
In the Hot Seat
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%
"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
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
"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
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."