What’s Next for Hotel Commission Structures?

Marriott International’s recent decision to cut its commission rate for group intermediaries from 10 percent down to 7 has spurred debate across the hospitality industry, much of it focused on the minutiae of how meeting planners are reacting and whether other hotel companies will follow suit. But the overarching question raised by the new policy is what it could mean for the industry’s entire commission model — which increasingly has been complicated by the growth and variety of intermediaries.

What do hospitality sales and marketing professionals need to know? More than anything, that there’s no single correct course of action — meaning hotels have to make their own decision when it comes to group commissions. A conference call for HSMAI’s Sales Advisory Board last week offered some factors to keep in mind:

  1. There will be short- and long-term implications. In the short term, companies that don’t have a large global presence — or do, but are not part of a large hotel portfolio — likely will discover new sales options. “Other brands and independent hotels are going to [differentiate themselves] … on business they may have not had an opportunity to do before,” a Sales Advisory Board member said, “and I think that’s going to open up some additional destinations to the third-party planners who are wanting to stick with their [existing] commission model and structure.”

And in the long term? “How many other brands,” the member said, “are going to look at this [new] type of model and say, ‘You know what? Maybe … need to reevaluate’” how we value the cost of customer acquisition.

  1. Intermediaries need to better differentiate themselves. This is the latest story to highlight the fact that not every intermediary is the same. A “one commission fits all” policy doesn’t reflect or reward the specific services that intermediaries bring to the table. One Sales Advisory Board member noted that while third parties providing production, transportation, audiovisual, and other “experiential” services can have an easier time of it, “it might be a bit of a challenge for brands … feeling that there’s a lack of transparency in understanding exactly what they’re paying for.” It’s on intermediaries to do a better job of communicating their specific value proposition — and hotels to determine how to value those services.
  1. Other industries might offer lessons learned. One Sales Advisory Board member pointed out that the financial-services and airlines industries have gone through similar restructurings, with financial services currently moving away from commissions and toward a fee-for-service model, while in the early 2000s airlines drastically cut commissions they were paying to travel agents. In both cases, it’s instructive to look at why those industries did that — financial services to create “a higher degree of fiduciary responsibility, and doing what’s right for the client,” the member said, and airlines as part of “being more thoughtful about what type of business they would pay commissions on to begin with,” as well as wanting to “create plans that were much more based on pay-for-performance.”
  1. Don’t forget: It’s still anybody’s guess. “An interesting thing for all of us to watch in the shorter term — whether it’s a month, or two, or six, or whatever — is going to be, what do [other hotel companies] do to maximize their opportunity?” a Sales Advisory Board member said. “… How competitive does it get among the other guys to try to steal” market share from each other versus addressing the ongoing debate about managing the rapid growth of customer-acquisition costs?

About HSMAI’s Sales Advisory Board

HSMAI’s Sales Advisory Board leverages insights, emerging trends, and industry innovations to fuel sales for hotels. Members include:

  • CHAIR: Ed Skapinok, Senior Vice President of Sales, Marketing, Revenue, and Reservations, Aqua-Aston Hospitality
  • Jamieson Asselta, Director of Sales, Northeast, IDeaS – A SAS COMPANY
  • C. Becker, Principal, Titan Group of New York LLC
  • Bart Berkey, Director of Global Luxury Sales, Marriott International Luxury Brands
  • Brian Burton, CHSE, CRME, Vice President of Revenue Strategy & Optimization, White Lodging
  • Michelle Crosby, CMP, Director of Global Sales, Hosts Global
  • Katie Davin, CHSE, Associate Professor, Johnson & Wales University-Providence
  • Amber Fox, System Consultant, NAVIS
  • LaDonna Gerhart, Executive Vice President of Sales & Marketing, Remington Hotels
  • Lisa Giaimo, Vice President of Sales & Marketing, OTO Development LLC
  • Cory Hagopian, Executive Director, Sales Effectiveness, AccorHotels
  • Kaaren Hamilton, CMP, CMM, Vice President of Global Sales, Carlson Rezidor Hotel Group
  • SiuYin Ko, Corporate Director of Global Sales, Rosewood Hotel Group
  • Melissa Kouvelas, Director of Worldwide Sales, Best Western Hotels & Resorts
  • Ginny Morrison, CHA, Vice President of Sales & Marketing, Spire Hospitality
  • Ronald Taylor, Vice President of Sales and Development, WCG Hotels
  • Jim Vandevender, Chief Marketing Officer, Knowland
  • Christine Wight, Executive Director of Hospitality
  • Tony Yeung, Principal, ZS Associates

Categories: Sales
Insight Type: Articles