Marriott International’s recent announcement that it was reducing commissions paid to third-party meeting & event planners by 30% was met with a combination of surprise, anger, and acquiescence. The 10% commission standard has been in place for so long that it is difficult to know when it was originated. The road taken in the partnership between these third parties and the hotel industry has not always been entirely amicable. There was even a time in our industry some 35 years ago when one of the major global brands took a position of not offering commission at all to event planners, using the logic that “we are such a powerful brand that this business will come to us directly; who needs these third parties?” History tells us that this brand, still a global power today, quickly retreated on this position.
When Marriott made its announcement last month that it would reduce the commission rate from 10% to 7% as of March 31st of this year, the reaction from the industry was swift. After the dust had started to settle it became apparent that the move, while clearly bold and sending a strong message, was less impactful in reality than originally thought. Marriott’s move was precedent-setting, of course, but by granting a so-called “temporary exemption” from its impact to the meeting planning industry’s “Big Four,” (Helms-Briscoe, Experient, Conference Direct, and HPN Global), Marriott has significantly reduced the dramatic impact that its action could have had. This is not to say that this “temporary exemption” will not ultimately go away, but the reality is that this impact is significantly reduced by the “protection” of its top four third-party customers.
So what does this mean for non-Marriott branded hotels that enjoy or want to enjoy more third-party meeting planner business? In the long-term, it means that the rules of this game have changed and that it is conceivable that even further consolidation will occur in this important segment. In the short-term, things can really get interesting.
If you own or operate a hotel that does not fly a Marriott-brand flag, how should you react to this? Today, right now, you have been handed a tremendous business opportunity if you choose to grasp it. For group business coming via third-parties (other than the Big Four referenced above), it is now a fact that the Marriott hotels that you compete against will offer 7% commission after March 31st. If you are bidding on such business, knowing that you are offering a 30% higher commission rate is a distinct selling advantage for you. As with any such advantage, you should make the most of this fact, and aggressively communicate it to prospective customers. In fact, an opportunity exists for you to take this message even more proactively to potential clients. We’ve all dabbled with commission overrides and kickers for business that happens in our down times, our “need dates.” With all of the attention being focused on this third-party commission issue based on Marriott’s recent announcement, why not aggressively go out with a message of such overrides or commission “bonuses” to turn this potential negative into a positive? For example, a message of “Worried about commission deterioration? Let ‘XYZ Hotel’ host your next Group event, and we will not only keep your commission whole, we will reward you with an additional 2% as our way of showing our appreciation for your business.’
Our industry is incredibly healthy and strong, but there will always be strategic decisions made that can have impact beyond their initial intent. In the case of Marriott’s third-party commission directive, their decision to do what is best for their hotels has created an immediate business opportunity for everyone else. How will you respond?