Marriott’s Commissions Cut: A Good Thing?

by | Jan 31, 2018 | For Hoteliers

Following the announcement by Marriott International that they will cut intermediary commissions on meetings by 3 percent, there has been a big rumble throughout the meetings and events industry.

A quick review of interviews in industry publications and across social media reveals that many intermediaries are angry and confused by these coming changes, and some even seem like they want to be vindictive.

In our view, now is not the time to get even with “Big Bad Marriott.” Now is the time to reflect on what brought Marriott to this business decision and make changes to how we operate in order to improve a broken group sales process. We might find that in the end these changes to our industry are a good thing for all involved, intermediaries included.

The impact of intermediaries

First, let’s take a look at why this change happened. The costs among group sales organizations has been increasing for years. In fact, when we were hotel insiders running Gaylord’s sales team, we wrestled with the escalating cost of sales.

With pressure on corporate event planners and other meeting professionals to justify return on investment, event planners turned to intermediaries to handle price exploration. With the ease of sending RFPs to hotels, the number of intermediary organizations exploded. With easy online RFP distribution came lead spamming. With increased lead spamming came the need for hotels to respond with lead catchers and call centers simply to manage the volume. The cost of managing a high volume of unqualified or mismatched leads across hotel brands has exploded, and Marriott is trying to regain some control over those costs.

For the past decade, as intermediaries, we have been our own worst enemies. Candidly, some intermediaries among us have forgotten what we do: We intermediate. That means we facilitate a transaction between a supplier and an end user. To continue to earn our keep, we need to ADD VALUE. This is the part of the equation we believe some intermediaries have forgotten. And unfortunately, as the expression goes, a few bad apples spoil the bunch.

Intermediaries need to remember who pays us: The suppliers.

They pay us for access to highly qualified customers that fit their hotels’ space and calendar. The end user expects the same thing: They expect us to know the market and the hotels and to find them a great fit at a fair value at the right time.

Unfortunately, some event planners or their intermediaries haven’t provided adequate information to the potential supplier. This means that they haven’t held themselves accountable to ensuring the hotel receives a consistent, quality, information rich lead. These meeting planners or intermediaries simply found it easier to send lots of RFPs through Cvent and other channels and then await hotel responses.

What does that say about the value of an intermediary’s service when many of them share commissions with their customers?

We can do better. Are we excited about the change in commission structure? Of course not, but our priority should be focused on providing the best service to our corporate event planners and other meeting professionals, which means finding them a hotel partner who is the best fit for their event.

It’s not only the intermediaries

While the cost of booking group business has increased for a hotel, these increases cannot be blamed on intermediaries alone. Group commissions are only a component of this equation, which means we must look at the total costs to a hotel sales organization.

Additional costs are everywhere within hotels: They have added lead catchers, call centers, and sales offices to manage the massive number of largely incomplete or unqualified group RFPs they receive (generated mostly through Cvent). With all these added internal costs, it seems that presently the only energy being spent pursuing cost reduction is to reduce intermediary commissions. To solve the larger cost-control problem, the hotel community needs to support efforts and innovations to find a solution for event planners and intermediaries seeking to more efficiently book their properties.

To hotel brands reading this, please understand that our statistics indicate that nearly 60% of an intermediary’s or event planner’s time in the group sourcing and booking process is spent chasing down hotels to get meaningful responses to their RFPs.

Intermediaries aren’t the only ones feeling this inefficiency; so is your property sales team. Your sales organization spends an enormous amount of time chasing responses as well. Why? Because hotels keep customers in the dark as to a hotel’s general space and rooms availability unless the hotel receives an RFP. If the only way an event planner or intermediary can determine if your property can accommodate the group is to send an initial RFP, then corporate event planners and intermediaries will send an RFP whether or not they intend to actually book your hotel.

This lack of transparency fuels cost creep for your enterprise. Without any change in this inefficient process, the cost of acquiring group business will continue to increase for hotels (and on this point, intermediaries are not to blame).

Our industry is changing

As an industry, we are failing to embrace and deploy technology to improve efficiency in group bookings. We operate in an incredibly clunky and inefficient marketplace. We need to introduce better information to all constituents involved in the process.

We are not the only industry that has had to change based on the need to provide better information in the process — especially to the end user. Let’s follow the lead of the residential housing market, where innovative companies like Zillow and Redfin have positively impacted their industry by providing better information to the buyer, seller and the broker, making everyone smarter and more efficient.

It’s a time of significant change in the meetings industry. Marriott has made the first move in the endeavor to reduce the cost of group bookings.

The bottom line

We should take this time to reflect on our jobs as intermediaries and look to add value to our supplier partners.

Do what they pay us to do: Qualify the “right match” customer and facilitate a fair transaction between the hotel and the event planner.

Perhaps as we make strides in better facilitating transactions, hotel brands can spend more time focusing on delivering better information to customers sooner, and we’ll get to the other side of this commissions cut and realize it has brought change for the good.