Hotel Contracts in the Wake of Commission Cuts

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Hotel Contracts in the Wake of Commission Cuts

Room night commission cuts mean planners cannot provide “free” services anymore

by Leo Jakobson
Originally posted on MeetingsToday.com
June 5, 2018

Read the full article here.

Before this year, in most cases, the standard contract between a third-party meeting/event planner and a client was relatively straightforward: The planner would not charge the client directly. Instead, the hotel booked would pay the planner a 10 percent commission on all hotel rooms used, covering their fee. It had been that way for decades.

But that all changed on Jan. 24, when Marriott International — which recently acquired Starwood Hotels and Resorts — announced that it was cutting the commissions it pays planners on room nights booked from 10 percent to 7 percent in its U.S. and Canadian properties. Hilton Hotels & Resorts quickly followed suit. There was a big uproar and a lot of anger, but by the time a third large hotel company, InterContinental Hotel Group (IHG), made the same cut in early May, the reaction had quieted. While some smaller chains and many independent hotels announced loudly in the first few weeks that they would stick to the 10 percent commission — a number even bumped that up a few points for the remainder of the year to grab business — there was a growing sense that the old business model of working for clients but getting paid by the suppliers they use is faltering, and the standard contract is on the way out.

The New Starting Point

Nicole McCoySome planning firms, particularly large ones, have long charged separate fees from the commissions they earn. As a full-service meetings management company, Bishop-McCann offers services other than site selection, including production, speakers, and program management, among others. “We have a general rate card that we negotiate with our ongoing clients,” says Nicole McCoy, director of global sourcing, for the Kansas City, MO–based firm. “Obviously, commission plays a role in that. The amount of commission that we anticipate is certainly something we are very transparent with. It is very much a line item.”

Read the full article here.