Ever since Marriott International announced it will cut commissions to third-party planners for bookings, industry professionals have reacted with a wide range of concerns.
The letter sent to third-party planners on Jan. 24 stated that Marriott would cut its standard 10 percent commission for bookings to seven percent for hotels in the US and Canada, effective March 31. A few days after, Marriott confirmed that it will honor existing contracts at four large intermediaries, including HPN Global, ConferenceDirect, Maritz Global Events and HelmsBriscoe, which will not see a cut in commissions this April. Again, outrage ensued from smaller third-party companies and intermediaries.
While criticism has been the norm, some other companies are looking at Marriott’s cut in commissions announcement as an opportunity to reflect on the state of the industry and where it’s heading. We spoke with Kemp Gallineau, CEO of Groups360, a company that provides data-driven solutions to the RFP process, about his take on the Marriott announcement and why he thinks it’s not necessarily a bad thing.
What are the key reasons that the Marriott move has received such backlash from planners and intermediaries?
Change always bring backlash, especially when it’s an overnight impact on someone’s earnings. In this particular situation, we have a case where it appears that Marriott has created two tiers of value that intermediaries drive. That’s causing some panic because it’s not clear who will be receiving seven percent commission versus 10 percent and for how long.
As an intermediary, what was your initial reaction, and has that reaction evolved over the course of the last couple weeks?
The industry has an inefficient process and rising costs thanks in part to lead spam — the digital distribution of information to increase impressions without necessarily providing the data people need to make good decisions. At Groups360, we knew after keeping an eye on other industries like real estate and car shopping that at some point in time, our industry was going to face a need for greater efficiencies, and technology was going to come into play to do just that.
How do you think the decision from Marriott will affect the way meetings are booked in the future, especially ones that are booked through intermediaries?
In the long run, I expect this decision to drive efficiency as the broker and consumer begin to demand better information, similar to other industries. Think about the impact of tools like Zillow and True Car. The broker doesn’t go away simply because the customer is now smarter. Instead, brokers have to become smarter, too, and the result is faster transactions that are easier for everyone.
While the Marriott decision reflects the state of our industry, what about planners who are concerned the decision primarily affects small, women and minority-owned businesses?
The issue is that Marriott seems to have drawn a line in the sand between four of the larger intermediary brands and everyone else. In our opinion, this rewards quantity of bookings but not quality of bookings. And if the crux of the letter argues that the reason for the decrease in commission is to curb the rise in sales costs, then wouldn’t you want to reward quality of bookings rather than quantity? It seems a bit backwards. In our experience, some of the highest quality bookings are delivered by these smaller firms (women, minority-owned or otherwise) because they are so hands-on, know their customers so well and are truly a value-added component to process.
Do you believe there will still be a place for them in the market, and do you have any tips for helping them recapture lost commission in other ways?
There will continue to be a place for small intermediaries as long as consumers choose them. Take a look at the other industries. Those who survived similar changes embraced technology to become efficient quicker. The worst thing small intermediaries can do now is sit back and wait. Instead, they need to find ways to use this change to leap forward in the services they provide and differentiate themselves to their consumers.
Are there any positives that meeting planners take away from Marriott’s cut in commissions?
There’s a focus on the hotel industry to lower cost, which means increasing efficiency throughout the ecosystem. This in turn means meeting planners should get access to more actionable information and a more streamlined process from sourcing to booking to post event analysis.