Ritz-Carlton Restructures Commissions: Will Other Hotels Follow Suit?

In a move competitors call "gutsy" and meeting executives call "bold," Ritz-Carlton cut commission payments to third-party site-selection firms to 3 percent as of November 6.

The proliferation of intermediaries earning 10 percent commissions to bring meeting clients to meeting properties prompted Ritz-Carlton to make the change. Ritz will continue to pay 10 percent commissions to full-service meeting planning companies, which it defines as those who "conduct on-site inspections, event planning, on-site meeting management, and are responsible for ensuring payment."

JoAnn Kurtz-Ahlers, Ritz-Carlton's vice president, sales and business development, says of the move, "We looked at all the areas and ways we pay commissions, the value of each channel, and how much business we get from each."

Test Case? The move sparked a wave of speculation across the hospitality industry about whether others would follow suit. Mark Sherwin, Marriott's vice president, segments, products, and promotions, reports that Marriott has been and will continue to "look at the growing trend of third-party intermediaries and try to determine the value these firms create, who the value is created for, and who should compensate them for that value." At this point, however, "Marriott will not make any bold moves like Ritz-Carlton," Sherwin says.

The same with Four Seasons, according to Tom Hubler, vice president of sales, North America. "We will pay up to 10 percent to all qualified third parties," Hubler says, "including site selection companies, with full disclosure to the end user."

Among the newest players in the 10-percent field are Internet-based site-sourcing companies such as EventSource. EventSource President and CEO Ed Sarraille emphasizes that "online" doesn't necessarily indicate a lack of service. Still, EventSource is looking at changing its revenue model, at least with its new corporate product, Compass, an Internet- or intranet-based meeting tool designed to help companies track meeting activity and spending across all of their divisions and departments. Hotels may pay a "transaction fee" rather than a commission for business booked through Compass.