Last week Marriott International announced it would cut third-party commissions on group business from 10 percent to 7 percent. This decision has a huge impact on the meetings/events world.
Dear Marriott,
After you acquired Starwood last year and became the industry’s “big daddy,” we’ve all been curious about what this would mean for the future of hospitality. Last week, we saw a glimpse of how you may choose to leverage your newfound size and power in the years ahead.
Many feel you decided to step on the “little people” by breaking from the industry norm of 10 percent commission and slashing compensation by 30 percent for most agencies. To add insult to injury, a day later, you announced that you would keep commissions at 10 percent (or more) for your four preferred partners—the big players.
The unmitigated rise of homesharing and online travel agencies, or OTAs, has had undeniable impact on your consumer leisure revenue, where loyalty is most certainly dead. If Booking.com and Expedia can generate up to 25 percent commissions, it is a clear demonstration of the power of aggregation. There was comfort, and inertia, around the industry norm of 10 percent, but your moves last week means that fragmentation will no longer be acceptable to meeting agencies. The group business agencies will be forced to consolidate in some form, and their collective power will force commissions above 10 percent. Ultimately, they will thank you for forcing them to work together.
In the meantime, your partners want to know where their cut is going. Cutting compensation by 30 percent could be acceptable if efficiency also was going to rise by 30 percent—in other words, it should be 30 percent easier to book group business at your hotels. To date, this has not been the case. You currently do not provide the owners of your hotels with smarter systems to help them score corporate leads and systematically analyze seasonal demand and competitive pricing to make quick and reliable revenue decisions. Instead, your hotel event teams continue to drown in “ghost RFPs,” suffer from high staff turnover rates, and trudge through an outdated catering system. Nearly every aspect of the booking process remains manual, painful, slow, and outdated for your corporate customers as well. And now you’ve decided to cut compensation to the people who help make this process smoother and more efficient.
The technology to improve corporate group bookings by more than 30 percent exists, but you have been reluctant to engage partners because you understandably want to “own it all.” But avoidance is no longer possible. It’s time to help your customers design their events online, easily pick the right spaces and packages within the right venues, rapidly negotiate and build custom events (without phone/email-tag and waiting games), contract events within their corporate policies, and have seamless payments. Integrating this with smart decision systems at your hotels, providing for rapid responses and pricing, could be the “next generation” approach that could justify the commission rate cuts and make life more efficient for all.
You are a great operator of hotels, but let’s face it, hotel operators are not software companies. The question is whether you will partner with leading technology companies—or will you try to create this technology yourselves and add another corpse to the “hotel app” graveyard? The evidence is clear: today’s customers want to compare across all brands before purchasing anything.
Until there is an answer for the 30 percent loss in value, your decision feels like it is based on “because we can.” We hope and trust that you will use your power for good. This is 2018: companies now rise and fall based on values. What matters most is how you treat smaller and weaker stakeholders, how you protect consumers, and how you add value to the community. Corporate leadership in today’s America means not making decisions on profit alone.
Ron Shah is the founder and CEO of Bizly, whose corporate meetings software is designed to bring the entire event transaction and event services online in one integrated platform.
