2018 Year in Review: Commission Cuts
In January 2018 independent meeting planners were met with some explosive news that reverberated throughout the industry: Marriott would be cutting commissions for third-party planners from the standard 10 percent rate to 7 percent!
Hilton, Hyatt and IHG soon joined the party, while smaller chains and independent hotels jockeyed for position by increasing their commission rates. More recently Loews Hotels took a notable stand and temporarily raised commissions.
Meetings Today covered the issue in a variety of articles:
- Marriott Commission Cuts Spark Industry Outrage
- Hyatt to Cut Planner Commissions
- Other Shoe Drops: Hilton Cuts Commissions
- Disney Stands Firm on Third Party Commissions
- IHG Cuts Independent Planner Commissions
- Loews Raises Planner Commissions at Select Properties
What does this mean for the meetings industry, and where will it end?
Meetings Today asked Eric Rozenberg, our “Independent Life” columnist and longtime meetings industry entrepreneur, for his take on the independent planner commission cuts:
Meetings Today (MT): Why were commission cuts for independent planners such big news in 2018?
Eric Rozenberg (ER): There are many independent planners whose revenues (exclusively or the major part of it) are dependent on hotel commissions. We have been talking about it for quite some time and, although it doesn’t come as a big surprise, [the issue] is now real, and we need to face it.
MT: How do you think this will affect the independent planner segment, and the wider meetings industry?
ER: There is no doubt that this is a major crisis and it is affecting tremendously the meeting planner segment. The more you depend on hotel commissions, the more you will be affected of course.
Imagine having to budget 30 percent less revenues for the next fiscal year although you haven’t lost a client. That is a very challenging situation. By extension, it surely is affecting the meetings industry and you are going to have direct and indirect changes, including within the hotel chains. The [commission cuts] are also impacting how we are operating with our vendors and engaging with our customers.
MT: What tips do you have for independent meeting planners who may be affected by this?
ER: My main tip is “chose your attitude.” You can either switch into a “bitter and vengeance” mode and wait for “the cycle to turn and have your revenge,” as I have heard in some of my friends’ comments.
Or you can look into the situation and think more strategically about the business model you have been following, the services you provide to your clients and the way you charge for those.
As Winston Churchill said: “Never let a good crisis go to waste.”
MT: As an industry veteran, what are your personal opinions on this issue?
ER: I’m biased because I never counted on hotel commissions to make my budget, it was always paid back to the client or included as a bonus. I believe this change is not going away and I won’t be surprised if the commissions are even reduced further in the future, even maybe up to zero.
In many ways, that reminds me of the situation with airlines and travel agencies in the past. Challenging times? No doubt about it, and a time of opportunity as well, to review your entire business model.
The need for independent meeting planners is certainly not going away and we are at the beginning of a new era where [planners] can play a more strategic role with their clients, bring more value and earn more revenue.
MT: What do you think the future will bring regarding this issue?
ER: I think this issue is far from being closed. I believe more hotels will continue to reduce their commissions in general while looking at ways to maintain their partnership with independent meeting planners, bringing them significant business through other more qualitative means (concessions, sponsoring their continued education, supporting business closing and creating unique experiences).
As [with] any entrepreneur, independent meeting planners are faced with changing market conditions and have the choice between going away or adapting.
Eric Rozenberg is an entrepreneur, speaker and bestselling author. He is president of Event Business Formula, an online platform dedicated to helping independent planners and event business owners.