February 2019 will see another major chain joining the cohort of hotels reducing the commissions paid to third parties, when Hyatt cuts its rate down from 10 percent to 7 percent.
As annoying as it can be, this shouldn’t come as a surprise. For years we have been talking about the threat of commission cuts, the comparison with airlines and travel agencies, and the movement that was initiated in 2018. Can it go lower than 7 percent? I believe so and time will tell sooner than later.
Based on that business decision from hotels, independent business owners who are solely dependent on commissions will lose 30 percent of their revenue without even losing one client!
Not the most exciting situation to be in.
Can it be reversed? I don’t have a crystal ball, but I don’t believe so.
This is a structural change, and “waiting for the next economic downturn” or spending time and energy to “fight [the hotel chains] and make them pay for it” are not strategies that I would be looking at.
Is there hope? Is there another way? Yes and yes.
For the 20 years I owned my agency, I never counted on hotel commissions to make my revenues. It was always an agreed-upon bonus with clients or a financial stream for the fees they were paying us.
How Event Planners Can Survive Commission Cuts
The most important questions facing any independent meeting planner today are:
- Which added value can I bring to my clients and how can I charge differently?
- If you put yourself in your customers’ shoes, which pains are you curing for them?
- Are you saving your clients time or money?
- Are you allowing clients to focus on their core business?
- Are you advising clients on how to leverage face-to-face meetings to execute on their strategy?
- When you look at the different moments where you are in touch with clients, are you reinforcing those messages?
- Are you an advisor or an order taker?
- Which other needs do your clients have could you think of servicing?
Those are certainly not easy questions to answer. It starts first by willing to go out of your comfort zone, doing things differently and creating new opportunities for your clients and your business.
As far as charging differently, it certainly needs a lot of discussion with your clients.
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This is not going to happen overnight, and you need to dedicate a lot of time and effort to meet with them—ideally face-to-face—for such an important discussion.
The idea is to shift your business model toward a value-based pricing.
Your clients might not have “paid” you directly in the past for the venue search part of your services, but at the end of the day, your commission was included in the price charged by the venue.
Moving forward, you can think about a rate card based on services, and the most important thing in my mind is to focus your clients on the outcomes, not on the work you are producing.
In other words, what’s in it for them? When you diversify your services offered based on client needs, you can have a totally different conversation. And then you can contemplate charging flat fees, success fees on pre-agreed KPIs, retainers fees and/or a mix of those.
An Independent Event Planner’s Strategy
Michelle Johnson, owner of The Anchor Group, thinks along the same lines.
“What kind of sourcing services and additional services are you offering?” she asked.
“You shouldn’t have all your eggs in one basket,” Michelle added. “I wasn’t much affected by the reduction of commissions as it represents not even a tenth of my business.
“I’m more looking at the glass half full: Seven percent is better than nothing.”
For Michelle, diversification is key, and she will never allow having more than 25 percent of her company’s revenues coming from one client or one type of business.
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I don’t know if Winston Churchill really said, “Never let a good crisis go to waste,” but it is very appropriate for the times in which we are living. More than ever, people need to meet face-to-face, and more and more organizations are outsourcing their meetings.
Hence, there is an opportunity for any independent meeting planner to be positioned as a strategic advisor rather than a commodity; to bring value and services to their clients and to charge accordingly.
It is the time to go out and strengthen your relationships with your clients.
It is the time to position your services on the long term. It is the time to change and to adapt and to create new opportunities for you and your business. So what are you going to do today about it?
Carpe diem noctem que (seize the day and night!).
Independent Life is a monthly column by meetings industry veteran and author Eric Rozenberg, who writes about the challenges and opportunities of being an independent meeting planner and entrepreneur.