Corporates
funding their strategic meetings management programs entirely through
commissions may want to create backup plans. This year could see one or two big
players in the hotel industry lead the way in altering how commissions are paid
out to intermediaries and corporates for group and meetings sourcing.
This idea has come up more and more during the past three to four years. So why
will it actually happen in 2018? With the consolidation of recent years, the
big hotel companies have more power than ever to do away with things they don’t
like.
While a change
in hotel commission structures would certainly affect those companies that rely
on them as some part of their revenue stream or as rebates to their travel
program, a number of consultants who spoke on background for this piece said
the segment of the business that is sure to be most impacted is groups and
meetings travel. “It’s going to explode,” one consultant said.
Hotel
commissions are what make many of today’s SMMPs work. Corporates and
associations typically source hotels in one of two ways: They use
intermediaries like travel management companies or meeting planning services
like HelmsBriscoe and ConferenceDirect; these kinds of companies carry out the
sourcing and then return all or a portion of the commissions they receive to
clients. Or corporates forego the intermediary and pay a full-time internal
person to source, using the commissions they receive from hotels to cover the
headcount. Both ways allow corporates to fund people or technology without
having to ask senior leadership for a significant investment.
But
hoteliers, from their own perspectives, are paying out significant sums of
money to large intermediaries or corporates for group business they might have
received regardless. As already has been demonstrated in recent years with
cancellation policies and direct booking rates, all it will take is one major
hotel to deploy a new structure for commissions before the rest of the industry
moves in lock step.
What a new commission model could look like is still
to be decided. Hotels could focus on number of room nights in a tiered
structure instead of percentages for each room night, paying out X commission
for Y room nights and giving favor to SMMPs that can offer more room nights. Or
hotels could pay commissions only if the corporation’s broader hotel program
considers the property a preferred property. Whatever the model, if things
change, the questions become: What happens to all the non-hotel players with
skin in the game, and can corporates still prove the value of SMMPs once they
have to ask for more funds from their organizations to make them happen?