3rd Party Event Planners Discuss Marriott’s Commissions Cut
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3rd Party Event Planners Discuss Marriott’s Commissions Cut

By Rich Luna | Jan 26, 2018

Marriott International’s announcement that it will cut commissions paid to third-party meeting planners to 7 percent from 10 percent at all of its properties in the U.S. and Canada has raised significant concerns in all corners of the meeting, event and hospitality industry.

Marriott sent a letter from Tammy Routh, vice president of global sales, to third-party planners earlier this week, saying that while “group intermediaries play an important role in the marketplace, costs for our North American hotels and owners are growing at a faster pace than group revenue, which impacts hotel profitability.”

“At Marriott International, meetings and events represent a critical part of our business as well as an opportunity to drive innovation and win with customers,” Marriott said in a statement. “The current business model and environment, however, present significant obstacles to making the investments needed to deliver a world-class experience for customers.”

But some third-party planners are saying that this is not a smart move and could have negative implications for clients.

“My position is that this move by Marriott is a slap in the face to the thousands of agencies that have been loyal to the brand and put hundreds of thousands of dollars in room revenue, F&B revenue and ancillary revenue into their annual bottom line,” said Carvie Gillikin, vice president of Fourth Wall Events in New York City and former president of the MPI Greater New York Chapter.

“Sure, the rumors have been flying even before the acquisition of Starwood by Marriott, but the end result shows their perception of a true partnership.”

He said that, from what he understands, Marriott “is only trying to squeeze the smaller agencies out” to make room for agencies to which Marriott has given a certain annual reprieve.

“I think they we are going to see other hotel brands start to offer increased commissions to third parties in an effort to guide business their way,” Gillikin said. “For many associations who depend on those commissions, Marriott is making it very difficult to choose them.

“As for what will happen to third parties, somebody has to do the work and corporate America does not want to staff enough planners to do all the sourcing. We will look to source hotels that will offer full commissions while offering our clients the same, if not better accommodations, locations and service. When a Marriott property is the right choice, we will have to find a way to make up the loss in our revenues. Sourcing the right destination/hotel is vital to the success of a program and must be valued as such. To my knowledge, I have not seen or heard from anyone that supports this.”

Calls to Marriott for additional comment Friday were not returned.

Paul Van Deventer, president and CEO of Meeting Professionals International, issued a statement. MPI has about 2,000 members who are third-party planners.

“As an association, MPI’s focus is on ensuring the long-term and sustainable financial health of the events industry, and raising the professionalism of those who work in it,” he said. “MPI’s membership consists of a broad and diverse community of event professionals who are directly and indirectly impacted by this decision, including thousands of third-party planners, the global hotel brands and numerous Destination Marketing Organizations (DMOs).

“Third-party organizations have become an integral part of the live events industry value chain and are a proven and important resource for planners, destinations and venues. As in any business relationship, the value of services provided needs to be determined by the organizations benefiting from said services.”

Marriott is the largest hotel company in the world, following its September 2016 merger with Starwood Hotels & Resorts. Marriott now comprises 30 brands and more than 5,700 properties globally. 

Routh’s letter said that “Marriott’s group distribution costs are growing faster than our group revenue; these costs are limiting our ability to invest in meeting products, experiences and innovation. Changing economics in this segment, plus these growing costs, required us to reevaluate our intermediary compensation model. We are introducing a new strategy that will result in a more sustainable way of partnering with intermediaries.”

Zane Kerby, president and CEO of the American Society of Travel Agents (ASTA), said the “30 percent cut in intermediary compensation diminishes the value of the role agents’ play. We plan to discuss this change with Marriott, our agency and consortia members and other stakeholders with an eye toward ensuring positive business outcomes for all involved. We are disappointed in the signal that a cut of this magnitude sends to the broader agency community.”

David Stevens, principal at Event Marketing Authority in San Francisco, said he finds the subject “quite provocative and, as cliché as it sounds, disruptive.”

He said since the beginning, his agency has been commission free as he felt it “ethically compromised us when negotiating for best possible rates for our clients. How can you really pull that off when for every $10 you save them, it costs your bottom line $1?”

He believes third-party planners are going to have to “rethink their business model. How much is their time really worth? Do they go to an hourly model, a project-based model or a hybrid? Planners are also going to think of third parties differently. When a planner sees a rate for a Marriott moving forward, are they going to think, hmm, could this be lower because they’re only getting 7 percent now? It’s not as low as it COULD be? Wonder what kind of rate I could have gotten if I had contacted my global sales rep, which I might add Marriott makes plenty difficult on figuring out who that is.”

Stevens said he has heard from only one person who supports the decision, a corporate planner, and “he’s of the thought that if a planner is doing their job right, networking, attending industry events, maintaining those relationships with their hotels reps, they shouldn’t even need a third party.

“That being said, I really find this as an opportunity for us as an industry to advance and start labeling our value for what we’re worth. Site selection is a time-consuming process, but it’s part of the job. It’s also why most brands have global sales people. So you can send out an RFP to a few people and get your responses from the many. By eliminating this hidden payment method, it increases transparency to the executive office internally and helps them understand just how much work we do, and the immense value we, and our ‘rolodexes,’ have. Why going to MPI events are worth our time, and why we should be seen as part of the business and not just a party planner.”

Anne Thornley-Brown, MBA, president of Executive Oasis International in Toronto, said event planners “work really hard to source venues and handle all of the logistics needed to ensure that things go smoothly for corporate groups. When they bring the hotels business, the least that they could do is share the financial benefits. I guess they are hoping that corporate groups will book directly and bypass the event planners.”

Renee Radabaugh, managing director and president of Delray Beach, Fla.-based Paragon Events, said it's unfortunate when a hotel does not necessarily see the value of a third party planner and their contracting influence.

"This most recent change just reinforces that this issue is becoming more prevalent," she said. "It seems as though numbers (perhaps through a revenue department) have come into play and that there is a 'need' to cut costs or increase revenue. This decrease in commission lessens the value of the professional planner and the service they provide to their clients. Many planners calculate a portion of their services in exchange for some portion of the commission.

”In the end, other hotel brands should remain wise and respectful of the planner and their buying power, and take this as an opportunity to further build and strengthen their relationships with them. Ultimately, people do not want to take their business where it isn’t valued or recognized and only time will tell how this move will affect the brand long term."
 

Author

Rich
Rich Luna

Rich Luna is director of publishing for MPI and editor in chief of The Meeting Professional.