Marriott announced yesterday that it was cutting the commission on all group bookings in North America from the standard 10 percent to 7 percent as of March 31. This applies to bookings in the US and Canada only.
Experient has confirmed that it and three other large group booking firms have been granted "a temporary exemption" from Marriott's commission cut. A spokesperson for Marriott, said that the company was not exempting any companies from the commission cut, but rather was honoring existing contracts. The spokesperson went on to say, "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. The current business model and environment, however, present significant obstacles to making the investments needed to deliver a world-class experience for customers. 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. To strike a balance and ensure the long-term health of our business, we will reduce commissions to intermediaries from 10 percent to 7 percent for all properties in the U.S. and Canada, effective March 31, 2018."
When asked, David Peckinpaugh, President of Maritz Global Events, which includes Experient and Maritz Travel, says, "We have been informed by Marriott that we, along with three other intermediaries, have been granted a temporary exemption." He declined to discuss the terms of that exemption, including how long it will apply.
In a letter obtained by Successful Meetings and dated Jan. 24, Steve Heitzner, chief sales and marketing officer, Americas, for Marriott International, wrote to third party intermediaries that book group meetings and events to inform them of the commission cuts, saying that the leading hoteliers,' "group distribution costs are growing faster than our group revenue," and that "these costs are limiting our ability to invest in meeting products, experiences, and innovation."
The other three firms that are reportedly not being impacted by the commission cut are HelmsBriscoe, ConferenceDirect, and HPN Global. HelmsBriscoe and ConferenceDirect have not yet responded to requests for comment. When asked to respond the Marriott spokesperson said "We can't discuss details of specific contracts, but we are honoring existing contracts."
"This is an interesting experiment," said Bill Kilburg, chairman and CEO of HPN Global, a site selection company based in Scottsdale AZ. Confirming that his firm is one of the exempt, he says, "Real estate is a cyclical business and at this point in the cycle with their footprint, the decision makes sense to someone at Marriott."
Kilburg adds that as the company looks at booking trends and the impact this decision may have, the policy may be tweaked. "We are sitting back watching this unfold as we are sure there is plenty more to follow," he said.
While noting that his firm had not been informed in advance about either the commission cut or its temporary exemption, Peckinpaugh says it was not unexpected. "We have foreseen this for a number of years," he says. "we have foreseen this [the commission cut in general] internally coming for a number of years. The potential change in the model has been on our strategic plan for, probably, five years. We've been looking at the market, understanding what's going on, and figured at some point somebody -- and most likely it would be Marriott after the Starwood acquisition -- would try to make a change. We didn't know anything in advance, but at the end of the day we were really not that surprised."