by Loren G. Edelstein | January 25, 2018

How are third parties -- particularly those whose sole income is hotel commissions -- handling the news that their income from Marriott will be cut by 30 percent? Many people were quick to weigh in, as M&C reported here

Among those with strong opinions is Brett Sterenson, founder and president of Hotel Lobbyists, a site-selection firm based in the Washington, D.C., metro area. Sterenson founded his company in 2007, after nearly nine years in hotel sales, first with Millennium Hotels and then Kimpton. The following are his thoughts on this hot topic.

Did you see this coming?
Yes, it's not something we weren't completely prepared for. Two years ago, I started the buzz about this at IPEC [the Independent Planner Education Conference, produced by M&C parent Northstar Meetings Group]. Since that time, I have been pretty incessantly hounding my Marriott reps to tell me what was happening, but I got nothing. I don't fault my reps; I don't believe they knew anything until yesterday, either.

Why did you anticipate this would happen?

When Marriott acquired Starwood, the buzz was that they are big enough now to really dictate rules in the industry. In some markets, they are really the only choice - in many markets, actually, including many markets that are important to me.

How did you react when you got the letter Marriott sent to third parties yesterday?
I was not shocked. And, while I was certainly not happy about it, there was a small part of me that was relieved the commission was dropped from 10 to 7 percent, and not eliminated entirely.

Is this a firm reduction, even for high-volume third parties like yourself?
Yes, my reps have told me it is absolutely not up for negotiation.

What are your concerns now for your business?
My biggest fear now is that this might simply be the first of a tiered rollout of reductions. This year it will drop to 7 percent, maybe next year 5 percent, and so on until it is cut altogether. This is an existential problem for my industry: If commissions go away, we go away. That is fear number one.

Fear number two is that other brands will follow suit. I would imagine all the other brands are cheering for Marriott right now. Let them be the guinea pig. Let them experiment with this. Because of their sheer size, Marriott is the lead blocker. If they make this call, then the others can then say, "Great job; 7 percent cut, here we are." That is a legitimate fear. If Marriott is not alone, and the cuts are the first of many, then we go away just like the airline travel agents went away.

The other fears are personal - like, I'm buying a house this year!

Are hotel commissions your only revenue stream?
Essentially, yes. My only other revenue stream is from my speaking engagements. I do not charge my clients any fees. If commissions go away, I need to find a new line of business.

Will you still book Marriott properties for your clients?
Yes, I will. Any reputable intermediary is not going to intentionally avoid Marriott at this time, and Marriott knows that. We won't do that because it is completely self-serving and not in our end users' best interest - and we would lose business. Avoiding them is impossible. A reputable third party does not choose the location of meetings based on commission. Marriott knows that, too.

Might some hotels take this as an opportunity to steal some market share from Marriott?

I do think that will happen, and some might even raise their commissions or at least hold flat. In fact, some independent hotels came out yesterday saying, 'We value third parties, and we will raise third-party commissions to 15 percent for group business booked in 2018, because we consider them valuable partners."

One independent hotel, the Viejas Casino & Resort in San Diego, posted that on Facebook. So, yes, some properties are going to see this as their opportunity. And that will work for a few, but it's not going to work for everyone.

Do you think the reduction will stick?
Not necessarily, and not in the longer term; that's one thing that puts my mind at ease. I think that our run here, with incredible rate growth and incredible demand, won't last forever. Actually, I think we are in the waning days of it. If that's true, and in 2019 Marriott finds all of its convention hotels empty, this may be a temporary change.

Nobody wants that to happen - it's not good for anybody - but if that were to happen, I can't imagine Marriott holding firm to reduced commissions. That might be what the other brands are waiting to see. If this is going to be just a yearlong thing, why damage relationships? Let Marriott do that!

What can Marriott sales reps do to appease their third-party customers?

I think you'll see concession packages increase. I can certainly see them offering richer concession packages to offset this policy. I know Marriott is not allowing their people to alter the commission structure, but they might offer richer points offerings - and Marriott is still the leader in points - or deeper discounts on F&B or meeting room rental, or rebates to the master account. They will find other ways to incentivize third parties. It's not going to replace the paycheck, but if they don't allow their hotels to do that, they are going to lose business.

There's a lot of backlash right now. What do you think the mood is at Marriott?
The people who are cheering are the people in Bethesda [Maryland, Marriott's headquarters]. But the people at the Marriott properties certainly are not happy. This didn't do them any favors, and they are going to lose business. I love my Marriott reps. I'm close with them, and I feel sorry for them. Their jobs are now a lot harder.

How do you think Marriott feels about the role of third parties in the group market?
I don't know how to sugarcoat this - so I guess I won't - but there is a not-so-secret message that Marriott gives its end users. And that is, "Work around the third parties."

But doesn't Marriott also cater to the intermediaries in other ways?

Yes, and that's another side story: the irony of the timing of this announcement. It's less than a week from when they sent me their third consecutive invitation to TPC, which is Marriott's annual Travel Partners Conference. Invitations are sent only to intermediaries who book a high level of business with Marriott. I have been invited for the past three years, and it's a lovely event. So, I get my third invitation, and less than a week later, they robbed me of 30 percent of my commission.

In your opinion, what does the meetings marketplace want?
That raises a very interesting question. If Marriott's point is that more of their business than ever is going through intermediaries, and as a result their costs are rising, doesn't that suggest to Marriott that more of their end users want to work with third parties? Rather than cutting the third-party commissions, shouldn't they be embracing that? Why don't they fix their sales structure? Maybe that's what they should be looking at.

What do you think needs to be fixed about Marriott's sales structure?

It's so decentralized right now. People are working with reps in central offices who are representing 70 properties, and they haven't even been to all of them. My clients have a relationship with me, and they would rather work with me. They call me no matter where they're going, no matter what size event, no matter what city. And if they're working with me, they don't have to be bombarded with solicitations, they don't have to follow up with anyone. And that's what they like.

If I was talking to Arne Sorenson [president and CEO of Marriott International] right now, I would make that point.

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