by Loren G. Edelstein | April 04, 2018
Marriott International aims to lower the commissions it pays to online travel agencies, CEO Arne Sorenson told Reuters yesterday. The effort to renegotiate those terms will start with Expedia, when its contract with Marriott expires later this year.
OTAs -- hotels' most expensive distribution channel -- accounted for 12 percent of Marriott International's business in 2017, up one percentage point from 2016, as reported on Feb. 15 by M&C sister brand Travel Weekly. In the company's fourth-quarter earnings call, Marriott CEO Arne Sorenson said the percentage of business sold through that channel rose because Starwood Hotels & Resorts "had a higher reliance on third-party relationships."
M&C has reported extensively on Marriott's recent decision to reduce commissions paid to third-party planners from 10 to 7 percent, which took effect this month. In a recent interview with Fred Dixon, CEO of NYC and Co., Sorensen admitted, "There's not an intermediary that loves what we've done." However, he said, "to make hotels economically viable in the long term…we've got to look at every expense item."
"I understand the chains are trying to show value to owners, and they're looking for increases in profit margins," said Michael Dominguez, chief sales officer for MGM Resorts International, in a recent interview with M&C. "I'm not saying it doesn't make sense; I understand their rationale. But I don't understand the timing. When GDP is growing, and overall revenue has grown for five consecutive years, and this doesn't even represent the majority of our business -- the data doesn't connect to all those dots."
Dominguez also noted that commissions paid to OTAs have long been a concern of the hotel chains. "If you look at transient business, you're paying well north of 10 percent to the OTAs. I know Hilton and Marriott have taken them on at some point," he told M&C last week. "You don't hear a lot about that anymore. It's hard to consistently win that fight."
"We would certainly like to pay less. We will have to see how the negotiations go," Sorenson told Reuters. Following the renewal of its contract with Expedia later this year, the company will renegotiate its contract with Booking Holdings, which owns,,, OpenTable and Kayak, sometime in 2019.