Marriott's announcement to cut third-party commissions from 10 percent to 7 percent in the U.S. and Canada is causing a reaction from both buyers and competitor suppliers.
Frankly, is anyone surprised? I have been pointing out the possibility of this happening for more than a year now. When the mega chains started to merge, that was a clear indication to me that the economies of new size and scale were not just an attempt to build market share and revenue, but perhaps a strategy by the new super-mega hospitality companies to review their existing business and revenue models. It's logical and understandable why they would use their new super-mega status to start to put pressure on areas that are impacting their revenues and average daily rates.
I suggest that the time to trigger your contingency plans in anticipation of commission reductions is now. And even if it's a tad late to the party for those who didn't think this would happen for a while, you need to figure out how the reduction of commissions will impact your respective strategic meeting management programs and events.
Here are some steps you should consider taking sooner rather than later.
1. Do the math immediately, and don't be shy about asking your meeting-management supplier partners to help you come up with the financial numbers you will need to report to management, especially if your program is based on commission retention and usage of commissions to offset logistics and operation costs. Trust me, someone in your company will be asking for the impact number to your program, and you should know this number right away.
2. What's your plan to mitigate any operational cost impact? If you don't have one, you're behind the eight ball, so get moving on creating one. Ask your social industries communities and association members what they're doing to mitigate their program shortfall.
3. If you are currently using a third‐party planner, the reduction in commissions is going to negatively impact their earning potential; you need to have a discussion with them now to determine how this will impact your ability to continue to employ them and how this will ultimately impact their ability to continue to do work on your behalf.
4. You should have been noting your program's actual costs in your summary dashboards and reports to your senior management all along, even if the cost was neutral or zero due to commission retention. If you have been reporting it, then management shouldn't be surprised to see your calculation of a 3 percent negative impact based on the current round of commission reduction. If history repeats itself and commissions eventually disappear like they did when the airlines started commission reduction/elimination, at least you can use that history to predict a new world where your program costs are not dependent on commissions. Business travel ultimately went to transactional costs and management fees. Given the copycat nature of our industry, I now predict that meetings and events will eventually get there as well, perhaps sooner than later.
Kevin Iwamoto is senior consultant at GoldSpring Consulting. You can follow him on Twitter @KevinIwamoto.