The floodgates are now open for the larger hotel chains operating in North America to lower their commission rates for meetings alongside Marriott and Hilton. At a time when meeting space is limited and expensive, a wider shift will likely lead to a wave of consolidation for third-party meeting planners as they become less profitable.
Where Marriott International leads, others follow.
Hilton Worldwide will reduce standard hotel booking commissions for meeting professionals from 10 to 7 percent later this year for group bookings at its U.S. and Canada hotels, as many predicted, following the example of Marriott International.
Business booked by meeting planners and travel agents before October 1 will still receive the standard 10 percent commission. Partners will be able to negotiate different deals with Hilton, though.
While Marriott couched its decision with concerns about funding technology expenses for the design of an updated meetings booking platform, Hilton ties the move to reduced costs for its owners and a need to reinvest in their properties.
“At Hilton, we recognize the important and integral role group intermediaries play in our meetings and events business, and we are proud to partner with a wide network of travel professionals to create meaningful experiences for our guests,” said Danny Hughes, senior vice president and commercial director of the Americas at Hilton Worldwide, in a statement. “At the same time, we also have to balance the needs of all parties, and we therefore continually review our sales and distribution strategies to ensure we are offering the best value for our customers, hotels, and owners…
“This change, whilst easing operations costs associated with group revenue, will allow our owners, over time, to make further investment in products and offerings that enhance the guest experience.”
While smaller hotels and hotel chains have been active in denying future commission reductions, and even touting increased commissions of up to 12 percent in the short term, the writing is on the wall for the wider hotel meetings sector.
AccorHotels, for instance, vehemently denied earlier this month that it would slash commissions, though its competitive position in North America is relatively weak.
Hilton is in the top three chains in terms of North American properties, alongside Marriott and Wyndham. To put things in perspective, Hilton currently owns, manages, or franchises 4,552 hotels in North America; Marriott has around 4,800.
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Photo Credit: A promotional photo of Hilton's new lobby concept. Hilton is chalking up its commission cuts on hotel bookings to the need for hotel owners to spend on hotel improvements instead of distribution fees. Hilton Worldwide