Over the last few months, there has been a lot of controversy about commissions in the meeting and event industry. Not only did Marriott International make a decision to claw third-party planners’ commissions back to 7 percent in North America, the chain also established a two-tier system with major players such as Maritz and HPN Global still receiving 10 percent commission. In March, Hilton Worldwide announced plans to follow suit and just today IHG announced the same. It’s a sticky situation.
RELATED STORY: Long-term career options for meeting planners
Now that the shock has worn off, it’s time for event planners to carefully weigh their options—cool heads must prevail. It is important to leave emotion out of it and make sound business decisions. So, what are the options for event planners who are experiencing a shortfall in income due to the policy change by these hotel companies?
One option is to book with hotel chains that offer higher commissions. This is problematic for a number or reasons and, at best, a temporary solution. If event planners bypass Marriott and Hilton properties, that flies in the face of the stance the industry has always taken. Event planners have always maintained that they make venue recommendations based on the needs of the client, not due to commissions or personal incentives. To bypass these chains brings that stance into question. Industry veteran Joan Eisenstodt has always expressed concern about the ethics of commissions especially when they are undisclosed and maintained that the commission model is unsustainable.
Many are waiting for the other shoe to drop. Has Marriott set a precedent? Perhaps, as Hilton has shown. Will other hoteliers follow this lead and, one by one, reduce or eventually eliminate commissions? Travel Weekly reported that some hotel chains such as Preferred Hotels & Resorts and a few independent hotels like Eden Roc and Nobu in Miami Beach designed promotions to court event planners by offering commissions of up to 12 percent. Is this likely to continue?
RELATED STORY: MPI CEO interviews members on commission cuts
The writing is on the wall. At this juncture, it would be wise to learn from the travel industry. Many travel agencies that were dependent on commissions eventually went out of business when airlines eliminated or significantly reduced commissions. Based on the events that unfolded in the travel industry, it is likely that hotels will eventually wipe out commissions.
It is becoming increasingly clear that event planners would be wise to revisit their business models and gradually wean themselves off commissions. This won’t be easy. Even event planners who levy fees for their services have factored commissions into income projections and adjusted their rates accordingly. Clients have not been paying for the full value of event planning services as these have been partially underwritten by commissions. It will be challenging for them to perceive the full value of services that have always been subsidized. While a sudden and drastic increase event planning fees will surely result in the loss of business, over time, these adjustments must be made. To do otherwise is sure suicide.
How long will it take for hotels to fully eliminate commissions? One year? Two years? Certainly not five. In Jamaica, we have an expression: “When your head is in a lion’s mouth, you have to take it out…slowly.” Slow and steady wins the race. The time to make adjustments is now.
RELATED STORY: RFP ethics: 7 landmines to avoid