Marriott International’s decision to cut third-party planners’ commissions by three percent struck a nerve throughout the events industry. While not entirely unexpected, reaction ranged from harsh to wait-and-see, sometimes within the same conversation. The reality is the market will dictate whether Marriott overstepped its bounds in dropping third-party rates from 10 percent to seven percent, effective in late March.
Position of Power
When Marriott officially merged with Starwood after an acrimonious process in 2015, it became the world’s largest hotel empire. The numbers are staggering: 30 brands; more than 1 million guest rooms; 110 countries.
With great power comes the ability to dictate the market. In a world where every company asks for more with less, Marriott argues it is making a savvy business move that will benefit clients by boosting its bottom line.
“The current business model and environment … present significant obstacles to making the investments needed to deliver a world-class experience for customers,” the company said in a statement to Connect.
Many planners don’t buy the argument.
“This is what happens when we give too much power to one brand,” says Shawna Suckow, CMP, founder and chairman of SPIN: Senior Planners Industry Network. “I understand they are a business in business to make money. I get that. But intermediaries are an important link in their sales chain, and they’ve just devalued that link.”
Brian Stevens, CEO of ConferenceDirect, notes the move comes as Marriott’s stock is booming. After dropping to $18 in 2008, the value is more than $144. The rise was not by accident, he notes.
“Marriott is a smart company and if this strategy is right they will stick with it, and if it backfires they will likely reverse their course,” he says.
Absent from the reactions thus far are other hotel companies like Hyatt and Hilton. Starwood-centric properties appear to be maintaining the status quo for now, but one wonders how long that will last given the Marriott Merger.
As the other hotel chains play a waiting game, the industry is left to wonder if this is the start of a domino effect. “My biggest fears today are that other brands will follow suit,” says Stereson.
Putting Loyalty to the Test
Ultimately, Marriott is betting on the fact that the chain is too big to avoid. While that may be the case for most, it doesn’t appear so for the South Carolina-based Square One Meeting Planning.
“We will look to book with hotel chains that value and appreciate the services a third-party planner brings to the table. Obviously Marriott is no longer that company,” says Square One Owner Tammy Faust.
But intermediaries risk harming their clients by ruling out Marriott, a fact Stereson knows all too well.
“I don’t make buying decisions for my client based on the commission package, I make it on what’s right for them,” he says. “If I start making the wrong choices for the wrong reasons, it won’t be long before I’ve lost my customer base.”
Several planners expressed empathy for the Marriott employees entrusted to enforce the new policy.
“I feel bad for the salespeople on the property level, who will bear the brunt of the planner response,” says Suckow. Stereson says those salesperson’s jobs got “ten times harder.”
Business Is Personal
Any fan of “The Godfather” knows that mixing business with personal feelings can be misguided. But to event professionals, business is personal.
Sterenson has two small children and is looking to buy a house in the Washington, D.C., region, one of the country’s most expensive places to live. His business is 100 percent commission-based. That three percent Marriott is lopping off may end up dictating where he moves.
“The impact could ultimately be devastating for firms like mine,” he fears.
Suckow surmises many third-party planners may build in compensation to offset the income loss.
But Marriott’s salespeople don’t have that option. Unless Marriott comes out unscathed from the three-percent cut, its company’s salespeople will generate less business.
Now, the industry must hold its breath and remain on an even keel.
“We are disappointed in this reduction, of course,” Stevens says. “Time will tell if this new idea of 7 percent is a smart idea or not.”