Second major hotel chain will cut third-party planners' rate to 7 percent from 10
Hilton Hotels & Resorts today announced that it is following Marriott's lead and cutting the commission it pays to third-party meeting planners who book business at its U.S. and Canadian hotels from 10 percent to 7 percent, effective Oct. 1. Existing business booked before then will not be affected.
In announcing the commission cut, Hilton senior vice president and commercial director, Americas, Danny Hughes (pictured), said that while his company recognizes, "the important and integral role" third-party planners play in its meetings and events business, "in light of growing group distribution costs and the complexity of intermediary [third-party] services offered, Hilton has revised its base group sales commission rate."
Still, Hilton has provided six months lead time until the new commissions plan comes into place, giving planners and their clients time to adjust to the new structure. Since the Marriott announcement, there has been some discussion in the industry that the commission model might not be the best way for third party planners to price their services.
Hughes adds, "We are respectful of how the changes that are being made impact our partners, and we took that under careful consideration as we planned for this update. What we're really focused on right now is a better way to balance the needs of all parties involved, enabling our owners to invest more in meaningful innovations that will drive more happy guests and more meetings to our hotels."
Hilton's plan is also not mandatory for all properties, Hughes confirmed, noting that the company "is changing its base group sales commission rate, which will be applicable to commissions paid by Hilton and at participating hotels in the U.S and Canada. As with many other Hilton programs, we anticipate a high degree of participation in this program."
"It's a sad day in the industry, round 2," said David Bruce, managing partner of CMP Meeting Services, who reacted to Marriott's move by quickly forming an organization that is in the process of turning into an industry association for small third-party companies and individuals, Meeting Planners Unite.
"It's a shame Hilton is following suit with Marriott and not looking out for relationships Hilton has had with the third-party market for quite some time," he added. "You do business with the people you trust. Here is another example of a chain forgetting who buttered their bread for so many years."
Hughes says Hilton's move is necessary in order to "balance the needs of all parties," adding that the reason for the cut is easing the costs that hotel owners pay for group business. That, "will allow our owners, over time, to make further investment in products and offerings that enhance the guest experience."
He points to a new report by research firm Kalibri Labs that found the cost of group business acquisition has risen dramatically in the past five years, to more than $4 billion, and is expected to reach $8 billion to $10 billion in the next five years. "The total costs can reach upwards of 35 percent of room revenue per group when all costs are considered," Kalibri said in its report.