by Alex Palmer | January 26, 2018
Marriott International's announcement that it would reduce commissions paid to third-party planners has sent a jolt through the incentive industry. In a letter sent to its group partners, the hospitality giant's executives stated that commissions paid to group and incentive intermediaries for U.S. and Canada bookings would be reduced from 10 percent to 7 percent, effective March 31, 2018.
 
"Marriott's group distribution costs are growing faster than our group revenue; these costs are limiting our ability to invest in meeting products, experiences, and innovation," Marriott International Chief Sales and Marketing Officer, Americas, Steve Heitzner, stated in the letter. "Changing economics in this segment, plus these growing costs, required us to reevaluate our intermediary compensation model."
 
While planners expressed concern about the decision, they also pointed out that in some ways incentive travel might suffer less than the domestic meetings market, since "so many incentives are done outside the continental 48," according to Mike May, CMP, IP, president of incentive house Brightspot.

Since the change in Marriott policy extends only to the U.S. and Canada, it would mean that other international events would be unaffected.
 
But overall the response throughout the incentive industry has been one of disappointment, both for how this decision will affect planners' bottom lines, and what it may mean for the relationship between group travel planners and the hospitality brand more broadly.
 
"I'm disappointed and saddened that Marriott would make this decision to selectively cut commissions for those who continuously support their business," said Dahlton Bennington, CMP, CMM, director of meetings and incentives for PROfound Planning. "As they report greater earnings and receive tax breaks, Marriott is not only being short sighted but detrimental to the grown of small businesses."
 
She added that it the result is that planners will need to negotiate better with the hotels and "strongly consider their clients' options."
 
"I can't help but reflect on the service third parties provide to the hotels in advocating for them and for our clients," said Bennington. "Third parties represent qualified business, offer professional services and unique insights for business to business partnership. I truly question why Marriott would want to disrupt and undermine their relationship with third party planners."
 
Scott Siewert, president of fab at Incentives, echoed that it seemed to be a devaluing of the business that incentive and meeting planners brought to the hospitality company.
 
"Marriott feels they are stronger and don't need us as much as they did," said Siewert. "They obviously don't think third-party planners are as valuable as they were."
 
He added that this might mean that incentive planners will have to pass the cost difference on to their clients or at least that they "will have to do more to prove their value to their clients" in order to make up the difference.
 
"I think most of us now, this week, feel like, 'okay, maybe they don't value third-party meeting planners as much,'" said May. 
 
He added that this is especially true following the revelation that four major group booking firms would be temporarily exempt from the commission cut.
 
"When you read the letter that they sent, talking about how commissions adversely affect their cost structure, to [make exemptions] for those site-selection firms really undercuts their own economic argument," says May.
 
He pointed out that Marriott would continue to incur the same costs for their site-selection-only transactions, seeming to value the large intermediary companies while de-valuing incentive planning firms.
 
"We can't discuss details of specific contracts, but we are honoring existing contracts," said a Marriott International spokesperson in a statement. "While group intermediaries play an important role in the marketplace, costs for our North American hotels and owners are growing at a faster pace than group revenue, which impacts hotel profitability."

Siewert warned that this could be a harbinger for the direction of the industry more broadly.
 
"If Marriott is successful, over the long-term, others will follow their lead and lower commissions," he said.
 
Siewert added that on the positive side, from Marriott's perspective, "they have obviously spent a lot of money making sure they provide a great product and made a decision to invest in themselves" even if that means less investment in the group partners they work with. He also stressed that while it was disappointing, the company was well within its rights to make the changes it saw as necessary.
 
"It's kind of a wake-up call and a reminder that we operate in a free-market system," said Siewert. "God didn't dictate that 10 percent commission would be an iron-clad law. There are no givens."
 
May added that at the end of the day, decisions would be based on what is "the right recommendation for their client," regardless of the commission structure.
 
"When they take a deep breath, they will be most influenced by what's the right recommendation," he said.