A letter from Hyatt Hotels Corp.'s global head of sales and revenue Jack Horne announcing the hotel company's decision to cut meetings commissions from 10 percent to 7 percent landed more like a feather on the desks of meetings professionals last week, compared to the anvil dropped by Marriott International in January. Hyatt's commission reduction will start with business booked in the United States on or after February 1, 2019.
Since January, both Hilton and InterContinental Hotels Group joined the 7 percent club, and for meetings pros contacted by BTN, it was just a matter of time before Hyatt joined the other big industry brands in making the change.
Reader Response
Nov. 21 - Thank you for your article in the BTN
newsletter I just received. Food for thought: small business owners, like
myself, are taking a huge loss with the reduction of 3 percent of our standard 10 percent
commission. I am seriously considering closing down my business after 27 years
of being a sole proprietor. Very sad indeed. I love my groups, I love my
industry but seriously cannot afford to make a decent living to keep my
business afloat.
—Third-party independent meetings professional
"Hyatt’s decision didn’t come as a surprise," said corporate meetings professional Amy Perrone, who works in the pharmaceutical and healthcare industry. Meetings consultant Betsy Bondurant agreed. She was at an MPI certified meeting professional conclave when the news hit late last week. "It was pretty much a non-issue," Bondurant said, characterizing an industry resigned to 7 percent as a new normal.
According to Hyatt VP of global sales Gus Vonderheide, the company was feeling the competitive pressure. A forecasted slowdown in the U.S. hotel market going into 2019 may have also driven Hyatt's decision.
"As market conditions continue to shift, we are forced to look at our business holistically," Vonderheide said in an emailed statement to BTN. "We have carefully evaluated our commissions structure to ensure it meets the needs of our constituents and remains competitive in the market. We did not arrive at this decision easily."
GoldSpring Consulting senior vice president Kevin Iwamoto said not only are the "millions and billions of dollars" reclaimed by hoteliers who've already cut commissions "too compelling to pass up," but also by reducing the money paid out to intermediaries, hotel companies are better able to compete on rate. "The real question now is whether the chains will seek to improve their revenue margins further by imposing commission reductions either via [geographic] region or globally," he added. "I think we'll all find out the answer to that question in 2019."
Whether the current players in the 7 percent club take a global approach or not, Bondurant predicts they will add more members to their ranks. "Other hotel chains will continue to follow," she said. "A few chains will be hold-outs for a while and offer commissions as a differentiating factor. I think commissions will eventually become dynamic. If there’s a need period, there is going be some type of a rebate offered to entice business."