Choice Offers Group Commissions

<B> Choice Offers Group Commissions</B>

By Chris Davis

Choice Hotels International late last month began paying a 10 percent commission to travel agents booking group and meeting business at its hotels. While this isn't a new idea in the industry, group bookings from agents weary from a steady stream of airline commission cuts could provide a renewed base of revenue for Choice.

Choice, which includes the Clarion, Quality and Comfort brands among its 4,000 properties, characterized the move as an olive branch to travel agents. Outsiders called it a way for Choice to tap into a market in which its brands aren't widely known.

"There's a lot of limited service in their brand and they have pretty limited penetration into the group market," said hospitality industry consultant Robert Mandelbaum of PKF Consulting in New York. "But Choice has always been creative."

While the largest corporations employ internal meeting departments to negotiate and book their groups, plenty of companies rely on agencies for these services. Luring extra customers through commissions can provide Choice with corporate business that could be critical as growth in the hotel industry slows, as some expect it will (BTN, Jan. 11).

Choice vice president of sales Bill Todd said the chain has been offering net rates exclusively for agent-booked group business. But agents want commissionable rates, and granting that request won't hurt Choice.

With a large group of travel agencies looking to meetings as a new niche, "a smart hotelier will offer the product they want," Todd said. "Every time we do what the travel agent wants, we make more money."

Choice is targeting small meetings from small to midsize businesses "that don't have full-time meeting planners--not the Fortune 100, but the other 10 million companies. Traditionally, it wasn't a product travel agents were looking to book until the airline commission cuts," Todd said.

The Clarion brand is Choice's keystone for corporate meetings, with between 40 and 50 percent of its 1998 business coming from such groups. At Quality and Comfort, groups made up only 25 and 15 percent, respectively, of 1998 revenues.

Officials at other hotel chains that already offer commissionable and net rates called Choice's move an effective hedge against slippage in occupancy.

"We've found that 65 percent of our customers go to agencies for advice, but only 11 percent of hotel revenue comes from agents," said Fred Miller, vice president of intermediary sales and marketing for Marriott International. "There's a big disconnect there, and gaining that business could very well be their motivation. They're telling agents there's a good reason to sell groups at Choice."

Miller doesn't intend to follow Choice's lead, since Marriott books groups coming from agents at commissionable or net rates on a case-by-case basis. But he said the move should encourage more meetings activity. "They have taken a common practice that hadn't been formalized and formalized it. And I hope they follow through with a lot of promotion to stimulate agents to sell group business, and help build a strong distribution network through travel agencies."

With corporations increasingly mandating the use of preferred agencies for all travel, including groups, many hotels are seeing an increase in meetings business from agencies.

"Travel agent group business has increased over the last few years," said Hyatt Hotels Corp. sales vice president Fred Shea. "Some is commissionable, some is net, depending on the customers. On the travel agency side, my guess is that most of it is commissionable. We need to make sure all the terms of the agreement are upfront and fully disclosed."

Agreed Starwood Hotels and Resorts vice president of global and corporate sales Roberta Rinker-Ludloff, "That trend has increased in the last two years. Some of it can be attributed to the technology that exists now. The ability to submit requests for proposals online makes it easier for agents."

In addition, noted one travel and meeting manager for a large corporation, many buyers are finding that hotels offer the same rate whether the customer mandates that it be commissionable or not. In that case, commissions are a bonus to offset agency costs.