< PrevNext > Will Marriott's Online Travel Agency Commission Negotiations Affect Corporate Programs? By Elizabeth West / January 22, 2019 / Contact Reporter Share This time last year, Marriott International hit the corporate market with some big news: It would slash meetings commissions from the conventional 10 percent to 7 percent. This year, a different type of commission structure is in Marriott's crosshairs as it renegotiates its contract with Expedia, which expired in November; they're operating on a contract extension until they reach a final deal. Marriott signaled in April that lowering online travel agency commissions was on its priority list. "We would certainly like to pay less. We will have to see how the negotiations go," CEO Arne Sorenson told Reuters.Analysts generally agree that Marriott has been paying around 12 percent for Expedia bookings and that the hotel company would aim for 10 percent. OTAs represent about 12 percent of Marriott's sales, according to company executives, and lower commission rates won't come free. Expedia will require concessions that almost definitely will include access to more complete Marriott inventory and potentially would include preferred rates.Observers disagree about whether lower Marriott commissions with Expedia will affect OTA-hotel relationships in general. Bjorn Hanson, adjunct professor at New York University School of Professional Studies' Jonathan M. Tisch Center of Hospitality, predicted commission structures will have to change and won't be limited to a single OTA. "Marriott can go to other companies and demand that they match what Expedia is doing for them." Other major hotel brands may not have as much leverage as Marriott but nonetheless will fight for lower commissions in a newly competitive environment. "Nothing stops other brands from saying [to Expedia], ‘You said you would not negotiate these rates and you did; you've put us in a difficult position,'" Hanson said. Plus, Marriott's contract with Booking Holdings expires in 2019, so we will likely see more commissions talks on that front. The Corporate MarketLower commission rates translate simply to reduced take rates for Expedia, but why should the corporate market care? Perhaps the easiest link is the one to Egencia, Expedia's corporate travel business. A hit to Expedia's margins in a more nuanced commission environment could be felt by Egencia. Should OTAs in general achieve broader access to hotel inventory and preferred rates as a trade for lower commissions, however, the effect could be broader. Hanson added that hotels themselves could decide to reduce room rates through lower-commission channels, "depending on individual markets and high- or low-demand periods. The last is likely."An influx of inventory types and/or preferred rates at OTAs could exacerbate hotel program leakage, with an uptick of travelers informing their travel managers (or, worse, not): "I found it cheaper online." Moreover, noted Hanson, companies that audit contracted hotel rates already have found that online rates for comparable rooms beat corporate rates as much as 20 percent of the time. Price assurance technologies like Tripbam and Yapta have latched onto this reality and Hanson suggested a growing business opportunity, particularly in dynamic pricing environments where corporates agree to a percent off the best available rate. "Who will model this? Will corporates be entitled to recovery?" he asked. Responding to the leakage issue already, a number of TMCs, hotel solutions providers and emerging tech companies have tapped the Expedia Affiliate Network, Priceline and Booking.com for inventory. While commercial agreements vary, at least some are based on a percentage of the OTA's commissions. Startups, in particular, rely on the revenue stream from hotel bookings. Should the OTA commissions landscape change, so will the take rate of those companies, giving them even less margin to survive. While that's a narrow impact, for sure, it's an important one for an industry trying to innovate more than ever. None of this will be obvious. That's why the industry will need to watch carefully as the effects permeate the market in 2019. Or, maybe they won't. Plenty of analysts predict changes to the Marriott-Expedia contract will be self-contained. Even if the latter are correct, these commissions negotiations are just one flex of Marriott's outsized muscle in the marketplace. We should watch for more.