Preparing for a Leaner Commission World

Industry groups offer support for independents amid commission cuts

The news that Hilton Hotels & Resorts will follow Marriott International in cutting commission to third-party planners from 10 percent to 7 percent was met with a combination of groans, sobs and not a little bit of anger from some quarters. That was quickly followed by announcements from new and established groups offering to help with the transition to what many are acknowledging is the new reality.

How Did We Get Here?

Tracey Smith, executive director of Senior Planners Industry Network (SPIN), has seen the impact of decades of economic cycles on events and the people who manage them. “Just in this century, we saw the downturn of 2000 and the additional hit from 9/11, when a lot of people were laid off and gave up on full-time work in favor of going into business for themselves,” she says, recalling the establishment of the independent planner role in the industry. “That was when it was a relationship business, and you were valued for your Rolodex and your ability to deliver on negotiations.” The industry grew as the economy improved and even thrived during a short buyer’s market in 2008, according to Smith.

Flash Forward to 2018

In a world of decentralized and ever-changing hotel staff, digital RFPs and transparent pricing, Smith laments that event planning has become much more transactional—a commodity.

Jan D. Freitag, senior vice president of lodging insights at hospitality research company STR, echoed that 2017 was both a sellers’ market and a transient-oriented one. His research shows that by all standard measures—occupancy, RevPar and ADR (average daily rate)—hotels had their best year ever. However, since the Great Recession of 2008, transient demand has increased more than twice as fast as group demand, and the brands are responding by building less meeting space, making that segment a smaller percentage of their business. “Demand is coming disproportionately from transients,” he said.

Moreover, supply coming online in the next few years reflects that changing market, with more than 70 percent of rooms under construction part of limited service properties with equally limited meeting space. “Very few ballrooms are being built,” he said. And that impacts the need to recruit new group business.

What’s Next?

“The commission cut was a slap in the face, telling us that we need to go back to those relationships,” Smith said. “Eventually the industry will turn again and we need to be prepared.”

The change in business model may also require some small business owners to improve their focus on basics, such as marketing, legal and financial issues, things that may not have been their core competency. SPIN is positioning itself as a resource for those people by producing recorded webinars that can help fill in the missing skill pieces at a critical time.

A new industry group, Meeting Planners Unite, is looking for ways to develop new revenue streams for independents. This could include finders’ fees from nonhotel suppliers—audiovisual companies, exhibit and transportation companies, and possibly destinations.

Dallas-based Meeting Professionals International (MPI), which has long included entrepreneurship courses as part of its web-based education, recently launched Independent and Small Business Owners Community, and offers discounts to independent planners on MPI Academy certificate courses and registration for 2018 World Education Congress in Indianapolis. In January, MPI President and CEO Paul Van Deventer issued a statement that said, “As an association, MPI’s focus is on ensuring the long-term and sustainable financial health of the events industry, and raising the professionalism of those who work in it.”

Christy Lamagna, founder and master strategist at New Jersey-based Strategic Meetings & Events, said she and most of the planners she knows are going to continue doing the best they can for their clients. “I am not going to let someone else’s bad behavior impact my good behavior,” she said.

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