Hyatt Claims Commission Cuts Follow ‘Careful Consideration’ of Stakeholder Needs

The move reignites ire among many intermediaries, who argue the decision stems from greed and undervalues their services.

hyatt-commission-letter

Yesterday, key third-party customers received an emailed letter from Jack Horne, Hyatt Hotels Corporation's global head of sales and revenue, which was obtained by Northstar Meetings Group. The letter reads as follows:

Dear Customers,
 
For over 60 years, Hyatt has been committed to partnering with the meetings and events community, and we truly value the opportunity to work with a variety of organizations that share our vision to create meaningful experiences.
 
However, as market conditions continue to shift, we are forced to look at our business holistically. We have carefully evaluated our commissions structure to ensure it meets the needs of our constituents and remains competitive in the market. As an outcome, effective February 1, 2019, Hyatt will move to seven percent commissions for intermediaries booking group business at hotels in the U.S. The current commissions model will continue to apply for all business signed prior to February 1. There will be no change to commissions for group business booked by third parties at Hyatt hotels outside of the U.S.
 
We did not arrive at this decision easily, but rather took our time to carefully consider the needs of all of our stakeholders. Consistent with Hyatt's purpose — we care for people so they can be their best — we remain fully committed to providing solutions that meet the needs of our global customer base, and improving the overall planning experience with our exceptional event services teams as well as time-saving technology tools and resources.
 
Moving into 2019, we look forward to providing you with more locations to choose from with a number of properties joining our portfolio as part of our acquisition of Two Roads Hospitality. Hyatt Sales Force representatives continue to be available to you and remain committed to making your meetings and events a success.

 
Marketplace reaction has been swift — and harsh. "Little about Hyatt's announcement surprises me in the least," said Brett Sterenson, president of the Washington, D.C.–area site-selection firm Hotel Lobbyists. "Nor did it surprise me when Hilton and IHG made theirs some months back. If I were to be surprised at all, I would say I was taken aback at their unabashed impatience with waiting to see if there'd be any short-terms gains from Marriott taking the lead."
 

As market conditions continue to shift, we are forced to look at our business holistically. We have carefully evaluated our commissions structure to ensure it meets the needs of our constituents and remains competitive in the market.
Jack Horne, Hyatt Hotels Corporation

Sterenson, who shared his dismay about Marriott's move with M&C this past May, added, "I guess the money left on the table was too much to resist." As of this morning, Sterenson had not yet received Hyatt's letter, but one of his Hyatt reps warned: "it's coming."
 
While angered by the cuts, "It hasn't changed the way I operate my business," said Sterenson. "It hasn't changed my relationships with their salespeople, whom I consider allies. But my impressions of the brands on the whole are clearly damaged. Nearly a year into this craze, I think what's clear is that Marriott comes out looking complete geniuses. The others? Maybe more like lemmings. But they're all getting richer, and presumably that means investing in their properties, right? That would be the best-case scenario in what is otherwise a disturbing disregard for the value of their third-party partners."
 

It would be nice if they’d be honest and simply say they’re cutting commissions because they don’t want to pay them.
Mark Jordan, Practical Communications Group

"Love how the hotel chains have cited 'operational inefficiencies' as the cause for cutting commissions," noted Mark Jordan, president of the Philadelphia-based planning firm Practical Communications Group. "Yes, ladies and gentlemen, we can't operate our hotels efficiently, so we need to cut the commissions we pay to those who generate our business." He added, "They really had to dredge the bottom of the barrel for an excuse since a poor economy isn't something they could lean on. It would be nice if they'd be honest and simply say they're cutting commissions because they don't want to pay them. Wouldn't change anything but at least you could respect them more. And it isn't over yet."
 
More transparency about business models would help third-parties more fully understand the hotels' positions, suggested Joan Eisenstodt, principal of Eisenstodt Associates in the Washington, D.C. area. "The industry is not talking about all the channels that have developed for sales to book business. No one has shown us how hotels make and spend money. If a third party is getting a commission and a housing company is involved and there is a housing rebate and they are incentivizing their own people, how much are they actually getting? If there is a $250 room rate, how much is not profit to the hotel. How much is being paid out to sell what the hotel offers? Hard numbers would be great. People are reacting emotionally without hard numbers."
 
In a reply received today, a spokesperson provided an excerpt from Horne’s letter.
 
Find related stories about third-party hotel commissions here.