Originally posted Meetings Today Blog
In Houston and Puerto Rico people are still homeless and without power. Though I have no statistics, I imagine some of those people are in the hospitality industry.
Flu is spreading around the United States and killing people; many cities are without shots or medicine or IV bags, the latter made in Puerto Rico.
Among those getting the flu are workers who don’t get paid sick leave and some, no doubt, work in our industry or the wider hospitality industry.
There is talk of war with North Korea that few take seriously.
Housekeepers and others in hotels are demanding “panic buttons” in cities where they are not currently mandated because of the attacks that are real and were documented in Time magazine’s “Person of the Year 2017: The Silence Breakers” issue and also noted in the January 2018 edition of Friday With Joan.
Wildfires, drought, floods and other natural disasters; refugees crowded into camps; the United States proposing to deport hundreds of thousands of people among whom we are certain are people who work in hospitality jobs.
All of these people and issues occupy my thinking.
With all that as a backdrop, let’s examine the extensive industry energy and conversations that are focused on Marriott’s reduction of commission from 10 to 7 percent for those who work solely or partially for commission from hotels.
It’s a greater amount of energy than I’ve seen directed toward the other issues.
First, some background and a disclaimer: I founded my meeting planning/consulting business, Eisenstodt Associates, LLC, in 1981 after working for an art museum, then full-time part of the year for a not-for-profit in D.C.
During off-time from the not-for-profit employment, I did contract meeting planning work for organizations in and outside D.C., my home base.
In all but one instance since then (when a client had already negotiated a rate with a rebate that would off-set fees from a third party and then hired my company), I have been paid hourly or daily or project fees from clients.
How did I determine what the source of payment would be?
When I started Eisenstodt Associates, LLC, I talked with others—there weren’t many “third parties” or “independent planners” in 1981—and all, except one, with whom I spoke said they worked on a fee-for-service payment system.
It was a model that made sense to me and didn’t present a conflict of interest, which proved to be a smart move in light of recent (and previous) events.
This blog post is not intended as legal or business advice.
It is opinion based on 40+ years in our industry and additional research. It is also based on my experience testifying as an expert witness in industry disputes and in a dispute in which I was directly involved, a situation where, had I not been paid fees versus commissions, there might have been a very different outcome.
Here’s that story, illustrative of the commission versus fee dilemma:
In 1984 I was a defendant in a case that involved a canceled and relocated meeting, the site selection and contract negotiation for which were done by an in-house planner at the time the site was selected. The judge found that, though the suit was against the group, me individually and my company, I had nothing to gain because I was not receiving commission or higher commission as a result of the move of the meeting.
Thus the cases against me and against my company were thrown out.
Because of that and other experiences, I have, for years, on the issue of commission paid to third-party/independent planners or companies from hotels and other industry suppliers, which is certainly not a new concern for our industry, engaged in discussions.
Most recently, on the issue of the Marriott commission structure change, the discussions have been across social media, in interviews by numerous industry publications—including Meetings Today for which I write regular blog posts that are featured in a newsletter—and in conversations with people on different sides of this issue including various third-party models, attorneys, hoteliers and DMOs.
In fact, the discussion around the “agency” model of commission pay versus fees has been one on the list of futurists and others as a model that is not sustainable.
It even contributed to the demise of many travel companies.
AND I get it—the anger and frustration … why a cut in one’s projected income is a blow, in any situation. And while I understand the anger, I think that we are long overdue in discussing the model and even more overdue in showing how our segment of the hospitality industry has changed and why the commission model as we’ve known it may be outdated.
Our industry has no standards of how one is to be paid; it has been left to individuals and their clients to figure out. Right, we cannot discuss specific fee-setting amounts. But the equity or appropriateness of commissions for varied levels of services is verboten except in private conversations … in hushed tones especially when it is verified that someone will pay higher guest room rates or other costs because others received commission. Thus we each negotiate the scope of work, time and fees with clients directly.
While the voices are loud over a change in commission for some, I also know that no one has fought for those of us who work for fees—who conduct training (being told that instead of an appropriate honorarium we should “do it for the exposure”), select sites, design meetings, negotiate contracts and provide site management—to be paid what we’re worth by clients versus depending on room pickup to determine what we earn.
Though I know I’m not alone, it appears others that share my experiences and views on the problematic commission payment model for third-party planners are a minority.
Or at least, other than in a few examples I’ve seen, many are not speaking up.
My objections to the Marriott commission brouhaha and boycott center on these key points:
1. Not all third parties are equal: I’ve seen the work of many who do site selection only and in fact, do only “lead generation,” and who are not providing other services such as contract negotiation, meeting management, on-site management, etc.
I know that not all third parties have contracts with their clients and thus are not protected or even smart in how they work. I know because I’ve seen it—and been told by many—that people are in for a quick buck for even just recommending a property and expect to be paid and have found that being paid by hotels is a far easier way than doing more, such as contract negotiation.
(An incomparable example from years ago on an industry listserv: planners would post asking for recommendations of properties and third parties would copy the request, put it on letterhead and send to hotels as if it were their client and expect and receive commission for the lead generation).
Of course, it’s not all and yet, it seems to be a growing number. Without standards of operation or adherence to industry ethics policies (see point 5), there is no regulation on how people operate.
2. Legal and tax implications: As noted above, in the lawsuit in which I was involved as a defendant and in ones in which I’ve testified, commission can clarify or cloud the outcome. If it appears that one is making more as a result of a commission because a meeting cancels and moves or one hotel is selected over another because the commission is greater, it can if not in fact, in appearance, be a conflict of interest.
In talking with a third party that accepts commission and then rebates some or all to the client, I was curious about the tax (and ethical and legal) implications for both parties. The initial recipient of the (usually) larger amount is taxed on that amount. Those to whom a portion of that amount is rebated, are taxed on the lesser amount.
It’s not “free money” in any case.
In talking with Josh Grimes, Esq., an attorney on the group side for our industry, he said: “In terms of the boycott, I suppose that planners can do what they want.
“But if they are going to ignore Marriott [properties] in favor of other properties that pay higher commission, then planners may have an ethical and legal (i.e., remember Sarbanes-Oxley – SOX – accountability rules?) obligation to let their clients know that they aren’t going to evaluate properties solely on the basis of what’s best for the client, but that planner compensation will also be a factor.
“The client ought to consent to this different way of sourcing properties.
“I remember the days when I did SOX presentations, when planners rejected any notion that some might choose one property over another based upon the amount of commission paid. I was told repeatedly that professional meeting planners would never let commissions be a factor,” he added. “It appears that something has changed.”
Lastly, I fear that with the deadline of March 31, 2018, for contract signing (when Marriott will pay less commission to some third parties than they had been), there will be rushed, bad contracts. Is there anyone still in the industry who doesn’t know what happens when contracts are rushed?
“Do-overs” are not easy when the terms are not well vetted.
3. Professionalism: Some have said that by paying some third parties less it means we are not well-regarded as professionals. C’mon! We have, sadly, never been.
And though platforms of various organizations have demanded we work harder at getting a “seat at the table”, by demanding commissions versus the seat, we are demeaning ourselves into commodities not professionals.
4. Boycotts: When a number of groups, including some of the clients with whom I work (and PCMA pre-emptively for Texas), said they would boycott cities or hotel companies or cancel meetings over the anti-transgender aka “bathroom bill” or other like civil and human rights policies and laws, there was much pooh-poohing that we were hurting cities, hotels and workers who were most impacted.
Somehow the “Say No to Marriott”—or #SayNotoMarriott if you’re on social media—boycott movement that is entirely about finances is acceptable.
In the case of the principle of cutting commissions to all but a few companies, it may in fact be principle. It is not being positioned as such.
5. Ethical implications: One of the organizations at the forefront of the protest about this change in commission amount does not have an ethics policy for its members though I, a past Chair of ASAE’s Ethics Committee, offered to help write one and the offer was refused (If I’m incorrect and one was created, my apologies. I couldn’t find it. Please provide the link in the comments).
Excerpts from major meeting and event industry organizations’ ethics policies could impact how the boycott of one brand is perceived:
The CMP Code of Conduct/Ethics is similar to others. In the CMP Code it says:
“As a recipient of the CMP designation by the Events Industry Council (‘Certificant’), a CMP must pledge to…
“Never use my position for undue personal gain* and promptly disclose to appropriate parties all potential and actual conflicts of interest.”
MPI’s Principles of Professionalism says this in the first section:
“Avoid actions which are or could be perceived as a conflict of interest or for individual gain”*
PCMA’s Principles of Professional and Ethical Conduct has among its principles:
- Respect the policies and regulations* of those organizations with whom I deal.
- Refuse inappropriate gifts, incentives and/or services in any business dealings that may be offered as a result of my position and could be perceived as personal gain.*
- Avoid any and all conflicts of interest* and advise all parties, including my organization, of any situations where a conflict of interest exists.
* Emphasis is the blog author’s.
There are also ethical and business implications for those cities and properties marketing higher-than-Marriott’s new commission and the “woo-hooing” of such offers on social media. How sustainable will this be?
Will these offers be applied across the board to all third parties? What about groups that have internal planners and want a discount that would reflect what a commissionable agent would receive? Or want a rebate to equal what others might receive?
Or an internal planner who doing the same work a third-party might do believing they are due perks for the work?
I think the waters are being muddied even more with these offers.
6. Do what you say: I’m mainly looking at the third parties who have always maintained that they do not book based on what they make in commission and instead book based on what is best for the client. If one rules out an entire company—or is it the ownership of hotels or the management companies as well as the brand?—because the person or company booking isn’t making enough, then can this be true?
7. When other hotel brands or owners follow suit: What then? Will there be a boycott of all brands? Will only brands—or owners of particular hotels who agree to pay the highest commission be considered?
Can a sustainable business model for brands and owners be groups who use a commissionable agent plus a housing company that receives a share of the room rate plus groups who want rebates to off-set their costs plus concessions that, in fact are not “free” but have a dollar value? When and where will it stop?
I understand economics and earning a living and the arguments in favor of the “trickle-down” effect as it relates here—those who don’t earn more can’t employ others or spend more to grow the economy. But where then, is the outcry for a higher minimum wage for those in our industry, especially for back-of-the-house workers and servers?
Some have cited the new U.S. tax laws and Marriott’s profitability as a reason they should pay third parties more or at least what they were paying. Why should commissionable agents receive more than those doing the, literal, heavy lifting in hotels? Or is it that some want everyone paid and the owners and brands to take the hit?
Could Marriott have handled this differently?
You betcha! IF instead of a letter sent without, it seems, warning, there had been conversations (which it appears there were not or at least not that anyone is disclosing) with large and small third parties to discuss this.
IF owners (where is AHLA’s voice?) were saying what we think they must be—that they are demanding greater ROI, would that matter to the protesting voices?
Or is this back to let them take the hit—they are getting tax breaks?
IF this had been applied across the board and not exempting four companies, who have allegedly been granted an exclusion from the commission cut until 2020, would it have been more palatable?
IF those 4 companies said “whoa—let’s do this across the board versus just for some” because “what’s good for all is best for the industry” would this have been more acceptable?
Is it that those who are contractors for some of these companies, especially among those exempted, and groused before about their smaller share of total commission and now will get even less, adding fuel to this fire?
Is a boycott for financial reasons for oneself now Kosher?
Really. I am trying to understand all the different viewpoints … and how the focus is so much on this issue and not on, say, Puerto Rico and the suffering of so many including many in our industry. I’m seeking answers and ethics versus rancor.
I know this is a tough topic and that you may want to contribute comments and prefer to do so anonymously. Comment below and if you prefer to comment anonymously, please send your comments to me at FridayWithJoan@aol.com and I promise to add to the discussion here and to ensure your privacy by, as always, not disclosing your identify to anyone.
Finally, here are some additional resources for planners to consider when confronting issues of ethics, payment and more:
How to Network and Ethically Do Business in a Relationship Industry
‘Ethical Negotiation’ – An Oxymoron?
What’s Wrong With Hotel Contracts?
Seven Keys to Hotel Contract Success
Is the Meetings Industry Corrupt?
When Laws and Meetings Collide: Go, Stay or Boycott?
Contracts: Accommodations (Meetings Today Webinar)
Contracts: Critical Clauses (Meetings Today Webinar)