The corrosive effect of commissions on the meetings industry

The corrosive effect of commissions on the meetings industry

Let’s talk about the corrosive effect of commissions on the meetings industry.

Our industry is abuzz about the news of Marriott’s decision to cut third-party commissions for group bookings by thirty percent. And the response has been “harsh“, especially because of the extremely short notice (it will be going into effect on March 31, 2018) and once it became known that four large site selection firms would be “granted a temporary exception“.

Marriott’s announcement sparked the potential of a commission war (some independent properties are raising group booking commissions). It led to fear of further reductions or elimination of commissions by other suppliers in the future. Taking a wider view, let’s talk about the corrosive effect of commissions on the meeting industry.

(I think the following points are pertinent to any industry that pays commissions, but that’s a topic for another post.)

Why are group booking commissions “corrosive”?

Let’s go back to basics. When a supplier pays an independent agent commission on a group booking, the agent benefits financially. This financial transaction does not directly involve the agent’s client (who may not even be aware of it). The agent, then, is not depending solely on client fees for income.

Who is the agent’s customer? Ideally it would be 100% the client. From the client’s point of view, the agent’s job is to find the venue that best meets the client’s needs. But when commissions enter the picture, the question arises as to whether the commission-paying supplier is now the customer too. After all, the agent provides a service (a sale!) for the venue — and receives payment for it. And that leads to concerns that should be on the mind of any client who is aware of that commissions will be paid. Did my agent steer me to this property because they stand to make money from recommending it, rather than because it’s the best choice for me?Can I continue to trust this agent to act in my best interests?

Remember one of Jerry Weinberg’s ten laws of trust: “Trust takes years to win, moments to lose.

The real-estate industry, which works solely on commission, is upfront about brokerage commission fees, which, though sometimes negotiable, are typically uniform and clearly included in client-broker contracts. The meeting industry does not generally match such levels of uniformity or transparency. For example, I often negotiate with non-traditional meeting venues. None of them have ever offered me a commission (and I would have been surprised and declined if they had). In my experience, commissions can range between 0 – 15%.

Of course, experienced clients are aware of the existence of commissions, and ethical agents disclose them. Nevertheless, commissions tie intermediaries to vendors who pay them, obscure financial transparency. Commissions muddy the waters as to whether the agent is solely acting in the client’s best interest. A naive client may see an agent receiving commissions as less expensive than one who is totally fee-based.

To summarize, group booking commissions are corrosive because they reduce clients’ trust in the impartiality of meeting planners, and they hide and/or distort the financial considerations underlying a booking.

Why trade associations are silent

Compared to the strong response from independent planners, trade associations have been “largely silent” to the Marriott announcement. The few official responses provide excellent examples of how to issue a statement that says nothing substantial.

This is not surprising, due to the financial model adopted by these associations. Kyle Hillman points out that it relies on supplier financial support to an extent that they will not say anything that might offend suppliers.

“…stop looking to the trade associations for help. It isn’t that they are bad, they are just not setup to be independent voices here. Their entire financial structure is based on supplier funding.No matter how egregious a situation is for planners or industry professionals, they can’t get involved without risking their primary revenue source.On internal issues within the industry – trade associations are not our advocates…”

“…I think we romanticize MPI, PCMA, ASAE as our champions when that isn’t their role. Their role is to provide enough value to members so that they can facilitate sellers soliciting their goods. They were never designed to be advocates for buyers.”
Kyle Hillman, Facebook Industry Friends Group

As a side observation, at least MPI and PCMA do not claim that they only represent meeting planners, but ASAE — the American Society of Association Executives — does not have that excuse if its name correctly portrays the people they claim to represent!

For this article I researched the relative numbers of buyer versus supplier memberships at MPI, PCMA, and ASAE but found nothing on their websites (feel free to share in the comments if you know). And unfortunately, these organizations’ annual 990’s do not break out buyer versus supplier support, though the program income figures are interesting and shown below {the 2015 returns are the most recent I could access}.

corrosive effect of commissions on the meetings industry
ASAE 2015 program income
corrosive effect of commissions on the meetings industry
MPI 2015 program income
PCMA 2015 program income

Regardless, intermediaries have no major association to represent their collective concerns. (Senior Planners Industry Network {SPIN} has published a petition demanding equal commissions from Marriott for all intermediaries.)

Corrosive conclusion

The upheaval caused by Marriott’s abrupt unilateral decision to slash intermediary commissions has created consternation for third-parties who have relied on these commissions for a portion of their income. Is this is the beginning of a trend like the one begun in 1995 when airlines capped and eventually cut commissions to travel agents? We can, however, take some encouraging lessons from the travel agent industry which, in response, reinvented its business models and, though the number of agencies has shrunk by two-thirds, is perhaps the healthiest it has been in years.

Paradoxically, those intermediaries who work solely on a fee-basis and do not rely on venue commissions are in a good position to increase their business as a result of Marriott’s decision, compared to other agents who may now need to find additional revenue sources, or perhaps even leave what is a demanding and difficult business. Ultimately, intermediaries relying less on commissions’ contribution to the bottom line will reduce the corrosive effect of commissions on the meetings industry.

Designing Participation Into Your Meetings

No, that’s not me up on the stage, and that’s not the kind of session I’ll be leading next Tuesday, May 22, at the MPI New England 2012 Northeast Education Conference, Rhode Island Convention Center, Providence.

My session Designing Participation Into Your Meetings will, unsurprisingly, include a fair number of interactive exercises: human spectrograms, pair share, The Three Questions, a mild experience of chaos, and others. My goal is to motivate participants to incorporate participant-driven and participation-rich design elements into their meetings.

I’d love to see you there!

The Solution Room—a powerful conference session

Solution Room

There’s been a lot of interest in The Solution Room, a session that I co-facilitated last July at Meeting Professionals International World Education Congress in Orlando, Florida. It is one of the most popular sessions I’ve facilitated at conferences this year. So here’s some information about the session…oh, and don’t miss the two-minute video of participant testimonials at the end of this post!

History of The Solution Room

Ruud Janssen explains that the original concept was co-created onsite at Meeting Professionals International’s 2011 European Meetings & Events Conference by Linda Pereira, Miranda Ioannou, Midori Connolly, Robert Benninga, Mike van der Vijver, Simon Bucknall, David Bancroft Turner, and Ruud himself. Ruud produced a short video of the original session, as well as a longer video of participant testimonials.

Minimum resources

  • A facilitator trained in running The Solution Room.
  • Enough round tables seating 6-8 people for every participant to have a seat.
  • Flip chart paper that completely covers the tables, a plenty of colored markers at each table
  • Sufficient clear space in the room to hold a one-dimensional human spectrogram for all participants

Brief description

The Solution Room is a powerful conference session, which not only engages and connects attendees, but also provides peer-supported advice on their most pressing problems. It typically lasts between 90-120 minutes, and can handle hundreds of participants. A session of 20 or more people starts with a short introduction followed by a human spectrogram that demonstrates the amount of experience available in the room. Participants are then given some time to think of a challenge for which they would like to receive peer advice. A second human spectrogram then maps participants’ comfort level.

Next, the facilitator divides participants into small groups of 6-8 people. Each group shares a round table covered with flip chart paper and plenty of colored markers. The group members individually mindmap their problem on the paper in front of them. Each participant then gets a fixed time to explain their challenge to their table peers and receive advice and support.

Finally there’s a public group evaluation. Two human spectrograms map the shift in comfort level of all the participants and the likelihood that participants will try to change what they’ve just shared.

A two-minute video of testimonials from my Solution Room session at the 2011 Meeting Professionals International World Education Conference in Orlando, Florida

Photo attribution: Flickr user tnoc

A story about the power of experiential learning

What approach should we use to teach participation techniques for meeting sessions?

With the rise of social learning and the decline in importance of formal learning, perhaps we should use experiential learning. On the other hand, in the same time needed to experience a limited set of participation techniques we can comprehensively describe many more. There again, perhaps experiencing a participation technique directly is a more effective way to cement both learning it and truly understanding its relevance. So, if we are teaching participation techniques, which of these two approaches is a better path for learning?

J’s light-bulb moment
Earlier this week I led a workshop at Meeting Professionals International’s World Education Congress (WEC). The 150-minute session covered a variety of techniques that foster and support meaningful participation during meetings. Participants spent most of their time using these techniques to learn about and connect with each other and explore questions about their experience at WEC and in the session itself.

As the workshop progressed, and I heard from the forty-six participants, it became clear that one of them, whom I’ll call J, had considerable prior experience with the techniques I was facilitating.

Near the end of the workshop I ran Plus/Delta (described in Conferences That Work: Creating Events That People Love): a method that provides a fast, public evaluation of a session or entire meeting. As an advocate for transparency and feedback, I chose the subject of our Plus/Delta to be a group evaluation of the workshop itself. During the evaluation, J commented that he had hoped that I would cover more techniques by talking about them rather than having attendees experience them directly. He then contributed a simple and ingenious way to extend Plus/Delta that was new to me.

My heart sank, just a little. Here was J, an experienced facilitator of participation techniques, proposing that I should spend the workshop talking about techniques rather than facilitating experiences of them. Could I be going about this wrong?

I moved immediately into the last technique of the workshop, running fishbowl: a simple way to facilitate focused discussion with a large group. All participants sit in a large circle of chairs, but only people in the “fishbowl”, a small circle of chairs at the center, can speak. After a few minutes of comments, J entered the fishbowl.

J said that he had read about fishbowls many times before and he understood how they worked, but he had never tried one.

And then, to my surprise and delight, he told us that experiencing the fishbowl had been a revelation to him, because he had directly experienced the power of the technique in a way that significantly enhanced his understanding of it, which he had previously believed to be sufficient. It was poignant for me to hear J express a new point of view that contradicted what he had said only a few minutes earlier, and I admired his courage in sharing his learning with us all.

I too have struggled over the years to define the best balance between understanding techniques through description and understanding them through direct experience. J’s light-bulb moment fits for me; these days I am content to let attendees learn participation techniques, first through direct experience and then, if necessary, via reflection and discussion.

Postscript
At the end of the workshop, J hung around and we talked while I was packing up my equipment for a flight home.

He told me that his fishbowl sharing had unexpectedly reminded him of a session he had once attended, entitled “One hundred icebreakers in one hundred minutes”, consisting of rapid descriptions of a hundred ways to introduce attendees to each other.

His rueful comment?

“I don’t remember any of them.”