Industry practice stipulates that hotels don’t pay commissions on penalty charges when travelers don’t show up, even if the rate they booked was commissionable. Yet, one expert said some travel management companies get hotels to stray from the standard practice. No-shows are fairly rare, but the topic could become more relevant if hotels continue to tinker with cancellation policies.
When no-shows occur, or if travelers try to cancel after the cut-off time, hotels typically impose a fee equal to the first night’s room rate. Hotels account for this revenue differently than they do for consumed room revenue.
“The commission payment tools, and indeed the philosophy in the industry, do not support paying commissions on non-room revenue any more than paying it on food and beverage charged to a guest folio which also ends up outside of room revenue,” explained one hotel industry insider. “I’m not saying it is right, but that is the logic behind it.”
Similarly, hotels typically don’t count paid no-show fees toward a corporate account’s volume goals.
Clients of hotel commission specialist Onyx CenterSource include travel management companies, hotels and corporate buyers. Commissions on cancellations and no-shows “is a topic we are involved in with our customers on a regular basis,” said chief sales officer Trond Sorensen.
Though hotels as a rule won’t pay commissions in those cases, Sorensen said some TMCs try to get exceptions written into their agreements. “It’s not frequent but it does happen,” he said. When it does, “the hotel is obliged” to pay commissions.
Hotels refusing to pay commissions on no-shows “is a big pet peeve,” said Jack Reynaert, manager of global travel and meetings for Meritor. He said requests to hotels for those commissions “always fall on deaf ears.” However, Reynaert, who runs a program using the ARC Corporate Travel Department designation, said he sometimes can convince hotels to count no-show fees toward his overall volume goals. “I show them how much we spent with them,” he said. “Even though we didn’t occupy the room, they still got revenue.”
Again, these are exceptions.
Hickory Global Partners president Chris Dane hasn’t seen agencies contractually secure commissions on no-shows. “You may be able to negotiate the commission on an individual no-show at an individual property,” he said, “but I never heard of if being done as a policy for any particular agency.”
Paul Hoffmann, CEO of eCommissionSolutions, said his firm can present to agency clients the opportunity related to hotel no-show commissions. “I can’t confirm or validate their success or rejection of their results,” he said, “but it is a topic that is being addressed often.”
For many, the challenge involved in uncovering the associated commission dollars and convincing hotels to pay isn’t worth the trouble. No-show rates in corporate travel are pretty small. Sources suggested they account for anywhere from a few percentage points of a company’s total hotel bookings to under 1 percent. Special corporate rates negotiated for individual accounts usually are not commissionable anyway.
For big travel management companies and corporate buyers who get commissions passed through, though, the dollars can add up. Business travelers book plenty of commissionable stays. TMCs bank on it.
The Corporate Solutions Group provides hotel commission collection services. Partner Bob Langsfeld said corporate clients who more aggressively try to recover commissions sometimes will look at no-shows and cancellations. He said the data trail on those can be hard to follow, further complicating the already challenging task of commission collection.
“There are ways to try to recover depending on the level of activity,” Langsfeld said. “You need your ducks in a row and knowledge about the property, the chain and the TMC.”
Upwards of 50 percent of client contracts with TMCs, he said, stipulate that commissions collected by the TMC will be returned to the client. But clients shouldn’t always expect to see it all. There can be a lack of transparency. For the TMCs, hotel commissions can be “a big deal,” Langsfeld said. “It is one of their last vestiges” of revenue from suppliers.