Ghost commissions in group hotel bookings: what platforms take and what agencies pay

A ghost commission is money a hotel pays to a booking or sourcing platform for group business your agency brought in. It never appears on your invoice, but your agency pays it anyway. The hotel recovers it through the group rate, and you pay that rate on top of the fees you already pay the platform.

What is a ghost commission in group hotel bookings?

A ghost commission runs through a short chain. Your agency sources the group, the platform in between takes a cut from the hotel, and the cost sits inside the room rate where nobody itemises it.

"Ghost commission" is our term. We found no trade body or publication that uses it. The mechanism behind it is well documented, though. A Meetings Today legal Q&A on contracts asks whether groups need contract language for third parties, using a sourcing platform as its example, that receive "a commission directly from the hotel and not the planner/group". Skift Meetings describes the same economics in site selection, which is most often offered at no cost to clients because the company doing the sourcing earns a commission from the property that confirms the business. The client gets the service free and the hotel picks up the cost.

Velvet Chainsaw, in a piece adapted from PCMA's Convene, describes how murky the commission model had become by 2018. It points to third parties that "share revenue (i.e., write a check) for the privilege of sourcing a group's bookings".

Our view: you can plan around a commission a platform discloses upfront. If a platform tells you hotels fund it, you can weigh that against its fees and price your groups accordingly. We object when a platform takes a commission on top of fees your agency already pays and nobody has told you it exists.

How does a hotel commission end up in the rate your agency pays?

Onyx CenterSource, writing for hotels, says commissions have grown into one of the biggest line items on a hotel's books. In our view, a cost that size lands in the rate, because hotels pay commission out of room revenue whichever platform receives it.

The published figures you can look up come from the big chains. For groups, PCMA reports that Marriott cut commissions for intermediaries from 10% to 7%, effective 31 March 2018. Velvet Chainsaw reports that Hilton and IHG made the same cut for their North American hotels.

We put the commission a platform takes on group business at 5–10% of room revenue in most cases. That figure is our estimate. The published numbers all come from US chains and North American trade press, and we found no European industry or regulatory source on commission levels or disclosure for TMCs and DMCs. Ask your hotels.

Commission also tends to follow actual pickup. Marriott's commission policy, for example, pays on consumed transient reservations at commissionable rates. Pickup is the same number that drives your attrition exposure. In our view, that makes a platform's commission a figure that moves with every rooming list change until the group checks out.

What does a ghost commission cost an agency on a typical group?

The arithmetic below is ours and for illustration only. Take 40 rooms for 3 nights at €180. That is €21,600 in room revenue. A 5–10% commission to a platform means €1,080–€2,160 the hotel has to recover somewhere.

We see two places it can come from. Either the rate you pass to your client goes up and your quote looks less competitive, or you absorb the difference and your markup gets thinner.

Now scale that across a year. On the same illustrative basis, an agency running 20 groups like this would carry €21,600–€43,200 in hidden cost, and at 50 groups €54,000–€108,000. That comes on top of the subscription or per-booking fees it already pays the platform.

There is a contract risk too. Meetings Today warns that, without an agreement on how a third party in the middle gets paid, "the group may be ultimately liable for payment". Apply that to a platform: if nobody agreed how it gets paid, your agency or its client can end up with a bill as well as the higher rate. Hotels have their own grievances. Velvet Chainsaw lists paying commissions on business the hotel already has on the books among the frustrations behind the cuts, and we think a hotel that suspects it is paying twice will protect itself in the rate.

How can you tell whether a platform is taking a cut from hotels?

The strongest signal, in our view, is a platform that wants to be on the contract. If it insists on running the negotiation, or wants to be named as a party or commission recipient, ask why. We can't think of a reason a tool working for you would need a place in your hotel deal.

Cvent's public statement is the kind you want to see. Its planner FAQ says Cvent "does not collect any commission on sent or awarded RFPs and is not involved in any of your contracts or negotiations." It explains that the Supplier Network is free for planners, that some organisations buy upgraded functionality, and that some venues pay extra for exposure. Cvent deserves credit for putting that in writing. We cover how Cvent compares for group hotel sourcing separately.

The same Meetings Today Q&A, though, names Cvent as an example of a third party that receives a commission directly from the hotel. That may refer to a different product or an earlier period, and we do not claim Cvent takes commissions. If even Cvent gets described in contradictory ways, rely on the answer you get in writing for the specific product you use.

We would also watch for hotels quoting commissionable rates you never asked for, or a commission clause naming a platform or any other third party. Platform pricing that looks too low to sustain the business deserves a question as well. The platforms we would use go the other way. They tell hotels at the RFP stage that the business is non-commissionable and ask for the best net rate.

Put these questions to each vendor in writing:

• Do you receive any payment from hotels on bookings we source through you?
• Are you named on, or party to, any hotel contract for our groups?
• Do venues pay you for placement or visibility in front of us?

How do agencies protect their margin from ghost commissions?

Contract directly with the hotel in your agency's name. Whoever holds the contract decides whether a commission clause goes in and who it pays. We think this is the biggest lever you have.

Ask for net rates in the RFP, and state that the booking is non-commissionable. A net rate shows you the true cost of the rooms, so you set your own markup and can see exactly where your margin sits. Our group booking glossary covers the contract terms around it, and you can find more guides on group hotel booking in our resources.

Meetings Today recommends a written agreement between the group and any third party in the middle on how that third party gets paid. Hold software vendors to the same standard. After the Marriott cut, MPI urged third parties to move toward a transparent fee-based model billed directly to your end-user clients. We think agencies should expect the same from their own tools, with a fee you can see and nothing tucked into the rate. A platform that earns only what you pay it wants the hotel rate as low as you do.

In GatheroniX, an agency sends a 40-person RFP from Requests in its own name, asking hotels for net rates. Offers lines up the proposals side by side, and the agency signs the contract directly with the hotel it picks. Contracts then flags any clause that differs from the accepted offer, such as a commission payable to a platform or other third party that nobody discussed. The agency runs rooming lists in Attendees and deposits and balances in Payments. We charge a flat monthly subscription plus a per-booking fee, with no hidden commissions, so the hotel has nothing to build into the rate on our behalf.

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GatheroniX runs group hotel bookings from request to payment for TMCs and DMCs, paid through a flat monthly subscription and a per-booking fee with no hidden commissions. If you want a partner that works that way, join the waitlist.