Managing commissions for hotels and agencies is a critical piece of running a successful business. Hotels only want to pay what's owed (and nothing more), while agencies want to be paid what’s owed (and nothing less). Really, these are two sides to the same coin.
Yet, due to challenges with systems interoperability, among other issues, the two sides of this coin don't always match up. The booking, stay, and payment data recorded by hotels and third-party brokers often have numerous discrepancies between systems. When this happens, there are headaches when it comes to tracking bookings, reconciling payments, and accounting for production.
Our experts Trond Sorensen of OnyxCenterSource and David Cabreza of Hilton, share some practical tips for both hotels and agencies when working with third-party commissions.
Working better together
Both hotels and agencies must Have these four pillars for successfully managing third-party commissions:
First, make sure your process captures all bookings -- not just commissionable ones. This reveals a full overview of bookings and commissionable data at any time. Without this view, it’s not possible to see the commission mix at any point in time.
Second, make sure these bookings have all the details. Sorensen explains:
“With everything that can happen to a booking, such as name changes, the confirmation number is important to capture and store for all bookings. Also, rate codes and the booking channel. Knowing the booking channel is important, even if the booking is completed through the GDS. This is important to know how much is outstanding to you.”
Third, don’t let reconciliation happen piecemeal. Reconciliation is important to make sure you establish a data set that is matching your booking data with your stay data.
Finally, have a process in place to monitor your performance. Without knowing how you're doing, it’s very difficult to negotiate contracts, navigate channels, and manage relationships. This information helps with managing relationships with partners,. Sorensen says:
“Know your performance. As you look at how much you book, and how much is being cancelled and how much is commissionable, all of those data elements are key to both develop your own business and to understand how you’re doing with your partners."
Practical tips for hotels
For hotels, part of a successful channel management strategy includes a complete understanding of commissions owed on each booking.
Put these best practices in place to improve your process:
Automate your payment process. A manual process is prone to mistakes. Invest time in creating a better process. Automation makes you more money!
Include all stay data. Not only including commissions due, but also show travel agents cancellations, net rates, no-shows. This removes all uncertainties for agency partners when they are doing their own reconciliations, which helps you as a hotelier down the road.
Upload structured commission data for all rates. Don’t limit the information that is shared with agencies. These structured fields aren’t usually mandatory but will remove friction around disputes down the road. Be transparent and reduce conflict. This also helps agencies know upfront what’s commissionable.
Publish your commission policies. Again, transparency is the key to successfully managing relationships around third-party commissions! By making these public statements, it reduces gray areas.
Don’t neglect support. When agencies have questions, or there are disputes, make it clear how to engage. By setting the terms of engagement, you have more control and are more likely to maintain positive relationships with agencies.
Practical tips for agencies
For agencies, the complex web of commissions can be very sticky. The blend of room types, contract agreements, and reservation changes (such as cancellations), must be expertly managed in order to keep margins healthy. Any slippage when it comes to tracking and soliciting what's owed is money left on the table.
Agencies should ensure that the following best practices exist company-wide:
Payment consolidation. Multiple payment destinations complicates the process. Even if you use a vendor to recover commissions, it’s better to consolidate your payments rather than rely on sending checks to addresses in outdated databases. Never lose a payment and then concentrate on delinquent hotels.
Inefficiency reduction. When you reduce inefficiencies, you can save a lot of money on bank payments. Clearing costs and wire transfer costs can dramatically reduce profitability.
Active collections process. Don’t sit around waiting to get paid. An active and consistent collections process can keep payments coming and reduce the outstanding amounts owed to your agency.
Relationship management. By knowing your partners, you have an understanding of your data, your channels, and where you can collect commissions. You don’t want to chase commissions that are not yours, or that will be paid out through one of your booking channel partners.
Book higher performing hotels. This is obvious but worth the reminder! Reward hotels that pay commissions on time with more business. If hotels have a commitment to you, then you commit more business to them.
With these practical tips, managing third-party commissions can be more effective and less stressful for both hotels and agencies.
When there’s more transparency and insight into the data, the relationship angles towards mutually beneficial. It's just better for everyone when both sides build trust through intelligent processes for managing third-party commissions.
For more in-depth knowledge from HEDNA’s Third-Party Commissions Working Group, check out our recent webinar on this topic.