Way forward, official position statement on venue/hotel commission

SAACIMatters VOLUME 28 NO.5
 

SAACI POSITION STATEMENT ON VENUE/HOTEL COMMISSIONS

Commission (loyalty, efficiency, service fee) payments by hotels and venues to event organisers is an international norm.

However, it should neither be a right nor an expectation, but rather a contracted acknowledgement between venue and organiser of the marketing and organisational services the organiser provides.

It is recommended that the venue/hotel establish a clear set of deliverables against which the booking party must perform in order to qualify for any commission and that this be included in the initial booking and contracting process.

If a venue or hotel feels that the partnership between it and the organiser is not mutually beneficial, no commission needs to be set - once again, the organiser should expect to add some value to the venue or hotel through the process and their involvement.

A commission should not be seen as a clandestine back-hand to be paid to an organiser as a reward for business placed, nor should the commission be regarded as a carrot or incentive for an organiser to place business.  An organiser should not be rewarded for the selection of a venue based on commission income as opposed to venue suitability.

It is furthermore recommended that an organiser who performs both venue finding and event organisational services, raise an acceptable fee to his client in respect of the services being performed. It is not considered sustainable business for an organiser to rely on commissions from hotels as their only source of revenue, unless the only service they provide is venue finding and venue liaison.

What our conferencing and events forum members had to say:

Cape Conferences: Thank you. I am so happy to hear that these issues are being addressed by SAACI, finally.

Taren Pillay 

On Show Solutions: Thank you for the opportunity to comment on this initiative. We are in support of this position statement and look forward to a more transparent, win-win situation for venues and organisers. 

Jacqui Reynolds

Z-Zone Events Solutions: Please be informed that we have read the position statement on venue and hotel commission and agree with its contents. 

Nick Ndaba 

Conference Consultancy South Africa: Commendations for this proposed position statement (with the assistance of the C&E Forum) I am indeed supporting it albeit as a minimum requirement for a relationship between venues and organisers as concerns commissions. The ideal still remain to work in a totally commission free environment where organisers are remunerated by their clients for professional services rendered. If a venue finding agency earns an income from the venue/s, the venue should then be regarded as its client for services specifically rendered to the venue. In my mind, a conflict remains when organisers own revenue from their clients and have that supplemented by commission from service providers (not only venues) as the organiser cannot act in a (truly) objective manner as the representative of their (primary) clients if service providers are also their clients by virtue of commission agreements. Doing away with commissions remain the only way in the quest to professionalise the industry so that in time, we can call this the business event profession (as opposed to industry).

Great job though for taking a stand. 

Pieter Swart

Southern Cross: Well done on a succinct and well thought out position statement. You have my full support.

Gwynneth Matthews

Phambili African Events: Thank you for this initiative, it is much appreciated. May I please make a few comments.

Definition of a Conference Organiser should be understood vs a booking agent.

In SA the Events Industry has changed dramatically and I need not elaborate to you as you are better informed than I on this. Over the years it has been a big frustration for Venues to pay the same commission to Conference Organisers that WORK the event ie. Act as the Project Manager and liaison person with the client venue vs the person that calls and books a venue on behalf of a client and then is not present for the event. I suggest that this is the key to differentiating the commission structure. This could be stated in a simple clause.

Is a sliding scale for commission not a viable proposition? 

Thank you once again for your hard work it is appreciated.

Gill Martini

Ilios Conferences: I understand the gist of this statement which is essentially that commission should be earned and should not be a company’s sole means of revenue, as is primarily the case with venue finders. 

But please allow me to present a dissenting view and play devil’s advocate. This statement may result in unintended negative consequences for this industry, especially us PCO’s.

I think that as a result of this statement there will be a rethink on commission with some venues deciding to completely stop paying any commission at all. This will set off a chain reaction which will eventually lead to all venues deciding to stop the paying of commission.

PCO’s usually do charge a management but supplement their income with commission received from venues. This extra revenue stream allows us to charge more reasonable management fees, thereby making our services more affordable to associations. Although commissions is not the only revenue stream for PCO’s it is a very important one. Should this revenue stream completely disappear it will have dire consequences for a lot of PCO’s, many will not be able to survive on Management Fees alone and would close down.

The few that remain standing would have to more than double their management fees in order to survive and turn a profit. This would make PCO services unaffordable to many associations, who generally are not cash flush, especially the national associations. Most of them rely on their annual or biennial congress’s to generate a profit which they use to finance their organisations. With this in mind many will simply no longer be able to afford PCO services at steeper fees, they will simply decide to manage it in house. This will put a further squeeze on the remaining PCO’s.

Venues in turn will increasingly find themselves dealing with overburdened and inexperienced secretaries.

Should this also result in establishments not paying accommodation commission as well, PCO’s would have to more than treble their management fees for the international association conferences. We would quickly gain a reputation for being amongst the most expensive PCO’s in the world. With no commission from accommodation there would be no incentive for PCO’s to provide this booking service. International associations planning to host their conference in SA will come across PCO’s who are not only very expensive but who also don’t provide accommodation booking management services. This will have a huge negative impact on South Africa as a suitable host destination. Our ICCA ranking will drop dramatically.

I therefore think that this Statement by SAACI will be a huge own goal for our industry if its triggers a rethink on commission.

Riedwaan Jacobs

If you wish to add your comments please email us at pr@saaci.co.za and we will add your comments to our website.