Paying the Intermediaries: An Analysis of Hotel Commissions

Posted on May 26, 2017
Published by: Hotel Online/Robert Mandelbaum
Published date: May, 2017

The increasing incidence of intermediaries selling hotel rooms and other services is a major topic of discussion among U.S. hotel owners and operators.  From online travel agents to convention housing companies, third-parties are placing themselves in between hotels and their guests during the sales process.  Of course these intermediaries want to get paid, and therefore this has become a rising expense for hoteliers.

Per the Uniform System of Accounts for the Lodging Industry (USALI), payments to intermediaries are classified as commissions.  In recognition of the rise in intermediaries, the 11th edition of the USALI stipulates two commission expense categories within the rooms department; one for commissions paid for the booking of transient business, and one for commissions paid for the booking of group business.  The commissions paid within the rooms department cover sales made for not only guest room rentals, but for any other ancillary revenue associated with those guests.  If, however, an intermediary secures business solely for the benefit of the food and beverage department (i.e. local catering business without guest room rentals), then the commission payment is recorded within the food and beverage department.

Not included in the rooms department commission expense category are payments made to agents for the rental of commercial space within a hotel.  These commission payments are recorded as professional fees within the administrative and general department.

In recognition of the rise in intermediaries, CBRE Hotels’ Americas Research began to track commission payments within the rooms department starting in 2015.  Our firm’s Trends® in the Hotel Industry database captures the combined commissions paid for both transient and group business.  The following paragraphs summarize the magnitude of rooms department commission payments in 2015 for U.S. hotels.

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