In this blog, we’ll set the record straight on some of the top misunderstandings related primarily to transient commissions and payments. Watch this space for a future article around Group, Meeting & Incentive commission payment practices and opportunities.

Payments and commissions are key components of any hospitality business, but the complexity of both has historically caused some confusion in the industry. And while navigating the two can be challenging, Onyx has spent considerable time working with clients to help facilitate a seamless experience. We’ve outlined some of the most common misconceptions about commissions we encounter in our work around the world, with insights on how hotels and agencies can navigate the process more seamlessly.

Misconception: All hotel rate categories are eligible for commissions.

Hotels have diverse rate categories, each with unique commission eligibility specifications. It’s important for both hotels and agencies to be up to speed on publicly available commissionable rates or contractual/agreement driven terms to know what, if any, commissions will be received.

This is specifically important for small and medium enterprise agencies, who drive a higher overall percentage of commissionable bookings. While they may not always secure the best terms, they can often leverage promotional rates.

Typically NOT commission-eligible

• Client-Negotiated Rates: These corporate rates are generally non-commissionable and are the result of direct negotiations with clients.

Typically commission-eligible:

• Free Sale Commission Policy: Free sale refers to rooms/room blocks often set aside for certain channels; this policy often allows for commissions on bookings and serves as an incentive for certain channels (wholesalers, etc.).
• Rack Rates/Best Available Rate (BAR): A type of Free Sale Rate, and also the most basic rate, that is distributed on publicly available channels.
• Direct Agreements: Sometimes referred to as an override agreement between hoteliers and agencies/corporations, an additional commission or rebate is paid when certain volume commitments are met.

May be commission-eligible

• Promotional Rates: These rates are commonly utilized by SME clients, but their commission eligibility can vary based on scenario. Chain rates may be included within this category as well.

Misconception: Commission processing time is standard across the industry.

Unfortunately, it’s not that simple. There are several factors that impact the commission process, including hotel chain/brand/property level accounting cycles, hotel tech systems, and data quality. Here are some of the nuances surrounding time to pay.

Commission processing does not occur in real time

Because hotels don’t conduct accounting activities every day, information often follows a specific cycle, typically weekly, bi-weekly or monthly. Depending on their processing cycle or frequency, the data/information flow might start the month after checkout. This can be impacted even more if hotel technology is dated . Understanding the average days to pay for an agency’s top 5-10 hotel suppliers can help them better forecast

Hotel tech systems don’t seamlessly communicate

Legacy hotel tech stacks/systems often require manual work to reconcile planned vs. actual stays. Automation is low, causing delays if processing dates are missed. Once Onyx receives the information, we automate the rest of the process. However, the speed to complete this process is still dependent on the specific hotel’s accounting cycle.

Aggregating payment for efficiency is detrimental to time-to-pay.

While it might be more operationally efficient to consolidate payments on a weekly or monthly schedule, this choice between efficiency vs. getting paid as quickly as possible impacts processing time. Striking a balance between efficiency and speed is crucial.

Data quality is solely the hotel’s responsibility.

Agencies play a crucial role by using accurate rate codes and maintaining updated rules engines so that the hotel easily recognizes the commissionable rate. This includes providing clear instructions to booking agents, independent contractors, and other agents on how to use the right rate codes. If the hotel must audit whether they should pay a commission, they may deduct an administrative fee from the commission before paying it. Clean, consistent data facilitates more accurate and efficient payments, and is the responsibility of both parties.

Misconception: Commissions are universal and dictated at the corporate level.

Hotel commission policies can be determined at the property, brand, or chain level depending on the hotel’s ownership structure. Given the hotel industry is incredibly fragmented, this contributes to the complexity in hotel commission processing. Consider a global hotel chain that has 5,000 properties globally, of which 4,500 are franchised. Consolidated commission processing could occur within the 500 wholly owned hotels, but each franchise could operate individually, with different processes and timelines.

What does Onyx do?

Onyx brings together payments, claims, and reconciliation to minimize overhead costs, banking fees, and the impact of foreign exchange. We also offer our clients guidance on optimizing data quality for enhanced returns, minimizing friction, and helping build stronger relationships.

When our clients rely on us to streamline the commission process, hotels pay agencies the money they’re owed faster, and agencies receive much-needed supplier revenue more quickly and easily, increasing their desire to direct more bookings to hotels that use Onyx.

Ready to be freed from the labor-intensive commission process or optimize your current practices? Get in touch with us today!