These middlemen collect advisor commissions from hotels and consolidate payments from multiple properties to forward to agencies, minus a small fee.
If the payment comes to a host agency, the agency must then sift through the consolidated payments and forward commissions to independent contractors, often spending significant time to reconcile the 100% commission request from the IC with the fee deducted by the middleman.
"It's death by 1,000 cuts," said Josh Bush, CEO of Avenue Two Travel. "Time is the enemy of the advisor. There are numerous third-party payers out there, and in many cases, they're the bane of our existence. It just seems much harder to do the same thing today than it did three or four years ago."
Bush and I were sitting in the Travel Professionals Pavilion at Forbes Travel Guide's (FTG) Summit in Monte Carlo last week. He understands why a hotel would want to outsource and consolidate multiple commissions into single payments, but it results in additional time and cost for agencies. In the end, "we're working harder to raise our thin margins for the privilege of having commissions paid," Bush said.
And all this may be taking place a year or more after the booking was made; the commission payment process doesn't begin until after the client has checked out. "That's particularly tough on new agents trying to build their pipeline," Bush added.
An hour earlier, FTG CEO Hermann Elger had announced that, in recognition that "the commission process is a major issue impacting the travel industry ... we will be paying the commission ahead of a client stay" if the booking is for one of the 1,400 or so FTG hotel partners and is made by one of their 54 endorsed travel agencies.
The initiative is part of Meridian, a platform FTG is developing that will include many features found in existing itinerary builders but which will also facilitate accelerated commission payments. FTG will front the money to agencies and take on the responsibility of getting reimbursed by the hotel.
(The company's "hotel partners" do not necessarily have an FTG star rating but rather have entered a commercial relationship for training, development, quality assessments and custom standards.)
Avenue Two is an endorsed agency, and Bush has been among the agency owners advising FTG as it develops Meridian.
When I later spoke with Richard Lebowitz, senior vice president of travel industry outreach for FTG, he softened the "later this year" timeline that Elger had announced at the summit but re-emphasized the commitment to the platform.
"It's a work in progress," he said, "but we've been working on this for about 15 months already. We have a solid foundation, and we're taking a holistic approach. It will have a client-facing app and, on a desktop, provide an agency owner with analytics."
Lebowitz said there were 18 developers working on it, and some were at the summit to meet with advisors for further input.
"The commission part is, by far, the most complex" part of Meridian, he said. "We know it's a big lift; there are myriad things we have to tackle. But we are committed to try to solve this problem. There's a need now, and we have to find a solution."
He confirmed that "we're not just facilitating this, we're going to have skin in the game. We will pay the advisor, and we will collect the money from the hotel."
Lebowitz said that there will, of course, be terms and conditions.
It occurred to me that if this is successful, it might provide a model that a luxury consortium could roll out at larger scale for its members and preferred suppliers; Signature, for instance, negotiated early-commission arrangements with a few preferred suppliers during the pandemic, and ASTA promotes a list of suppliers, including major tour operators and cruise lines, that have advance-payment schemes.
Could another organization float the money as FTG will do? Unlikely. There are some things that can only work at a modest scale. Small countries like Singapore or Monaco can succeed with social programs that larger, more complex societies couldn't successfully enact. Similarly, an advance-commission program may only work in a trust-based ecosystem of 54 vetted luxury agencies and select high-end hotels.
Bush, whose agency is affiliated with Virtuoso, sees a very specific reason FTG might succeed.
"Consortia can be great in conflict or error resolution [with a supplier], but I think Forbes' five-star hotel rating transcends the agency channel," he said. "The rating is critically important to the hotel, and if one of the requirements to maintain the rating is to pay commissions on time, we've got an 800-pound gorilla as our advocate."
By Arnie Weissmann
