Skift Take
Outstanding payments for hotel commissions tend to peak in the fourth quarter â just as the travel business hits its most volatile period. Using analytics and strategies that allow commissions to be paid as quickly as possible can help hotels avoid year-end backlogs, simplify their financial reporting, and improve relationships with their partners.
This sponsored content was created in collaboration with a Skift partner.
As the end of the calendar year draws near, it marks a hectic time in the hotel business. Winter starts to settle in for many major markets, driving down room nights and rates â and driving up the potential for commission backlogs. Conference season starts to slow down, and corporate travel budgets taper off as well. Then thereâs the holiday season, often driving record numbers of travelers but also a high risk of unpredictable weather patterns and other cancellation drivers, the impacts of which Skift and OnyxCentersource explored in a recent âData Snap.â As that article concluded, cancellations can wreak havoc on hotelsâ and travel management companiesâ (TMCs) ability to predict revenue.
These varied patterns culminate in a consistent effect as the year draws near its end: the lowest share of room night check-ins across the year. Onyx data from 2019 and 2023 shows that December averages just 5.8 percent of annual room nights, nearly 2 percentage points lower than August, the month with the next-to-lowest share.
A Surprising Twist: Slower Demand⦠but Also Slower Payments?
The fourth quarter marks another milestone thatâs not exactly what hotels or their TMC partners would prefer to see: A peak in outstanding commission payments. Onyx data from 2019 and 2023 shows that across the year, an average of 2.3 percent of hotel room nights have unpaid commissions. Throughout the first half of the year, the rate of unpaid commissions stays under 2 percent on a week-by-week basis.
However, once June comes around, commissions start to see consistent backlogs from week to week by comparison to the first half of the year, and hotels donât recover until late December, presumably when theyâre able to clear their books at the end of the year (or when they have a little extra time due to slower demand). The peak for unpaid commissions, hovering above 3 percent, occurs in November and runs through early December.
Commission Backlog Hot Spots: Where to Watch
Hotel occupancy rates vary from market to market due to volatile fourth-quarter demand, as do unpaid commissions. Looking at regions across the world, there is a uniform trend toward higher outstanding commissions from quarter to quarter, but hotels in Asia-Pacific consistently have higher rates than their counterparts in Europe and North America.
Hotels and agencies in these regions should be particularly mindful of year-end delays and take steps to resolve outstanding payments.
Real-Time Payments: An Opportunity to Cash in on Trust
Unsurprisingly, unpaid commissions create friction between hotels, TMCs, and other partners, who rely on timely payments, as Skift and Onyx explored in another recent Data Snap.
Third- and fourth-quarter commission delays may be caused by a number of reasons, such as operational overload. Because demand spikes in the second half of the year, hotels’ focus may shift to guest services and sideline administrative tasks like commission payments. Or, hotels may simply be putting off their commission payments to conserve cash during the year and then paying them in late December to meet year-end financial targets.
But it doesnât have to be this way. After all, housekeeping isnât just for guest rooms â itâs for finances, too.
One important way hotels can shore up their commission payment processes is to centralize their funding structures, in contrast to funding commissions through each individual property, which can reduce their average days to pay by nearly 40 percent. In addition, they can utilize business intelligence like OnyxInsights, which allows them to see exactly what commissions are owed and compare payment practices with industry benchmarks in real time. By doing so, hotels and agencies can compare competitive insights, helping them to understand industry benchmarks that help them make better business decisions.
Proactively clearing commissions has multiple benefits for hotels and TMCs alike:
- Reinforced relationships: Timely payments can strengthen ties with partners, ensuring future collaborations.
- Smoothed cash flow: Paying off commissions helps hotels better manage their finances and prevents disputes.
- Enhanced reputation: Hotels that consistently clear their financial obligations gain a reputation for reliability and professionalism.
In addition to these benefits to their businesses and partnerships, perhaps taking steps to keep up with commissions in real time will give hoteliers a chance to relax, refresh, and focus on the big picture when the next year-end season arrives.
âThe Data Snapâ is a monthly article series that paints a clearer picture of the dynamic hotel booking landscape, empowering hotels and agencies to make data-driven decisions that help them build productive partner relationships and drive more revenue.
OnyxInsights offers a comprehensive view of the industry landscape, enabling hotels and TMCs to make well-informed decisions and better serve their clients and partners. Onyx CenterSource processes over 100 million transactions annually on behalf of 200,000 agencies and 150,000 hotels globally, representing nearly $2.1 billion in hotel commission payments. Visit onyxcentersource.com to learn more.
This content was created collaboratively by Onyx CenterSource and Skiftâs branded content studio, SkiftX.
