Sourcing Academy

Disclosure of Third Party Payments, Rebates, Commission

Understanding Disclosure of Third Party Payments, Rebates, Commission

In this video, you’ll learn what third-party payments, rebates, and commissions are and why they are used, as well as things to consider when groups attempt to seek rebates.

Overview

• Hotel room rates may be commissionable to a designated agent and/or may include a rebate. A rebate and commissions are different.
• A rebate is typically paid to the group itself and is usually a set dollar amount from the Group’s room rate and is paid to the Group after the meeting. Groups often use rebate revenue to offset their costs of using the convention center or shuttling/transportation costs.
• Commissions are usually paid to a third-party company that assists with the group’s booking and are generally based on the contracted room revenue

Group Perspective

• Rebates should be specified in the hotel contract, e.g., “The Group rate includes a rebate of $10.00 per night for each room night utilized and paid for by Group’s attendees. The rebate will be paid to the Group within thirty (30) days of the Group’s last departure date.”
• Many hotels require that the Group disclose the rebate to its attendees so that it is not viewed as a charge that the Hotel is imposing on the guest.
• Groups will often make any required disclosure of a rebate in its meeting registration materials, e.g., “A portion of the room rate will be used to offset Group’s meeting expenses.”

Hotel Perspective

• Any time a payment is made out of the room rate to a third party without disclosure, it could be considered a “bribe” or other impermissible payment, depending upon the applicable state law, which could expose both the group and the hotel to civil or criminal liability.
• Rather than take a risk that failure to disclose rebate or commission is improper, hotels typically require the group to take responsibility for making disclosure to attendees.
• The group or third party should not be reluctant to disclose as having to “hide” how you make money or pay for your event suggests impropriety.
• Rebates and sometimes commission increase the room rate, which may make the rate non-competitive in the market and incent attendees to try to book lower priced rooms outside the official room block.
• Consider increasing the event registration fee by the amount of the rebate rather than adding it to the guest room rate.