The evolving role of Destination Management Companies
As the pandemic has taken its toll on the meetings and hospitality industry, destination management companies have been particularly vulnerable to the huge waves of postponements and cancellations. These on-the-ground experts, ever ready to pull together ground transportation, off-site events, team-building activities and more, normally serve to connect meeting organizers with the wealth of opportunities available in any given locale.
But with Covid-19 thwarting most plans to gather face to face, 65 percent of DMCs have had to cut staff, according to a recent surveyfrom the Association of Destination Management Executives International; others have been forced to relinquish office space as bookings dropped. And in the most dire of scenarios, some companies have ceased operations altogether — as was the case for the global firm Pacific World.
“Everyone has been deeply impacted by Covid-19, but this has been particularly painful for DMCs,” said Stephanie Harris, president of the Incentive Research Foundation. “They rely on group business as their very strong primary source of revenue, unlike hotels or other areas where there’s a leisure component to that business. It’s really changed the conversation around how destination management professionals play in this environment and the value that they bring.”
Though many of these firms have suffered losses and continue to face challenges, DMCs are responding to the crisis with a mix of ingenuity and moxie, developing new skills, expanding their offerings and retooling their business practices to become more sustainable forces in the meetings industry.
Note: This article includes video comments from DMC leaders who will be taking part in the panel discussion on “The Changing Role of DMCs” at Global Incentive Summit on Nov. 4-5. Click on the video to hear their thoughts on why DMCs are especially important partners for meeting planners now.
Better Business Practices
Beyond their dependence on group travel, DMCs have other intrinsic challenges, such as how these firms collect their fees. Typically, DMCs spend resources before events (for example, creating décor elements in advance); if that event is postponed or cancelled, the DMC is out the dollars they spent. If such costs were not directly spelled out in their contract with the client, the DMC might not be able to recoup that money at all.
This year might have taught these firms a tough lesson about putting all the details on paper, considering 63 percent of the ADMEI survey respondents said just one-fifth or fewer of their in-person programs slated for 2021 have signed agreements.
“DMCs are doing work for 2021 business,” says Alaina Tobar, regional general manager of PRA Northern California and president of ADMEI. “Likely, they are doing the work without a signed agreement. It is vital that DMCs are paid for their work, even as they are in program development.”
This topic was broached during a recent DMC roundtable hosted by the IRF. Nicole Marsh, partner at Imprint Events Group, a DMC Network Company, emphasized that firms like hers are “giving of our time and in many cases have spent months or even years putting programs together, but potentially don’t get a dime until it operates.”
Marsh is already making a shift in contract conversations with clients, where she is now considering if she should charge a flat management fee, a retainer or upfront payment for pre-event work. “We need to do that to protect our company,” she says. “If we just give all this work away and then nothing comes to fruition, there won’t be DMCs in the future.”
He stresses, “There has to be collaboration on both sides with our customers, as well as with us. We’re not looking to just nickel-and-dime all the way through. We’re just trying to keep our businesses open and healthy, and get paid for the work that has gone into programs that sometimes take so many months, if not years, to operate.”
To this end, ADMEI has put together focus groups to address and further develop recommended contract and fee policies for both DMCs and clients. “This could be an opportunity to adjust the way we operate,” says Tobar.
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