DMCs and Planners: It’s Not Business as Usual
by Robin AmsterWill incentive and meeting planning companies be squeezed out because their clients’ in-house staff are teaming up with destination management companies (DMCs)?
While the results of a new survey from the Society of Incentive Travel Executive’s (SITE) International Foundation do not provide a direct answer to that question, they clearly illustrate that the business relationship between DMCs, incentive companies and in-house corporate meeting planners is in transition.
A majority of DMCs in the survey said they are being pressured to become “one-stop shops” for incentive travel programs. Incentive planners and DMC executives who spoke with Travel Market Report differed on whether they’re seeing this dynamic, but they all agreed on one point: what used to be clear and separate in terms of who provides what service is in flux, and that threatens to disrupt the traditional execution and delivery of incentive travel programs.
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“It’s all over the map,” said Jane Schuldt, CITE, president of World Marketing Group, a Minneapolis-based company representing international DMCs. “There’s been a shift in who’s buying what over the years.
“The big story is, it isn’t all one way; it’s happening forward and backward, top to bottom, and bottom to top, to all players in the supply chain. End users in effect are leap frogging the intermediary and wondering why they have to have someone in the middle. It’s the whole thought process of ‘I want to go as direct as I can,’” said Schuldt who is also chair of the SITE International Foundation Research Committee.
In SITE’s survey, 55% of DMCs agreed or strongly agreed that they’re “finding it necessary” to take on traditional incentive company services and become one-stop shops for incentive programs. Only 30% of planners agreed with the DMCS, but 60% of users (clients) shared the DMCs’ viewpoint.
When DMCs were asked if they want to venture into incentive company services, a smaller percentage, about 50%, agreed or strongly agreed. About 60% of planners and about 76% of users agreed with this. About 57% of DMCs said they agreed or strongly agreed that they are “equipped” to provide incentive company services, compared to about 22% of both planners and users who agreed.
Another survey finding reflects the seismic influence of technology on incentive travel planning. Nearly 73% of planners and close to 67% of users said they’d book group services online with multiple suppliers rather than use a DMC to coordinate and manage all aspects of a program.
Who does what
DMCs typically provide travel fulfillment services at a destination, including ground transportation, meet and greet services, activities and tours, and event planning. The actual design of incentive travel programs, including rule formulation, marketing and communication, analysis of destination options, and tracking data, are incentive companies’ traditional realm.
There’s also been a certain amount of overlap with, for example, either a DMC or an incentive company booking hotels, depending on the program. And factoring in travel agency group departments and site selection companies that negotiate and book accommodations, the field offers clients many options.
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“The old days of black and white lines between incentive/meeting planning companies, DMCs and site selection companies are gone; the lines have blurred,” said Richard McCann, co-owner and partner of San Diego-based Summit Performance Group.
“In the last five years, as business has gotten tougher, everyone is crossing over and taking whatever business they can get,” he said. “Incentive houses are now competing with DMCs and site selection companies. We’re all solutions-based companies. The client doesn’t always understand where the lines are drawn; they just want a solution.”
Invasion issues
Companies “invading each others’ space” is an issue, said Steve O’Malley, senior vice president of Maritz Travel in Fenton, Mo., and SITE International Foundation president.
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“We all need to be wary of the dynamics that exist,” he said. “If DMCs want to claim that space [occupied by incentive companies], then incentive companies may want to claim DMCs’ space. It would change the competitive atmosphere. It could set up a chain reaction.”
O’Malley said that the survey’s finding on one-stop shops makes intuitive sense. “If users are going direct to DMCs, then they are probably asking them to do more.”
Some DMCs, however, are not seeing clients seek their services directly. In fact, they’re concerned with being cut out of the supply chain.
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“There’s a lot of concern about being disintermediated,” said Laurie Sprouse, CITE, CMP, president of Dallas-based DMC Ultimate Ventures. “There are a lot of corporate meeting and incentive planners who have less time, less money, less resources, and yet the programs are under more scrutiny than ever and they are told they must meet certain objectives. They think they’ll save money if they go direct to vendors and cut out the DMC.
Economic dynamics at play
Given the recent economic turmoil, it’s not surprising that budget issues account for much of clients’ motivation in going direct to DMCs.
According to O’Malley, 70% to 80% of all meeting and incentive travel spend is managed by a client’s internal meeting staff. “Internal meeting planners are stretched to the limit and resources are so constrained now that everyone is looking at how things are getting done.”
From the in-house planners’ point of view, asking a DMC to do more isn’t as objectionable as going to a third party incentive and meeting house, he said. “That third party planner is a threat to their position; it’s safer to go to a DMC.”
According to Schuldt, “For end users there’s a perception of saving money by going direct to a DMC. Sometimes there’s just the impression of efficiency because no corporation is going to deliver the same amount of business that the third party intermediary world delivers to DMCs.” The additional time and resources required to work directly increases, not decreases, costs, she added.
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At Briggs Inc., a New York City DMC, president Anthony Napoli, CMP, DMCP, agreed that “for clients now, it’s all about perception. They think they can save money by going directly to DMCs.”
Napoli noted that some incentive programs are so small, the incentive company asks his company to service the business directly. “Otherwise it’s not cost effective for the client and the incentive company would rather keep the client long term.”
DMCs do what they need to do
Financial issues are also behind DMCs’ impulse to do more.
The recession was especially difficult for DMCs, according to McCann. “They suffered the most. They have always been the companies at the destination doing the big, lavish off-site parties. But those huge incentive programs have pretty much gone away.”
Sprouse believes that “some DMCs may feel it necessary to do whatever they’re being asked to do. There was business my company used to turn away that we’re now doing. There used to be a financial threshold and below that, it wasn’t worth our time and energy. The economy has made us all lower our threshold on what a good piece of business is.”
Yet DMCs appear hesitant to assume traditional incentive travel services, according to the survey. “That involves a whole other skill set,” said Napoli. “I don’t even know if I’d want to do that. Here in New York City, it’s a full-time job handling destination management.”
Traditional incentive company services are not part of DMCs’ core competency, O’Malley agreed. “To provide those services they’d have to invest in acquiring those skills. But it’s not only the financial implications of making that move. To do so means a full frontal attack on planning companies who have been their clients.”
Ultimately, the existence of incentive companies is not threatened, he said. “What incentive planners do is less about managing the aspects of a trip than producing programs that drive business for clients.”
As McCann put it, DMCs are not the “grand strategists” that incentive travel companies are.
