Should DMC’s be charging for creating proposals?

SITE NEWS

The events sector of the hospitality has an ongoing struggle with trying to define ‘what is fair’ to charge a client when quoting for a piece of business.

By Tes Proos, Site Africa president.

Destination Management Companies (DMCs), globally, often come across scenarios whereby they find their resources and intellectual property (IP) literally being copied by clients. Some examples include clients who use their services to receive quotes and ideas, then take the same quotes and ideas to a competitor and ask for a cheaper quote. In other cases, the client themselves, go directly to the suppliers and book everything directly.

This is clearly an absolute waste of resources and daylight robbery when it comes to a DMC and their supplier’s intellectual property. How does one prevent this?

On 27 June 2022, a healthy discussion was moderated by Padraic Gilligan, chief marketing officer of SITE Global, with highly experienced panellists including Mike Waller, chief executive officer of award-winning DMC Dragonfly Africa; Aoife Delaney, immediate past president of SITE Global as well as Lorenzo Pignatti, chief executive officer of Terra Events Italy. Padraic explored between the three organisations as to how they quote and where do they draw the line.

Several interesting case studies were discussed and some pertinent points emerged including the following:

• DMC fees may vary from client to client and may well vary depending on the regional origin as well as business sector of the client.

• Some would quote nett rates and add a management fee.

• Some would mark up line items and quote a management fee.

• More clients are using large international hotel groups such as Marriott and Radisson and book accommodation directly, therefore in some cases DMC’s cannot charge management fees on accommodation – provided that the client does all contracting, rooming lists and other accommodation related services directly with the hotel.

• Discuss the pricing model with the client from the outset.

• The panel generally agreed that flexibility on pricing models is essential.

• ‘One size fits all’ will never be practical, as service requirements vary.

On the topic of large corporates demanding 30/60/90-day postevent payments, it was agreed that it is a practice which should not be allowed — but to what extent are we exposing our companies to playing bank to large corporations?

Lorenzo Pignatti of TerraEvents in Italy made an important point that, DMCs should not be selected on their payment terms, but rather on their creativity and ability to deliver a world-class programme. In addition, we need to adapt to a changing industry and be exceptionally careful with regards to contracting.

Mike Waller of Dragonfly described an interesting analogy in that DMC management fees also act like an insurance policy. What if something does go wrong, for instance, flights delayed due to weather? This immediately adds to the DMC workload, yet additional management fees are not commanded. Service delivery and peace of mind that all situations can and will be handled should be part of justifying management fees.

Then there is the matter of value vs time. Putting together a suggestion on paper within two hours might seem easy, but how much time and effort has been put into supplier relationships and previous experience to deliver that RFP on time and on point?

How to handle clients that keep circling back with quote amendments and seeking new ideas and not confirming? The best way forward with this is drawing up a letter of intent prior to providing a detailed proposal that might involve a great deal of technical skills, design and so on. As with a site inspection, the DMC can then credit the work back to the client when the programme confirms — as accommodation and other operators often do.

It is a highly complex topic, and the plan is to regroup towards September 2022 to continue discussions.

You can watch the webinar here:

https://us02web.zoom.us/rec/share/4s MiUMpw6u1EXK7CqcZ16y1bDsd2FrT VknNPpR-mGGY0_ tm4fgKMxKrxJHbA5net. QwpxyjjZGUfqvDqG

By Tes Proos, Site Africa president.