Chris Lee

The State of the DMC Industry: Part II

Chris Lee, head of big destination management company ACCESS, looks at the future of the DMC industry and in the face of consolidation, recommends his company's co-op model.

Chris LeeLast week, DMC expert Chris Lee looked at the sea changes that have affected the DMC industry in recent years. Today, he provides his forecast for the future, and advocates for the 'co-op' model.

Consolidation: Past, Present, and Future

Some of the industry’s earliest consolidation began in the 1990s, when Production Group International (PGI), funded by investor-borrowed money, made over a dozen acquisitions of DMCs with the goal of creating a global company. A second wave of consolidation followed in the early-to-mid 2000s, and even more consolidation has taken place since.

In early 2005, GEP consolidated members from DMC Network, Contact and others. Later that year, PGI was purchased by TBA Global. Two years later, Allied bought PRA. Then, during the summer 2009, the private equity firm Core Capital acquired Allied. In 2010, Ovation Europe, in the hopes of forming a global consortium, aligned with DMC Network. That same year, Kuoni Group bought TBA Global. In 2011, August Jackson Communications purchased USA Hosts, which rebranded as Host Global Alliance. When GEP declared bankruptcy earlier this year, many DMCs regrouped under GDP.

In response to the changing needs of both DMC owners and clients, more DMCs are discovering a solution in consolidation. Clients have led this trend with consolidated purchasing, but DMCs have responded quickly. Clearly, consolidation is here to stay. With so many different methods of consolidation, local DMCs should carefully evaluate new partnerships and alliances to find an approach that best benefits them. 

Best Practices in Consolidation

At ACCESS, we have faced these choices, too. In addition to being a founding member of The DMC Network, as well as a past member of The Contact DMC Group, for five years between 1995 and 1999 we joined PGI and functioned as a conglomerate.  We ultimately returned to independence under the ACCESS name. We have observed consolidation both when it fails and at its finest. Today, as we continue to strengthen our national DMC brand while building a strong global alliance with our partners Pacific World and Amstar, our behavior is guided by a simple question: How can we build the ultimate DMC?

As every DMC owner knows, ours is an industry that thrives off relationships. Because today’s clients routinely choose new destinations for every trip, clients may only visit a certain destination every few years, which means local DMCs have less opportunity to create deep relationships with them. This hurts both the DMC and the client. The DMC must work hard to drum up new business or convince clients to plan events in cities they have already experienced. Even if the client eventually returns several years later, the DMC then has to invest time understanding the client’s tastes and preferences, which have likely changed. Meanwhile, the client feels vulnerable. Without the promise of repeat business, clients fear that local DMCs have less motivation to ensure that every program exceeds their expectations.

In a true partnership, the DMC knows its client and the client trusts its DMC. This understanding that relationships are the core of the DMC industry should drive any successful approach to consolidation. At ACCESS, we recommend a model of consolidation that is different from the traditional consortium and franchise models of consolidation. Our "co-op" consolidation model—in which local DMCs remain owner-operated but are fully-integrated within a larger DMC partnership—is the only model in which local DMCs are fully invested in themselves.

Under this "co-op" model, relationships flourish. Because we are able to offer more locations, we work with our clients more often and we know them better. Since our offices communicate internally, clients never have to explain their preferences twice to us, so they consider us a trusted partner. Furthermore, clients recognize that we have powerful motivation to ensure that every facet of their program goes smoothly because they know we’re focused on the longevity of our partnerships. After all, whether a client enjoys our program in New York could impact whether they sign up for an event in San Francisco. This model benefits both the DMC as well as the client.

Some local DMCs are drawn to the consortium model, in which they are represented by a larger brand, because they are often able to hold onto their own names and brands. What these DMCs don’t realize is that they are promoting the larger brand at the expense of their own identities. At trade shows and conferences, the larger brand builds name recognition while its small DMCs find themselves once again lost in the shadows. In contrast, under the "co-op" consolidation model, local DMCs share a name and a brand, which means that every promotion dollar benefits every location. 

Another method of consolidation, the franchise model, has its own set of weaknesses when applied to the DMC industry. Franchises are often structured around uniformity that is, ironically, the antithesis of the local touch that DMC clients crave. And while franchises attract newcomers who are eager to learn, clients are often rightfully wary because they have no way of identifying which office is established versus which is still learning. Under the "co-op" model, only locations that are experienced and established are invited to join.

When it comes to consolidation, learning what not to do is just as important as learning what works. When DMCs consolidate haphazardly, owners lose their independence and clients lose the personalized service of each destination. Consolidation should not be synonymous with standardization. In addition, decisions should be overseen by those on the ground. When decisions are made by investors who lack a deep understanding of the industry or driven from a financial perspective, outcomes suffer. Owners should remain empowered to make decisions in the best interest of their clients.

At its best, consolidation preserves the autonomy of talented owners, showcases the unique local flair of each destination, and adds convenience for clients. That’s the co-op model of consolidation.

The Future of the DMC Industry 

What do all of these changes mean for the future of the industry? With 27 years of experience under my belt, I have witnessed my share of industry changes. If the spate of consolidation during the previous decade is any indication—and I believe it is—then the coming decade will bring even more consolidation than we have seen so far. This consolidation will not be limited to national alliances, but will spread throughout the world. With greater consolidation will come greater sophistication across the industry as a whole. This is good news, because the synergies that can be created among multiple destinations are limitless. As DMCs align to share best practices, the DMC space will continue to improve.

Twenty years ago, a mere handful of hospitality schools dotted the country; these schools were mostly geared toward hotel management. Today, colleges offer courses on event planning and have entire departments dedicated to the destination management industry. Each spring, these institutions graduate a new crop of talent: smart, well-educated professionals who have studied the business and now want to be practitioners themselves. In an always changing, ever more demanding industry, these young men and women will be well-served by their unique training and education. They are fortunate to have a grasp of the industry that my peers and I took many years to learn.

These talented men and women, no doubt capable of a degree of sophistication to match these changes, will find themselves with promising futures in an exciting industry. They are simply another indication that our industry is growing and flourishing. The future of the DMC industry is bright.

Chris Lee, DMCP, is partner and CEO of ACCESS Destination Services, having begun his destination management career in the early 1980s working for ACCESS precursor California Leisure Consultants in San Diego and Los Angeles. He is a co-founder and past president of the Association of Destination Management Executives, a contributing author to “The Guide to Successful Destination Management,” and the 2006 Destination Management Professional of the Year honoree.

Hide comments

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish