“Success is not a random act. It arises out of a predictable and powerful set of circumstances and opportunities.”
–Malcolm Gladwell, "Outliers: The Story of Success"
The destination management business is in flux. Gone are the days when most destination management companies (DMCs) operated in just one destination and clients sourced them individually, one program at a time. Today, more DMCs service multiple destinations across the nation and throughout the world. To meet the needs of a more sophisticated clientele, using more sophisticated supply chain management, the DMC industry has adapted. Increasingly, DMC owners are choosing to align with national and global brands to ensure the longevity and succession of their businesses. Over the past eight years, the destination management industry has experienced more consolidation than in the previous four decades combined.
There is no doubt: The industry is changing. The recent shift toward consolidation may appear to have emerged gradually, even inexplicably; however, a closer look reveals a powerful set of circumstances and opportunities beneath the surface, including changing demographics, evolving client needs and expectations, and global trends that will permanently impact the future of the industry.
DMC Owners Face Questions About The Future
Many, if not most DMCs were founded when the DMC industry came of age during the 70s and 80s. As these Baby Boomer owners look to retirement, what will happen to their businesses? How can they ensure the futures of the companies they have worked so tirelessly to nurture?
Almost every small business, including DMC owners, began at a kitchen table “mom-and-pop” environment. What determines the success of a business—and often, the success of an industry—is what happens when the business outgrows the kitchen table. ACCESS shares these humble roots. In 1969, we began in San Diego as California Leisure Consultants; a local company trying to define a new industry. Soon, we grew into an independent regional company, with offices throughout Southern California. Today, 45 years later, we offer services in more than 100 destinations across 30 countries. Along the way, we have learned quite a bit about growth, consolidation, consistency and success.
Changing Clients Needs Have Fueled New DMC Offerings
Our clients have changed too. Meeting and incentive travel planners now deal with much stricter procurement processes, risk management and greater financial oversight within their organizations than ever before. Few companies are willing to work with DMCs and other vendors that are uninsured or underinsured, or lack financial strength or longevity. In particular, Fortune 500 companies, which especially value liability protection, rarely choose to work with DMCs that are unable to provide their own insurance; multiple layers of insurance protect clients and offer them peace of mind during events. All of these factors contribute to the fact that vetting vendors has become a time-consuming and lengthy process for clients.
In addition to saving time and driving efficiencies, more clients are choosing to work with fewer partners in order to better leverage their volume. In response to this trend, the number of destinations served by individual DMCs has expanded dramatically. By some estimates, the industry has seen a 200 percent increase in the number of destinations served by DMCs over the past decade alone. Ten years ago there was only one or two (U.S. based) national DMCs. Today there are a half dozen, and most of them also serve international destinations as well.
Even more recently, clients have evolved from expecting national offerings to expecting global offerings. At ACCESS, we responded by joining forces with global destination management companies Pacific World and Amstar. We know that clients have many choices and they have made it clear to us that they recognize the value of a single DMC partner that serves multiple destinations. In today’s climate, DMCs that do not serve multiple destinations are no longer competitive on a large scale.
Still, at least one thing remains the same: No matter the location, whether in San Diego or South Africa, clients expect a local touch. They want access to hidden-gem venues, one-of-a-kind entertainment, and mouthwatering cuisine that can’t be found anywhere else. Unlike tour companies that arrange pre-packaged trips with assigned meal times and bus schedules, the DMC industry has always shined in its ability to offer unique, nuanced experiences that are fully customized to each client.
But these types of demands—from handling complex logistics to navigating multiple locations—can topple a small, local DMC. As these trends continue, aligning with a strong brand has become imperative for independent DMC owners. If you’re a DMC that currently serves only one or a handful of destinations, how you can you ensure your success in the face of these changes? Should you hurry to open new offices? Scramble to buy DMCs in different locations? As a local company with limited resources, is it even possible to compete against emerging national and global brands? How can you offer your clients everything they expect? These are the questions that many DMC owners will grapple with in the coming years.
In Part Two of this piece, we'll address each of these questions individually and in detail.
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.