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by Pádraic Gilligan, Managing Partner, SoolNua

screen-shot-2015-11-21-at-18-05-58My good DMC friend Fran Rickenbach has been pursuing me for some time now. I won’t deny that this frightens the daylights out of me. Those who know Fran know why. She’s a formidable lady, a “mountie who always gets her man”, in a manner of speaking. You see I promised Fran I’d persuade @Supergreybeard to join me in Barcelona in January next for a duet before the annual conference of the Association of Destination Management Executives International (ADMEI). Trouble is he’s been bleaching his beard under a merciless sun in the South of Spain since late August so we haven’t got together yet to work out what we’re going to say. So Fran continues to mail and call and I tell her I’ll be right back to her.

And I will be, once this blog is published.

Mysteries, Enigmas, Riddles and Conundrums

I now know what we’re going to say at ADMEI and I even have the title for the presentation. It’s written above – “The DMC conundrum – will it ever be solved?” The title came to me following a series of discussions and experiences with DMCs in places as diverse as Vancouver, Oslo and Dublin all of which highlighted, and not for the first time, that the figure of the DMC is a riddle wrapped in a mystery inside an enigma all covered in a conundrum.

At the heart of the challenge is the conflict of interest between the DMC as  consultant and the DMC as agency: as consultant the DMC earns a fee for the impartiality of her advice while as an agency she earns a markup for the very partial sourcing of certain products and services. Thus there’s a commercial schizophrenia at the heart of the business model – if the DMC is getting a fee at all it’s always far too low so, inevitably, she must rely on markups and commissions to stay afloat and by so doing is compromising – at least theoretically – the very reason she was hired in the first place.

A little history

But first, a little historical perspective. Destination Management Companies evolved from incoming ground agents and tour operators almost 50 years ago when the rush and flow of mass tourism started to split into niche tributaries, requiring a more specialised destination experience and a more “business class” service level. So, like humans evolved from apes, DMCs evolved from ground agents. It’s simply part of who we are and we cannot deny it.

Ground operators earn a crust by the agency model, ie, sourcing products and services at a price and selling them on at a higher price. The key to  success here is buying at the lowest price possible and selling at the highest price possible but therein the latent agency hazard: my focus is now divided between price management and customer satisfaction whereas for the consultant focus is exclusively on the latter.

The perfect business model for DMCs

So what does the perfect business model for DMCs look like? How would we design it now if we could roll back the years and start all over again? Undoubtedly the consultancy model is better for its professionalism, transparency and clean lines. The undisputed core competency of the DMC is her local knowledge, expertise and connections. That’s what she’s selling – not bus transfers or Gala dinners or pillow gifts. As a destination expert the DMC has no less claim on professional status than an accountant or attorney who sells her knowledge, expertise and connections to customers in units or blocks of time. So clearly this is how DMC’s should charge for their services.

But they usually don’t because they’re still liked umbilically to their agency origin and are too scared to cut the chord once and forever. If they could cut the chord, either individually or collectively, then DMCs would metaphorically start to walk on their hind legs and be able to look other professionals squarely in the eye. They would evolve fully into the Trusted Advisor that most of them already are but be free of the agency mentality that scrambles for a margin on every transaction and never fully climbing out of that primordial murky swamp.

ADMEI in Barcelona

screen-shot-2016-09-23-at-11-10-31-a-mSo this is what @Supergreybeard and I will discuss at the forthcoming ADMEI Conference in Barcelona. The ADMEI Conference is the indispensable global forum for the entire DMC community to dialogue, discuss and debate core issues like identity, vision, mission, values. This is the only opportunity in the year when DMCs can interrogate, ponder and reflect upon MICE industry trends exclusively from the DMC perspective. This is an industry event where talking with each other is not only permitted but obligatory! There are no suppliers and no customers to deflect attention from the matters at hand. Any customers or suppliers who are in attendance are there as part of the educational programme, not to be sold to or bought from!

Destination Management Companies need to become Destination Management Consultants. They need to evolve along the 4 stages suggested by Maister, Green and Galford in their seminal work, The Trusted Advisor (2000) from niche subject matter experts to experts whose knowledge extends beyond the bounds of their subject to valuable resources to finally become trusted advisors:

The highest level, the pinnacle, is that of trusted advisor, in which virtually all issues, personal and professional, are open to discussion and exploration. The trusted advisor is the person the client turns to when an issue first arises, often in times of great urgency: a crises, a change, a triumph, or a defeat.

See you in Barcelona!

Pádraic Gilligan and Patrick Delaney are former owners of Delaney Marketing Consultants and Ovation Group which eventually became the MCI-owned Ovation Global DMC. They now work with Aoife McCrum at SoolNua, a specialist agency offering strategy, marketing and training for destinations, hotels and venues in the MICE space. 

“Once a DMC, always a DMC”

 

 

 

 

DISCUSS...

3 thoughts on “The DMC conundrum – will it ever be solved?

  1. Adrian Segar says:

    Pádraic, you clearly touch on a core dilemma that most professional service-oriented businesses face: the ethics of the financial business model used to bring in revenue.

    Long ago, when I owned a solar manufacturing company, I used to say that what our customers were really buying was our expertise in creating high-quality solar hot water systems, installed correctly so they would last for many years (mine is 34 years old and still running fine) as opposed to the poor quality alternatives sold by our competitors. But almost no one wants to pay enough to support what expertise actually costs to acquire (some exceptions: lawyers, architects, engineers), so we made our money on equipment markup rather than our true value. Americans are much more comfortable paying for stuff; good advice, not so much.

    But when you’re selling purely services, you have to decide between client fee-based consulting, the lure of income from vendors, or some combination of the two. My choice has always been to shun any option that would jeopardize the reality or perception that my consulting could be swayed by financial incentives. I’ve been lucky enough to be able to chose this route; I’m well aware that many don’t have this option if they want to put food on the table; though there are also those who choose to pursue fees in ways I don’t think are ethical (e.g. my recent post http://www.conferencesthatwork.com/index.php/event-professionals/2016/09/is-paid-influencer-marketing-ethical-in-the-event-industry/).

    I agree completely with your closing statement: “Destination Management Companies need to become Destination Management Consultants.” But I wonder how many in the industry will listen and make this often-tough change.

    1. padraicino says:

      Adrian – brilliant comments, as always. Thank you. I must say it’s far easier for me to offer this reflection from outside the DMC ranks. On the inside the need to survive tends to blunt and blur any thought processes or, at least, to direct them squarely away from anything that might hurt revenues. From the outside, looking back at a market activity that I know (and love dearly) I cannot but conclude that there’s a conflict at the heart of the model. I hope this post and your comments can start some much needed discussion around the value proposition of “intermediaries”, what constitutes fair reward for the value proffered and how should it be calculated.

  2. Adrian Segar says:

    Pádraic, your response reminds me of what Upton Sinclair said: “It is difficult to get a man to understand something when his salary depends upon his not understanding it.”

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