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Why Use a DMC
by the Association of Destination Management Executives
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ICCA Intelligence Volume 13 - October 2006
Case study: Process for appointing a DMC.
ICCA received the following request from an association. We thought that other association executives might be interested to see our detailed responses to the specific issues raised by your colleagues, and these are set out below the initial query.
"We are in the process of appointing a DMC for our event in Italy next year.
We are currently taking two DMCs into consideration, and we have received both offers. DMC 1 has guided us on a site inspection, and DMC 2 has organised a smaller site inspection. After this, DMC 2 informed us of their "usual inspection policy":
‘In case of inspection visit DMC 2 will do its best to obtain best possible rates or complimentary places from suppliers. The costs sustained will be charged net of any commission and included in final invoice in case of booking confirmed. On the contrary an invoice will be issued for the total and payment will be requested upon receipt of the same.'
Firstly, I would like to know if this is common practice at all.
Secondly, I assume that it is recommendable having just one DMC working on one event. If we have decided for one or the other - is there normally a contractual agreement signed for all the social functions or per social function? (We will have around 4).
Finally, DMC 1 has excluded the agency fee and added it as a percentage on the total price. On the other hand, DMC 2 does not mention an agency fee, but is slightly more expensive. What is a usual percentage of an agency fee?
Have you got any checklist or general criteria for the process of choosing a DMC that you could send to me?"
Firstly, I would like to know if this is common practice at all.
ICCA:Some DMC's and indeed other intermediaries do charge for site inspections, but it is not common practice and is mainly used to discourage "non-serious" familiarisation trips. Where charges are made these should always be explained in advance of the site inspection: we don't think it is professional to introduce the charging policy after the site inspection. Where charges are made these should be clearly stated and not be "open-ended".
Where charges are made it would be typical for these to be waived if the DMC is successful in winning the overall job.
Secondly, I assume that it is recommendable having just one DMC working on one event. If we have decided for one or the other - is there normally a contractual agreement signed for all the social functions or per social function? (we will have around 4)
ICCA: It is definitely preferable to only work with one DMC because there are definite economies of scale, and in most examples we are aware of there would be one contract for the multiple jobs.
Finally, DMC1 has excluded the agency fee and added it as a percentage on the total price. On the other hand, DMC2 does not mention an agency fee, but is slightly more expensive. What is a usual percentage of an agency fee?
ICCA: DMC's typically charge clients a "fixed price + per delegate price" or a "per delegate price", rather than a percentage of the total bill, although there are many models. This reflects their fixed costs plus variable handling costs. The cost of the functions should have little bearing on the DMC's costs, so this pricing method is more transparent. For example, if you decide to upgrade from table wine to champagne, why should this increase how much you have to pay the DMC? This is definitely an area for negotiation.
DMC's also earn money by charging suppliers commission (which is almost always a percentage of the total revenue that each supplier earns, usually 8 to 10%). It is becoming more common practice for clients to ask DMC's and PCO's to clarify where they are earning commission, so that there is transparency in financial relations. Understanding the total earnings potential of the DMC will help you to negotiate a fair price.
Whilst there is a "usual" commission percentage paid by suppliers to DMC's, we are not aware of any similar % for clients.
Have you got any checklist, or general criteria for the process of choosing a DMC that you could send to me?
ICCA: We don't have a checklist, but think that one of the best and most pragmatic approaches is to request a list of similar clients they have recently handled who would be happy to provide a reference. They should be happy to identify satisfied clients who can recommend them (and who may even discuss how their fees were structured).
Hope this is helpful. Martin Sirk, CEO.