In last week's article, we looked at the pros and cons of working with North American tour operators. Today, I want to discuss the nuances of working directly with local destination management companies (DMCs), which function much the same way as tour operators, but with several distinctions:
Profitability
Every business needs to know its numbers, so don't take this decision lightly. Traditionally, travel agents have worked on a set commission structure, but that is not always the case anymore.
DMCs serve much the same function as North American tour operators. They often work on net (wholesale) rates, allowing agents to mark up the price as they see fit. Many travel advisors find they can comfortably add upwards of 20% to their trips when working with local DMCs.
This can look mighty attractive if you're accustomed to tour operators paying you 10 or 12 percent.
Payment
The payment process with DMCs is not complicated, but a bit more complex than working with a tour operator who simply charges your client's credit card directly.
When working with local DMCs, payment is typically processed by your agency (or your host) and sent by wire transfer or corporate account. This places the responsibility of payment processing, fees and timely payment on you, the travel professional.
Be aware that many DMCs implement a surcharge to process international credit card transactions (typically 3-5 percent). However, you may find a similar surcharge when processing payment through your host, so do the math and see what makes most sense for your particular business structure.
And the speed of payment is perhaps the most appealing aspect of working on net rates, as agents are compensated once the client has paid in full. So if your client pays for the trip up front, you get paid immediately. Compare that with tour operators, where there may be a year or more between your work in planning and your clients returning from their trip-that's a long time to wait for a payday!
Security
Many travel advisors are wary of working with foreign companies because of the different laws and regulations, as well as being half a world away if problems arise.
Local DMCs are governed by local laws in their home country. They may be half a world away, with different working hours and foreign telephone numbers. In this case, it is critical to do proper due diligence, which is placed squarely on the travel advisor.
When working with DMCs, you'll need to do some extra legwork up front. Consider the following:
-Check to see if your host agency has preferred relationships with DMCs in the destination you're looking for.
-Ask for recommendations from trusted colleagues who have worked with the DMC personally.
-Go on a familiarization trip with the DMC.
When working with any supplier, it is your responsibility to do the research and work with businesses you trust. Without proper vetting, you run the risk of working with a less-than-reputable or, worse, an illegitimate company.
If you'd like to develop a similar working style, but traveling for months at a time isn't realistic for you, consider:
-Creating a short, 3-5 minute video sharing your Elevator Pitch and "Why" story.
-Scheduling a one-on-one, face-to-face call on a platform like Skype or Facetime. A face-to-face conversation is more beneficial than a phone call or email.
-Developing a friendly working relationship with one specific company contact for all of your communications, so you don't have to re-introduce yourself each time.
As the saying goes, "it's not what you know, it's who you know," and in our industry, it's all about building strong relationships. Take the time to consider how your business's profitability is affected by the suppliers with whom you choose to work, how they can best serve your ideal clients, as well as how your business decisions can positively (or negatively) affect the destinations you are selling.
Until then, stay inspired!
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