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This is a question often asked, and nobody can give a clear-cut figure as the answer depends on local conditions and economics. A margin which might be normal in Europe might be exaggerated when is applied in another world area, say central Africa.
DMC’s therefore should not have the presumption that they must work on a fixed 5, 10, or 15% or that margins are imposed by the clients. The profit margins are imposed by the economic situation of the destination and the market. A DMC who has overhead expenses of 15% can not work on 5%. It is therefore up to the DMC to decide on his profit margin, taking into account his general expenses, his competition and the needs of the market.
Given the fact that the clients always need the best rates available the DMC has two choices for increasing his profit margin and at the same time give the client a fair value product. Decrease his general expenses or buy better.
Sometimes the IH or Conference Organiser will request that the DMC work on “cost plus,” or in services like “a la carte dinning” have to be charged on “cost plus”. What service charge should the DMC ask in these cases?
Working on real cost, it is normal for the DMC to ask for a service fee because he will plan, organise, and provide the service. He will also guarantee the payment to the local suppliers and make advance payments. In these cases it is acceptable to ask for a fee varying from 8 to 15% or more depending on the destination and the service.
When the DMC is asked to cover extra on-the-spot expenses not foreseen in the quotation, again it is normal practice for the DMC to ask a handling fee for covering such expenses. In this instance the DMC is acting as a bank for the client, guaranteeing the payment to the suppliers, and being forced to do extra accounting work. It is therefore justified that he requests and charges a fee.
It is of interest that professional Incentive and Meeting organisers recognise the right of the DMC and accept such charges while Travel Agents who might be involved in an incentive or meeting programme have usually difficulties in accepting the rightful principal of such charges.
At the next issue: Following up the proposal
© Tasso Pappas CITE
Tasso Pappas was President of the SITE Greek Chapter 2006-2010 and served as President of SITE Intl. in 2000. This article is an extract from his book “To be or not to be a DMC” which he wrote in 1996 as his thesis for the certification as CITE (Certified Incentive Travel Executive). More information about Tasso Pappas you can find at http://sites.google.com/site/tassopappasconsultancy/
Contact: tassopappas@otenet.gr
Theodore is the Co-Founder and Managing Editor of TravelDailyNews Media Network; his responsibilities include business development and planning for TravelDailyNews long-term opportunities.
