This article is written by Ananya Mondal, pursuing Diploma in Advanced Contract Drafting, Negotiation, and Dispute Resolution from LawSikho.
Table of Contents
No doubt, the travel market operates extensively. The travel agencies including both online and offline services provide a large number of services to a large number of tourists, so they have less control over the resources at the immediate destination. destination management companies or DMCs build the connection between travellers and service providers. The essence of the DMC is their local knowledge. DMCs offer plenty of opportunities for travel agencies.
Destination management companies work as the intermediaries between a connection of local suppliers and travel agencies who again sell such services to travellers. They work within the distribution chain of tourism products and services. Destination management companies negotiate at favourable rates and execute agreements with several, distinct suppliers on the spot: restaurants, local hotels, guides, car rental companies, etc. Therefore, they blend the services, bunch them into fascinating packages and resell.
Nowadays destination management companies operate as a single point of contact for the B2B and B2C clients. As a B2B client, a travel agency links to the DMC database and provides those services to the clients. A DMC ensures the suppliers accomplish their responsibilities and also is always there to provide further services if everything doesn’t go as per the plan.
What is a destination management company?
A destination management company (DMC) is a company based on local, for-profit tourism business, and whose function is for providing groups as well as individuals with services to fulfil the requirements and interests of their meeting, travel, and entertainment at a certain time and place. It is important to note that a DMC may either be a home-based business with one person or it may be a worldwide company including 500 employees located in major cities.
What is a destination management agreement?
A destination management company (DMC) agreement is a legal contract between an event or tour planner or travel agency and the local supplier or service provider, where the local supplier provides to the event or tour planner the professional services for planning and implementing out-of-town event programs and services.
Destination management company agreement can also be helpful for a professional meeting or a corporate event.
Benefits of destination management company agreement
1. Arrival and departure assistance
It is the main transfer service with meet-and-greets. According to many DMC services, the local representatives wait for the visitors with a welcome indication at the meeting spot, assist with the luggage, take them to the predetermined shelters, and again take them to the airport on the day of departure through the prearranged vehicles.
Many operators advance their service level by including an excursion or a story for enjoying the ride. For example, SunTours Caribbean, additionally the transportation, allots some tour representatives to visit in-resort clients for guiding them with the area they’re locating in. A few operators like Mautourco provide cold towels, flower garlands, and corporate gifts to their new visitors.
2. Tours and excursions
Destination Management Company offers safaris, cruises, traditional excursions, rubberneck tours, and many more extraordinary experiences which will not be provided by the travel agencies on their own. For example, Orient Tours, a DMC of Oman and the UAE, provides a number of packages in the Arabian Desert such as enjoying the sunrise behind the sand dunes, a ride in the desert on a quad bike, and a nightlong camel riding on dune drive, sandboarding, and many more Arabic entertainments.
3. Event or activity planning
Having connections with domestic suppliers, hotels, and venues, destination management companies have a tremendous advantage over other travel players in the condition of coordinating tailor-made activities for groups, events based on a theme, and programs. Many destination management companies make plans for educational programs, weddings, sports events, concerts, roadshows, etc. For instance, SNTTA Emir Tours organizes golfing experiences based on the smallest details from hotels and tee times to transfers and excursions.
The operators of destination management companies can also provide accommodation services in remote areas. As an example, the name of the Turks and Caicos Islands in the middle of the Atlantic Ocean can be taken. Olympia Destination Management offers a lounge with VIP facilities at the local airport and arranges luxury hotels and villas for vacations.
5. Meeting, Incentive, Conference, Event (MICE) tourism
Destination management companies help to make plans for team-building travels and organize in-resort meeting events. DMCs are a helping hand for travel or event planners at companies. According to Kim Parizek, a travel expert, destination management companies help her to serve her clients at a larger level.
6. Corporate social responsibility programs (CSR)
As the tourism business is getting famous day by day even from the social and environmental perspective, DMCs are receiving an increasing number of requests for CSR, as they are a key source of their experiences.
Beyond Experiences, a DMC in Australia sets up CSR into the boardroom of the destination and corporate group packages as there will be the chance for travellers to contribute to the local community by helping koalas who survived the bushfires.
7. Car rentals
For having relationships with local car rental fleets, Destination Management Companies get cars at reasonable rates and deliver the cars for rent. In some DMCs, the car rental widgets are added to the websites of the company.
8. Travel-associated services
Some destination management companies provide the whole process of travel, like arranging visas, insurance, and many more related documents.
Factors to be considered when developing a destination management company agreement
1. Relevant expertise
The destination management company agreement should deal with the demand from the perspective of the customer. This is how one can check if his/her travel plans will work for the clients.
Before entering into a DMC agreement, the travel or tour planner is supposed to check in the best possible way about the details of the number and types of local service providers the DMCs are associated with, including the owners of the property, activity offerers, ground transportation companies, and even the government entities under which the DMCs are registered.
There is no doubt that many destination management companies are lagging behind in digital advancement, particularly the smaller ones. However, one is suggested to keep searching for a better replacement for the smaller one.
4. Quotes and commissions
Once one narrows the choice to a few capable destination management companies, he/she surely wants to get the best rates, and he/she is suggested to compare the quotes with any other similar service. Probably one chooses to leverage the transfer services at one destination management company and buy tours from another one. Additionally, the event or tour planner may ask for a full breakdown of commissions, as there could be some undisclosed fees. For example, several DMCs implement an event management fee that alters depending upon the custom charges.
Care and caution should always be taken into consideration. Accordingly, one should not jump to conclusions but first gather information about working with similar entities and examine their business license.
Important clauses for drafting a destination management company agreement
However, a verbal agreement is not sufficient for the travel or event planning business. One is always supposed to have a written destination management contract in order to form the terms and conditions of the service. The contract will be the source of solution in case a dispute arises.
1. Payment schedule
In maximum event or tour planning programs, an initial deposit should be made, and further, the remaining part should also be paid after the event.
In a DMC agreement, a due date is supposed to be mentioned for the deposit which is made initially. DMCs should not begin work until the initial payment is made by the client.
The rest can be paid by the client while the event ends. One must ensure to examine the line items, for example, venue rental, equipment, catering and mention taxes and other added fees.
2. Terms for cancellation
It may happen that a client will back out halfway through the event or tour planning process.
In that case, only the contract can protect the company from monetary loss. Although, it should be noted that all the payments that the DMC received before the cancellation are not refundable.
It is also noted that clients have the responsibility for event costs made since the last payment. Accordingly, if in case the last payment of the client was the initial deposit, then the DMC will be compensated for all the work it has done till then.
3. Cancellation-by-you clause
Opting out halfway is not rare for clients of the DMCs. Even the event or travel planner may want to pull out for enough reasons such as, after getting a last-minute request from a high profile client, backing out of a vendor hired by the event planner, facing an unexpected health emergency. In that case, this type of clause, which is used in the hospitality industry, is considered a cancellation-by-hotel clause.
Therefore, in the destination management agreement, it is advisable to include the scenarios which allow the event planner to back out. In addition to it, one is also expected to mention the provisions for the client he/she is backing out on.
4. Termination clause
A termination clause should not be puzzled by the terms of cancellation. Termination refers to cancellation for uncertain events which are beyond the control of either party.
It may include incidents related to weather, a government shutdown, a pandemic, or any other disaster. A termination clause defines the situation where none of the parties can be held liable.
5. Indemnification clause
An indemnification clause safeguards one from the liability he/she is sued by a third party for negligence on the client’s end. For instance, if an attendee is injured, the clause makes sure that the attendee cannot hold the DMC legally responsible. Another instance is damage to the venue. In that case, the venue operators are supposed to hold the client liable, not the DMC.
After all, termination deals with cancellation for unexpected events beyond the control of each party.
Destination management companies provide services directly to the customers, but a large number of them also give out their travel products through travel agencies and tour operators. Firstly, it is noted that some estimation management companies set up groups for better efficacy and readiness in working with them. Independent DMCs collaborate on the basis of destination, the market they operate in, and the type of services they offer. They also share business ethics and principles.
A destination management company agreement is the safety net. Parties should never agree to work on the basis of only a verbal agreement, even when one works with a loyal client with whom he/she has developed a relationship. The agreement not only safeguards each party financially but also restricts needless disputes that can spoil the business relationships.
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