What is a reasonable markup for DMC to charge for banquet chairs?
There is no one answer. Prices can vary widely from one company to another, and a lack of transparency can lead to a lack of trust.
Some DMCs (companies that plan tours, activities and transportation in specific destinations) charge a package price or a per-person price, while others charge a percentage markup above the cost, called “cost-plus.” “There’s no one-size-fits-all pricing anymore,” said Lisa DeLeon, vice president of global sales at Terramar DMC. “‘How would you like to see pricing?’ is more common practice now.
Deidre Everdij, owner of COTC Events, determines costs based on an estimate of how long the project will take in consultation with her sales, creative and operations teams. “Sometimes we hit the mark, and sometimes our clients push us over the edge with excessive proposal revisions, multiple site visits, or multiple conference calls.”
Operating costs and profit margins
DMCs with higher sales volume are able to negotiate discounts and pass them on to customers. So, going back to the chair analogy, if the planner rents that off-the-shelf chair, he or she might pay $50, while the DMC might get the same chair for $35.
However, how much of a discount DMC will pass on will vary, as they have to mark up the chairs to cover their operating costs and achieve their desired profit margins.
“The operating costs of a business are 15% to 20%, so the chairman’s profit margin is the company’s overhead,” said a DMC chief executive who asked not to be named.
This overhead varies, but may include insurance (some clients require the DMC to purchase at least $5 million in insurance, which can cost $30,000 to $70,000 per year); operating the office; and labor costs. “Then we add profit margin on top of that,” he said.
“Most DMCs are looking for a margin of between 8% and 10% at best, unless they are ripping you off. Our margins are very tight. So when planners say they want a 3% discount, unless there is Spend a lot of money or we can’t survive.
Planner’s Strategy
DMCs and planners agree that the most effective way to work together is to start with the budget.
Because DMC is familiar with local restaurants, they can provide solutions that stay within your budget, such as using existing soft seating or linens, or replacing florals.
To win business, some DMCs are willing to combine pricing models into a single proposal. A contract may contain several different pricing models (such as a package price for one element, and a per-person price or hourly rate for other elements) depending on what the project stakeholders want.
Susan Avery, a global events expert whose clients include Meetings & Incentives Worldwide, Opus Agency and Strategy Incentive Solutions, recommends understanding labor costs (this is the largest project) and using LinkedIn as a guide for searching for various positions within the DMC. To keep things simple, all her campaigns are partnered with just one or two DMCs.
She always asks if the furniture supplier is national and offers good prices, noting that once the upholstery is purchased or made, the value depreciates. “The newest themed decorations will be the most expensive.”
The value of expertise
What planners pay for when hiring a DMC is expertise. However, some DMCs claim to be destination experts, but in reality are failing planners.
“DMC was founded to be the local expert,” said Joe Fijol, founder of Ethos Event Collective. “We’re not everywhere, but wherever we are our goal is to be the pulse of the destination.”
He said developing member countries also face different operating costs, depending on where they are located. “What’s going up is inflation and the cost of living. I can no longer charge my clients 20% to make up for these increases. In some places I have to pay double-digit cost of living increases.
Planners need to be aware of all this when evaluating DMC pricing. “We believe that the way to achieve our clients’ goals starts with our people,” Fijol said. “They are truly our product.”
