Destination Management Companies (DMCs) in developing countries face unique challenges in light of macroeconomic events like rising inflation, escalating energy prices, and inconsistent service from local and long-haul airlines. Crafting suitable strategies to counter these adverse situations is crucial for a DMC's survival and growth.
Destination Management Companies (DMCs) in developing countries face unique challenges in light of macroeconomic events like rising inflation and escalating energy prices. Crafting suitable strategies to counter these adverse situations is crucial for their survival and growth. Inflation erodes the purchasing power of consumers, thus impacting the spending ability of tourists, which directly affects the DMCs. However, DMCs can leverage a few strategic tactics to mitigate this impact.
1- For the overseas B2B tour operator markets DMCs should contract on a short-term basis as much as possible unless the overseas Tour Operator insists on long-term rates for a catalog or other vertical of clients. This means that transport and hotels can change rates and the DMC will not have to eat these additional costs. More on contracting strategies later.
2- For the B2C direct bookings the DMC has a host of options but the volume may vary on tour type and location. Almost every inbound-centric DMC has to look toward a B2C strategy as the patterns of travel consumption and product have evolved into a new structure or paradigm. Examples would be accounts on social media that elicit direct contact, contracting to provide services for hotels as they take bookings from the OTA platforms and enhance their revenue streams by selling tours, hiring influencers to direct traffic to the DMC's website, etc. The potentials are too numerous and varied to list at length in this short article.
Product Development – It is Necessary to Be Creative
Firstly, creativity in services and offerings could be an effective buffer against inflation. DMCs should focus on providing experiences that are unique, local, and cannot be replicated easily. This can involve creating local cultural experiences, ecotourism projects, or adventure tourism initiatives. Unique offerings create additional value for tourists, making them more willing to pay higher prices necessitated by inflation.
Creativity will also be essential in overcoming these challenges. DMCs can differentiate themselves by offering unique and tailored experiences that can't be easily replicated. This could include cultural immersion experiences, adventure tourism, eco-tourism, or wellness retreats. This could also include developing CBT or other product that is exclusive to the DMC and to one village or location, thus, making it difficult for competitors to copy or replicated on short notice. Another option is to establish a CBT project with an overseas TO and co-brand it with the TO and include it in the itineraries for the TO. This ties the TO to the DMC and also builds brand and recognition.
Moreover, diversifying income streams can help cushion the impact of economic shocks. For example, DMCs could consider adding ancillary services such as travel insurance, equipment rental such as bicycles, or event planning that might include weddings as an example.
Secondly, adopting dynamic pricing models can help. Prices can be adjusted based on seasonal demand and supply, ensuring optimal revenue. While this requires significant market understanding and predictive analytics, it allows for better management of income streams even when inflation rates fluctuate.
Contracting Hotels: This is deep subject matter but it is advisable to have static contract rates for long-term bookings(in advance, overseas tour operator market) and dynamic for shorter-term bookings. Assuming that the clients will use the DMC for hotels, one should always ask the hotels for costs-free add-ons that the DMC can use as marketing leverage in a crowded market place. These could include free airport transfers, free foot massage, dine-in our dine-out discount vouchers, etc. If you service two radically different markets, say Chinese clients and French clients, ask the hotels for two contract rates with the less expensive being for the Chinese.
Thirdly, DMCs can focus on increasing operational efficiency to reduce costs. This can involve using technology to streamline business processes, reducing the need for large-scale physical assets or administrative staff. This reduction in costs can then offset the inflation impact.
Contracting Staff: A DMC will have its core staff and then try to use seasonal contracts where practical. Or a firm could use providers that can act as both driver and tour guide thus saving costs. There are many variations to this but the bottom-line consideration is to keep fixed costs as low as possible while at the same time maintaining a high level of service.
When it comes to an energy crisis sending crude oil prices soaring, this can hit DMCs hard by drastically increasing transportation costs. However, DMCs can innovate to lessen this impact.
One approach would be focusing on "slow travel," promoting local attractions that don't require long-distance travel. DMCs can design itineraries that include more time at fewer locations, promoting immersive experiences rather than whirlwind multi-country tours. Another angle consistent with this theme is to appeal to digital nomads, those who work but also have leisure time to explore and book tours that meet their preferences for adventure and sustainability.
Also, DMCs can encourage sustainable travel options. For example, promoting cycling tours, walking tours, or using energy-efficient vehicles for group tours. Not only does this save energy, but it also appeals to the growing market of eco-conscious travelers. (See our article on selling "Green" tours via social media. )
As for staffing, DMCs can employ more locals who understand the unique aspects of the destination, hence providing an authentic and personalized experience. It will also reduce costs associated with expatriate staff and contribute to the local economy.
Further, adopting a lean model with a core team supplemented by freelancers during peak season can keep the fixed costs low. Upskilling existing staff to handle multiple roles can also reduce the need for new hires.
Lastly, DMCs can foster partnerships with other local businesses. By building strong relationships with local hotels, restaurants, transportation providers, and other service providers, DMCs can negotiate better rates and reduce their dependency on imported energy.
In conclusion, DMCs in developing countries can counter inflation and an energy crisis by being innovative in their offerings, efficient in their operations, lean in their staffing, and collaborative in their approach. Such an approach can not only help DMCs survive in challenging times but also contribute to local economic growth and sustainable tourism.
#sustainabletourism #resilience #ecotourism #digitalnomad