DESTINATION management companies (DMC) are cautioned to be extra-vigilant about potential defaults amid the current economic crisis in the eurozone.
The warning came from a DMC who related its story to the Daily, on the condition of anonymity, about how a tsunami of crises since 9/11 had left it with a total of half a million dollars of outstandings from no fewer than 10 companies with which it had good relations.
One of the companies, which declared bankruptcy, has set up a new one and is represented at this show, according to the DMC.
“I think we should be a bit more aware that business models have changed, the world has changed after the tsunami of crises we all had since 9/11, and we’re uncertain yet what would happen,” said the DMC.
“If countries and banks can go under, don’t assume that whoever you are working with cannot.”
DMCs interviewed by the Daily agreed there was a need to exercise extra caution in current times. Ken Chang, vice president of Associated Tours Hong Kong, said: “Things are too beyond our control and the debt-crisis is of a magnitude we’ve never seen, that even the people you deal with for so many years can be susceptible.
“Since 2008, we’ve applied caution to American companies – in our whole working life of 33 years, we never saw great names such as Goldman Sachs going under – now the radar should be on Europe.”
David Barrett, speaking in his capacity as a former DMC, had this advice: “Do not extend credit for MICE because 80 per cent of the time, the business is a one-time wonder and you don’t have an extended relationship with the end-user.
“The large DMCs are vigilant, but the new kids on the block that have come onto the market and grown in the past few years are less vigilant because they have less experience and perhaps they want to chase after the next piece of business. We are in such a fast-paced business now that people are just chasing one business after the next and are not looking after the bottomline.”
Barrett said he learnt from a lesson in 1996 when the company he was with then had allowed a dealers incentive to Thailand to run on full credit and was left with an outstanding of US$48,000. “The amount of stress it put on the team and I – you lose focus on other priorities because you were chasing after a business (debt collection) you had already delivered,” he recalled.
A veteran DMC in Thailand, Chaladol Ussamarn, president & CEO of CBS Travel Asia, said: “The economic crisis in Europe is a big problem. Only Asia is booming. We have to be careful and we must insist on prepayment before arrival.”
Another veteran, Dennis Law, managing director of Star Holiday Mart based in Singapore, said: “The risk is greater for those who handle leisure FIT and groups, than MICE. Because one event can cost a fortune – I just did one in Indonesia which cost half a million dollars – 90 per cent of DMCs would ask for a prepayment.
“I’m more concerned about slow paymasters than defaulters now, as I anticipate the economic crisis to result in payments being slower.”
– Full analysis in TTGmice and TTG Asia
