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

WITH improved connectivity boosted by the rapid growth of LCCs, Asia continues to reign as a preferred corporate travel destination among the region’s DMCs and TMCs.

BCD Travel Singapore, head-corporate leisure, Desmond Lim, said: “(Asians) have limited days (for) travel, and they cannot go to destinations beyond a five- to seven-hour flight radius, so Asia will continue to be the incentive destination (of choice).”

While clients’ incentive budgets have stayed the same for IMR Group Malaysia, the company’s director, B P Tan said the increasing number of flights in the region had aided product creation.

He said: “For example, Malaysia Airlines recently increased its Kuala Lumpur-Bangkok frequency, giving us more airlift capacity and more competitive fares, which translates to better prices for (clients).”

Tan explained that reduced airfares would allow for better quality catering and activities for event delegates.

“With (stagnant) budgets, we have to be creative to deliver what clients need,” said Joe Kok, MP Travel & Tours Malaysia business development director. “Indonesia and Thailand have been our main destinations but we cannot keep sending clients to major destinations like Bali. We need to introduce new programmes, so the Kuala Lumpur-Semarang service (launched by AirAsia earlier this year) has given us an opportunity to create new itineraries.”

The Philippines and Cambodia are also seeing stronger outbound MICE traffic as a result of improved regional air access.

Said Linda Tan, operations manager of JTL Travel & Tours Philippines, which has seen a hike in the number of incentive groups in recent years: “Apart from the (developing) economy, the rise of LCCs has made it more affordable for companies to send (their top performing staff) on incentive tours.”

While Canaan2 Travel & Tours Corp Philippines general manager, Mirasol Pasia-Uy, observed more clients going to Guam, Australia, New Zealand and South Korea with budgets of up to US$1,300, she found that the majority are still travelling to neighbouring countries with a budget of US$500, made possible by cheaper flights on LCCs.

Similarly, Indochina, Singapore and Malaysia – all with good flight access – are most popular among incentive clients of Asia Explorer! Travel Cambodia, according to its managing director, Kim Chan Lekha.

KOREA Tourism Organization (KTO) will expand its marketing focus to include MICE markets in Europe, the US and the Middle East next year, following its success in tapping China and South-east Asia.

KTO Incentive & Exhibition Team assistant manager, Kim Young Sil, told the Daily: “We were given a significant increase in budget this year and we are expecting another increment next year. With this, we want to expand our market.

“We have had MICE events from Europe and the US, but compared to neighbouring destinations like China and Japan, we feel that the markets’ awareness of South Korea is not really there yet.”

Kim explained that there were instances of foreign trade buyers asking what South Korea had to offer for MICE, and whether KTO represented South or North Korea.
KTO’s 2013 marketing strategy will focus on Western Europe, including Germany, the UK, France and Spain, while in the Middle East the bureau will seek to court high-end corporate meetings and incentives.

Kim said: “Seoul City has made inroads in the Middle East through its participation in the Gulf Incentive, Business Travel and Meetings Exhibitions over the last few years and we are planning to start entering the market next year.”

Besides exhibiting at travel marts, Kim said KTO would also organise its own road shows to target source markets.

“At some marts we will also sponsor the buyers’ lounge which allows us to showcase our destination, performances and health services (for incentive participants),” Kim said.

Destination branding activities will, however, be different for the Asian, European and American markets.

Kim explained: “In Asia, our campaign highlights our modernity – advanced technology, skyscrapers and K-pop music. In the long haul markets, we will showcase our rich culture. Instead of featuring a K-pop dance performance at our booth during a travel mart, for example, we will put on traditional dances or re-enact a traditional wedding.”

When asked if the timing was right to launch promotions in Europe and the US, at a time when these markets are battling economic woes, Kim said moving in now with destination branding and education would set the stage for business once the situation improves.

Several buyers from the US and Europe told the Daily that stronger destination awareness must be established for KTO to succeed in drawing their clients. Real Events Europe director, Caroline Pocock, whose clients are major banks, said: “I think the biggest problem is (we) don’t know anything about (South) Korea. I know where it is and that it has industries, but why should I put it on the map against Hong Kong?”

US Travel manager, Hyun Hee Kim, also called for strong incentives to balance out the high cost of flying clients to and within South Korea and pricey land components. “Compared to other Asian countries, (South) Korea is an expensive destination,” he said.

Meanwhile, Omeir Travel Agency manager-VIP holidays, John Varkey Kailath, welcomes KTO’s move to go beyond leisure promotion in the Middle East.

The kingdom is inching closer to securing a race for the 2014 F1 season after the Sports Authority of Thailand announced that F1 chairman, Bernie Ecclestone, had agreed in principle to a night race on the streets of Bangkok.

Responding to the prospect of a Thailand Grand Prix, Belgium-based travel consultant Marc Lambert of Antipodes Voyages said: “We already run F1 trips to Asia and this is booming business. It would be great if Thailand can secure a place on the race calendar, and it will certainly grow business to the country.”

These events usually attract corporate groups, whereby companies will bring their top customers in small groups. These are high-profile and high-yield travellers, often combining business with leisure.

Groups visiting the Singapore Grand Prix will typically begin the trip with a meeting, attend the race, and then spend a few days doing leisure activities such as golf.
Although the event is a great incentive opportunity, it has limited appeal as interest groups tend to be male-dominated.

Asked how the event may be packaged, Bart Declerck, event consultant of DDMC Event Design Belgium, said: “I see the Grand Prix as a potential incentive for sales people. We always try to match the product to the client, so as a male-orientated high-octane sport, motor racing complements their competitive personalities.”

Hosting an international event of this stature will not only create direct business for the travel sector, but also raise Thailand’s profile as an international MICE destination.

“To secure the race would signify to everyone that Thailand is moving up in the world. It would have a psychological impact on clients who would see the country in a different way,” said Gordon Owen of UK’s Messrs G Owen & Co.

“If the Grand Prix really does come to Thailand, it would help overcome resistance that organisers may have towards the destination.”

Reporting by Timothy France