The key to working with DMCs

Q: Our agency wants to organize a small group tour to Bali. We have been in contact with several local companies that call themselves destination management companies, or DMCs. They have asked us to send them a proposed contract with our requirements. What is a DMC? Aside from a description of the tour program and the payment terms, what should such a contract provide for?

A: A DMC is a tourism business that can offer various services to groups and individual travelers. It can be a for-profit company or a nonprofit. It is essentially a local subcontractor to a tour organizer such as your agency.

Although the name includes the words “destination management,” a DMC typically does not manage an entire destination.

Rather, it provides one or more of such services as arranging local transportation, hotels, guides, restaurant reservations, activities, excursions, conference venues, themed events, gala dinners, logistics and meetings. Often, DMCs can provide lower local rates than you could get on your own.

You should always have a written contract with a DMC so that its responsibilities and your rights are very clear. The contract should also have some legal protections for you and the participants, such as the following:

• Your agency’s advance payments should be refunded in full within 30 days if the DMC failed to perform its duties for any reason whatsoever, including events beyond the DMC’s control, such as strikes or pandemics.
• Your agency should have the right to cancel and receive a full refund within 30 days if more than half of your group is unable or unwilling to travel to the destination for any reason, including Sate Department advisories or fear of travel.
• Your final payment should be delayed until you are quite sure that the trip will operate.
• The DMC should have a duty to inform you immediately if it becomes aware of a participant’s complaint or medical or other emergency.
• The DMC should have a duty to carry liability insurance in such amount necessary to indemnify your agency and to cover participants’ against injuries or death.
• The DMC should be prohibited from charging your agency or the participants for anything other than what is in the contract.
• Guides should be prohibited from accepting commissions or the like from local merchants.
• The DMC should not market directly to participants or use their contact information for other business purposes.

By now you might be saying to yourself, “Well that’s all well and good, but how could we possibly enforce our rights if the DMC breached our agreement?” Unless the DMC does substantial business in the U.S. and has an office here, you would probably have to sue in the DMC’s home country — an impractical proposition for most agencies.

My response is that a good contract will help you avoid disputes and litigation in the first place, as parties that are in business with each other tend to follow what their contracts provide, at least most of the time. 

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