Sam Mallikarjunan of HubSpot can help you prepare your business for inevitable future shake ups.
Does $32 for a box lunch sound like a good deal? Would you pay $4 for a bottle of soda? Is charging $150 per hour for a standard shuttle mini-bus or $200 per hour for a motorcoach considered reasonable pricing?
Mark-ups of 30-40%-plus on transportation and other services are common among destination management companies (DMCs) that act as middlemen between meeting planners and the many vendors needed for an event. In one case in Los Angeles, group boxed lunches were marked up 100% for a DMC client.
While DMCs have the flexibility to write their own deals with clients, operators note that DMC clients often pay a high premium for the ground transportation that takes attendees to and from airports and around town on tours and excursions.
After the recession of 2008-09 thrashed the business travel and meetings and conventions sectors, all parties involved focus more on costs. Meeting planners must meet tighter budgets while operators try to run their fleets more efficiently to salvage pre-recession profit margins.
Four basic approaches to securing meetings and conventions business are gradually evolving in the industry. These approaches, mostly technology-driven, enable operators to take on more of the functions required to plan conventions and meetings of all sizes, or at least provide superior transportation logistics. The ROI (return on investment) results in less cost to the client and lower overhead for the operator.
The four approaches are:
The software can be tailored to specific regions or cities by listing all available hotels, meetings venues, restaurants, entertainment options, ground transportation options, airports, places of interest, catering/food services, tours, and multiple categories of supporting suppliers and services needed to pull off group events of all sizes.
The destin suite comes in three levels: e-dmc, destin-e, and e-guest access:
The software can calculate and coordinate in real time all levels of chauffeured service, types of vehicles, individual arrivals and departures, and destinations. The system is transparent and accessible. Traveler verifications and notices can be sent on smartphones and iPads.
“We can put any company into the destination management business,” Beaubien says. “It’s an end-to-end DMC package. I can customize it and do whatever I want. I can look at spreadsheets, know how much I’m spending, and it tells me my mark up, how much money I’m making, days, number of people, etc. It’s got everything in it.”
Beaubien, who is based in Tuscon, Ariz., developed the concept after many years working in the limousine and destination management sectors. Coordinating 30-50 groups per month at certain times of his career gave Beaubien the upclose insights he needed to gradually develop the multi-layered destin software product. He drew upon an initial government grant and consulted with technology experts at the University of Arizona to help put it together.
Beaubien estimates his destin software can help an operator develop $1 million in annual meetings revenues by the end of the first year, and eventually generate a $3 million to $4 million annual piece of business within the first few years.
The most complicated component of managing events is ground transportation. Transportation costs for meetings and events clients can be marked up as many as three times: By the operator, by the DMC, and in some cases by the travel planner. So instead of making do with a 25% mark-up by the operator, and then a 30-40% mark-up by the DMC, an operator using destin can boost profits while saving money for clients, Beaubien says.
“DMC people tend to be very snobby. All the knowledge that’s in here, they have a hold of it. The system now has all this knowledge and runs the business. Dependency on DMCs is eliminated with this product and opens up a whole new line of business for [operators]. Transportation companies have to protect their assets.”
A basic destin software, now discounted 30% for start-up, costs as follows: Build fee for the local database, $5,000 (includes remote training); monthly license fee per user, $100/month or a $2 transaction fee per passenger; website integration, $1,500 (for a current website); website construction, $3,000 (using destin templates). “We customize for any city,” Beaubien says. “We work with convention and visitors bureaus (CVBs) and tour companies. e-destin goes in and puts database together, and trains people how to use the tool.”
One operator about to adopt the destin suite of event management software already has developed and copyrighted a previous generation of Beaubien’s technology.
Marc Kaplan, owner and president of Catalina Limo and Transportation Service and Stadium RV and Bus Wash in Tucson, Ariz., has handled groups of up to 500 people with a DOS software program that he wrote. It does automatic scheduling and dispatching, selects vehicles, and calculates turnaround time. Acquiring the destin software will bring Catalina’s in-house technology into the 21st Century, and enable it to e-mail and correspond with customers via Internet/e-mail-enabled gadgets, Kaplan says.
Kaplan, a 1999 LCT Operator Of The Year, runs a fleet of 15 luxury vehicles and serves as a Tuscon affiliate for some of the major global chauffeured transportation networks, including Carey, Boston Coach, Empire CLS, Music Express and Limolink.
“The DMC is being squeezed out because of the economy,” says Kaplan, who has run limousine vehicles since 1985. “Operators are going direct to the clients. I offer the same services that a DMC does.”
Kaplan has observed that travel planners are requesting fewer excursions such as golf outings, adventure tours, and horseback riding in order to save money. Operators must provide value, he says.
“Things have been tough for the last three years. Everyone is looking to cut. A DMC does a lot of work, but the mark-up is very high. A DMC will have a three-hour minimum on transportation,” Kaplan says. “How are you going to make money? You will do what others used to do. You will cut out the middleman. You change, adapt and move on.”
NO. 2: Event Ground Global Proves Fleet Smart
At Coastal Car Worldwide in Pompano Beach, Fla., operator Evan Michaels and business partner J.C. Carey spun off a software idea from their company’s experiences handling 500-600 group events per year in the corporate meetings hotspot of Southeast Florida. Michaels developed MOS, (Manifest Optimization Solutions) under a separate company called Event Ground Global (EGG). MOS offers users the ability to manage manifests for complete and complex ground transportation plans of all types. It can design, forecast, and modify multiple manifests in real time, cutting the time needed to plan ground transportation from hours to minutes.
Taking it to the next level
Last year, EGG entered an agreement with Global Ground Automation (GGA), a company owned by Rearden Commerce, a developer of technology that automates the reservation process for the ground transportation industry. The agreement makes MOS available to more than 95% of the Fortune 500 companies via the SaturnConnect Internet reservation system.
The EGG system can be adapted to chauffeured transportation companies, travel planners, and DMCs, says Evan Michaels, CEO of Costal Car and EGG. “Our intention is to bridge the gap and make meetings much easier for those enterprise clients so they can deliver data more efficiently,” he says. “Ground transportation companies can take less time and effort, and it helps them regionalize a tool like Saturn so they can get to everybody.”
The details of meetings- and convention-related transportation constantly changes up until the actual event. “Ground transportation companies see [data] very late and often get inaccurate data,” Michaels says. “That leads to problems during the program and reconciliation issues with cars and people not matched up properly.” The EGG MOS system organizes Excel spreadsheet manifests with all the data, and compares it against the correct formulas for airline flight codes and terminals, he says.
“If we didn’t have the tool it would take me 80% more manhours to work those programs and spreadsheets to get that data in,” Michaels says.
Philip Devlin, vice president of development for EGG, says, “The system picks up on similarities and inefficiencies and calculates groupings based on arrivals and flights, and eliminates redundancy. It’ll take information and identify logical assignments and recognize anomalies.”
The system also provides exact costs per person within minutes, Devlin says. “Travel managers are looking more closely at costs per person for flights, hotels, and meals. It was not possible to capture that cost up until this point.”
Training and costs
Working on three manifests is what it takes for the average operator to be comfortable with the system, Devlin says. EGG trains operators through a mix of onsite visits and webinars.
MOS pricing starts at about $1,000 per month and goes up based on the number of events the system will handle for an operator. Devlin estimates that the ROI is noticed after handling three 150-person events per month. “This can be used as a sales tool to appeal to clients, and win a piece of business that gets you more into the meetings business,” he says.
“You can go to a DMC and say, ‘Let me do all that work for you. Tell me your parameters.’ An operator can eliminate 10 hours [of work] from the DMC.”
SIDEBAR: System Saves Labor, Offers Service Selling Point
As of May, the Event Ground Global’s MOS system for organizing events-related ground transportation had been sold to 12 chauffeured transportation operators in the U.S.
One of those operators, Johan DeLeeuw, president of Olympus Worldwide Chauffeured Services in Atlanta, which runs a 15-vehicle fleet, says in the first six months of using the EGG system he has seen his meetings transportation business rise from 21% to 31% of overall sales revenue.
“Dealing with ground transportation and manifests are the biggest challenges for transportation planners,” DeLeeuw says. “They don’t like dealing with it. They e-mail it over to you and expect it to get back to them without errors or service incidents.
“The turnaround time is the main [advantage] on the system,” he adds. “We don’t touch the data at all that we’re provided. We run it through the system. It gives them an accurate proposal for cost back to them based on information provided.”
Internally, Olympus saves a lot of of money on labor costs. “It saves our employees from doing it two or three days straight,” DeLeeuw says. “Our reservationists love it. Before they would discuss who would do it. There were a lot of typing errors. Once we run [the data] through the MOS program, we get data the way they send it to us.
“DMCs used to do this for them, and now we can do it instead,” he adds. “Corporate meeting planners can save money and time dealing with a ground transportation provider directly. Nowadays it is important to be looking at every penny spent.”
Levin, owner and president of Escondido, Calif.-based Sterling Rose Transportation, a 2008 LCT Operator Of The Year, remains focused only on ground transportation services for meetings and events. He prefers to partner with hotels that host business groups, deal with some clients directly, and provide DMCs with accessible transportation.
How it works
As LCT first reported on its website in November 2010, Levin started experimenting with spreadsheet manifests on Google Docs last June. He impressed some travel manager clients who gave him more business. The Google Docs enable Levin to sort the travel information of groups and convention clients by arrival, departure, times/days, hours, airport terminals, etc., and then use that information to assign people to vehicles. Travel managers and Levin’s staff can access and update manifests at the same time, which are available remotely via laptop computers, iPads and smartphones.
Now Sterling Rose gets about 20-30% of its business from meetings-related transportation. Levin has picked up group business for Palm Springs and Los Angeles, in addition to meetings and hotel clients in his core service area of San Diego County.
“As these people get comfortable with our process and us, it leads to opportunities all over the place,” Levin says. “A sales manager for a hotel was going to go with DMCs for transportation and I said I could do it myself.” Google Docs also enables Sterling Rose to plan transportation for clients in cities outside of California, as the company did last year for a company holding a meeting in Charlottle, N.C. “This is sort of new for us,” Levin says. “In handling out-of-market events, we’re figuring out how the big boys do it.”
Levin estimates that a transportation company using Google Docs can save a client about 20% to 30% in costs. “We don’t charge for manifest management; it’s just part of what we do,” Levin says. “A DMC could possibly charge a group management fee in addition to transportation as well.”
Google Docs help create peace of mind for hotels and large groups, while ensuring an operator plans routes and deploys a fleet as prudently as possible, Levin says. “Because they share in the document, it allows partners and hotels to be more efficient with staffing because they are part of the process.”
Levin’s relationships with area hotels that host meetings have provided him the connections to corporate clients that plan and hold meetings. Sterling Rose also sees much value in growing its business with DMCs by either providing transportation only or by doing so while helping them plan manifests.
Levin believes the use of technologies such as Google Docs can help chauffeured transportation companies stand out in a more cost-conscious and competitive meetings and conventions market. “We’re trying to use technology as something value-added, and give services without charging more,” he says. “It’s getting harder and harder to differentiate yourself.”
“The idea was to add value for clients,” says Catherine Chaulet, senior vice president of client partnerships at Best of Boston. “Boston Coach would go beyond transportation and Best of Boston would have much more access to vehicles for extraordinary flexibility.”
At the time of the acquisition, Boston Coach was seeing dramatic growth in its events-related transportation. “The clients were looking for more and more services,” Chaulet says. “It was a perfect fit economically and [provides] one-stop shopping for event planners.”
The key savings for clients in a chauffeured transportation/DMC arrangement comes in time and flexibility, with a slight savings in cost, Chaulet says. “A lot of event planners organize events in a very structured way, and then the event happens and it is different. One of the biggest challenges is having access to fleet size and coordination. There is certainly some cost savings; it’s not drastic, but there is flexibility and time savings.”
One of the biggest challenges for a chauffeured transportation company working with a DMC is communication, especially the constant updating of travel manifests required as the event nears. For Boston Coach, the acquisition of Best of Boston allowed employees to work in the same office on the same system, Chaulet says. Cross-training enables them to learn how arranging services extends well beyond the transportation, although that is the critical core of planning an event.
Another advantage is that billing and finance are more direct, Chaulet says. “Many chauffeured transportation companies have software that is only targeted toward ground transportation,” she says. “But if you start DMC services, you need all the infrastructure to support services, billing, finances, and invoicing.”
Advances and advantages
Because of the synergies between a global chauffeured transportation network and a DMC, the enterprise offers a competitive advantage over other event planning options, Chaulet says. “For DMCs and clients, transportation is always the element that is most complex to manage,” she says. “Things change all the time. If you are working with a company that has knowledge and expertise to handle it well, there is an enormous burden taken off of meeting planners.”
Chaulet advises operators considering a DMC to make sure the service is staffed with knowledgeable employees who can draw upon a vast network of hospitality relationships. “The secret to a successful acquisition or DMC is the talent you are going to bring,” she says. “You need to hire someone who understands events and knows how to manage events. You need to hire staff who are creative and enthusiastic. The rest you can make it work, but your staff is really what will make or break it. Hiring junior meeting planners and calling yourself a DMC is the best way to hurt yourself.”
Sam Mallikarjunan of HubSpot can help you prepare your business for inevitable future shake ups.
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