Direct vs third party incentive travel proposal models: ethics, benefits and constraints

by Anne Thornley-Brown, M.B.A., President

Executive Oasis International

I run a team building and incentive travel firm in Toronto, Canada. I've observed some distinct differences in the way in which European and North American companies procure these services.

In North America, Asia and the Middle East, there is heavy reliance on the Internet and referrals from co-workers to source incentive house and team building services. Typically, someone from the company that wants to use the service contacts the service provider directly, describes their requirements and requests a proposal.

One of the main drawbacks with this approach is that the person who is tasked with contacting providers is often an inexperienced team member. They often lack some of the key pieces of information needed for their company to make a decision. This can result in a lot of back and forth and a proposal that misses the mark. The parties who will ultimately be making the decision sometimes do not have the time to contact companies directly or to fully brief the team member who will be making the inquiry.

Suggested Process Improvements: Provide a full briefing to the member of your team who is contacting prospective suppliers will significantly improve the effectiveness of the direct model. This briefing should include:

  • Goals and objectives
  • Preferred Dates - 3 options
  • Approximate budget and what it includes
  • Class or Grade of Accommodation Required
  • Class or Grade of Air Travel
  • Class or Grade of Transfers
  • Meeting Room and Facility Requirements
  • Facilitated Team Building Requirements
  • Meeting Facilitation Requirements
  • Team Recreation Required
  • Tour and Excursion Requirements
  • Galas and receptions required

3rd Party Model - Europe/UK

The inquiries we have received from Europe and the UK  have followed a totally different model. Typically, companies do not contact service providers directly. Instead, they will put a bid out to 3 travel agencies, local DMCs, or event planning houses for a corporate incentive trip or team building session. The agencies will then contact 2 - 3 service providers who specialize in the destination in which the client has expressed an interest (e.g. Dubai, Abu Dhabi, Japan, Singapore, Jamaica).

The advantage of this approach is that the party making the inquiry is experienced and has a knowledge of what to ask for incentive trips or trips that involve travel, a business meeting and social events. The main drawback is that, for sessions that include facilitated team building, the briefs are usually incomplete. Typically, local DMCs have experience in dealing with hotels, transportation companies, and airlines but lack an understanding of the skill set of business consultants and facilitators. They may not have an understanding of the client's business objectives and desired outcomes. Since one is not dealing directly with the company, there can be difficulty in obtaining information that was not included in the initial brief.

The other drawback is that the 3 local agencies that are contacted then request quotes from 2 - 3 firms that specialize in the destination. Hotels can end up getting requests from 6 - 9 incentive travel house or DMCs for the same incentive. These are all on short notice and every time there is a change in the specs, again 6 - 9 firms are bombarding the hotels and resorts with requests.

Often when these requests come, they are urgent. A 48 hour turnaround is typical. Although the request was urgent, decision making typically takes at least a month. It can be a challenge to manage relationships with suppliers under such a scenario. Hotels have expressed frustration about being bombarded with urgent requests for quote and then a significant delay in decision-making.

The incentive travel planners or foreign DMCs invests a lot of time in preparing full quotes for hotel, transfers, meeting facilities, meals, entertainment, and team building.

Eventually, a decision is made. Sometimes suppliers are informed of the decision. Often they aren't. It isn't unusual for the client to be reluctant to pay an extra level of mark-ups. Under that scenario, the European planner or travel agent will start from scratch, go directly to the hotels and other suppliers and provide a quote to directly the client. In other words, it ends up being that a planner in another part of the world was used to do the  location scouting and sourcing for free and then cut out of the action. This is highly unethical.

Suggested Process Improvement: A few simple steps could make the 3rd Party model more effective.

  • Request quotes from 3 local agencies.
  • Ask the agencies to identify the incentive houses or DMCs they have contacted
  • Based on submissions, make a decision about which agency and which incentive house or DMC you are going to use
  • Narrow your hotel choice down to 2.
  • Never use the suggestions of destination specialists without compensating them

With this modified process, requests for modification and updates will only go out to 1 agency and their incentive house or DMC plus 2 hotels. This will cut down on a lot of the back and forth. Recognize the fact that by using an 3rd party model, you will be paying an extra layer of mark-ups. Only you can decide if it's worth it. If you don't have the budget for this, consider going directly to 3 incentive travel houses or DMCs that specialize in the destination. It is highly unethical to use the destination specialists to do your location scouting and research for you and then cut them out by going directly to the hotels or asking the local agencies to use the intelligence that has been gathered without compensating the specialists.

3rd Party vs Direct Incentive Travel Planning Model: Cost/Benefits

I am interested in generating a discussion about the benefits and drawbacks of the Direct vs. the 3rd Party model.

  • What are the benefits and drawbacks of the direct model?
  • What are the benefits and drawbacks of the 3rd party model?
  • Why do European companies prefer the 3rd Party model? Is it a way of dealing with language barrier?
  • Why are requests put out on an urgent/last minute basis?
  • Why is there then a significant delay in decision making?
  • Would European companies be open to paying a retainer up front to cover all the costs that go into sourcing information and preparing proposals?
  • What steps can be taken to avoid the breach of ethics that occurs when companies discover they are over-budget and attempt to cut out a tier of mark-ups by going direct using the research that has been collected free of charge?

I look forward to your comments.