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What Are the Consequences of Hotels and DMC Consolidation?

Is bigger really better? Hotels and DMCs are moving fast toward consolidation—here, we take a look at the potential consequences.

Consolidation is a reality in all realms of business. It happens in the hotel industry, advertising agencies and event companies. No one industry avoids consolidation, but that does not mean it is a bad thing. Consolidation can be positive for a company. It can win bigger business or bring in more revenue. Maintaining a boutique business is not a bad thing, either. It can allow for more internal decision-making, or consistency across departments.

With these positives and negatives in mind, there is no necessary right or wrong side. Consolidation increases both revenue and opportunity. But if the big companies lose their starry-eyed newness—the culture boutique companies usually carry—are they better off?

Take for example PRA, which acquired Briggs, a DMC leader in New York City, in 2017 and Destination Nashville in February. PRA CEO Tony Lorenz chose a proactive approach over organic growth. While the firm has been a destination management company since 1981 and services more than 100 destinations, acquiring Destination Nashville served as an important component to PRA’s expansion strategy. “Acquisitions aren’t necessarily a better avenue than organic growth, but they can make sense in highly fragmented markets,” says Lorenz. “These acquisitions are also more time-efficient, which can, and should, lead to a better outcome for all parties.”

Screen Shot 2018 10 19 At 10 11 20 Am 607x620Business is evolving at such a fast pace that any boutique firm wishing to grow into what is considered the big leagues can only do so through consolidation. Therefore, if you find yourself with an opportunity to be purchased, company leadership must ask: What does our five-year or 10-year growth plan look like? Can consolidation opportunities in our market help us achieve these goals?

Aaron Kaufman, CSEP, president of Toronto-based Fifth Element Group, says there are disadvantages to having competitors acquired. “I think the live-experience industry is in for a big wake-up call in the next 24 months,” says Kaufman. “The ability of marketing, advertising and public relations firms to add live experience to their agent of record agreements puts firms like mine in jeopardy simply because the large-scale clients become unattainable, and larger agencies will acquire smaller event firms to manage those accounts.”

However, this does not scare Kaufman from considering being acquired if the right partnership is presented. In fact, he admits to having one eye toward a merger. “I think anyone who isn't working on at least making their business attractive to potential suitors is going to regret that decision,” he says. “I, of course, approach any acquisition conversation with an open mind understanding that I am in a large, attractive market and am still in the growth stages of my firm. Yes, I do consider everything that comes my way.”

If you find yourself in the conversation of possibly being acquired and trying to figure out if the future “marriage” will work, ask yourself if the acquiring business has a strategy aligned with your goals. Says Lorenz, it’s not likely to be worth your time invested in building the firm “if the acquiring business does not have a solid and proven strategy or rationale in place, or the financial backing to handle the responsibility of the combined businesses.”

No matter what side you fall on, it is an exciting time as we watch recent hotel and DMC mergers and acquisitions unfold, and discover just how they will change the future of the industry.

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