(Article first appeared in MeetingNews Jan. 14, 2005)
PGI, the big event planning company, last month severely cut back its destination management business, folding it into its event services operation and shuttering eight of 28 offices.
The company also laid off 50 employees and shook up its senior management team.
PGI's retrenchment came little more than a year after the company announced two distinct brands to market its destination and events management services: Destinator by PGI, and PGI The Strategic Events Agency. Now the company will market all its services under the latter brand.
Offices were closed in Atlanta, Dallas, Houston, Denver, Philadelphia, Palm Beach, Fla., Orange County, Calif., and Athens, Greece.
"The offices were flat in terms of their ability to create additional opportunity," said Bob McCormick, newly named president of PGI The Strategic Events Agency.
The layoffs leave PGI with 302 employees. The company had upwards of 450 people during the industry boom years of 1999 and 2000, according to McCormick.
PGI's meetings service will handle destination management business that had been booked at the closed offices, McCormick said.
"By strengthening our meeting services offering, the necessity of operating stand-alone offices in cities overwhelmingly focused on destination management services became redundant," he said.
McCormick said the company's meetings management service has grown substantially over the past year, with planners assigned to specific clients across destinations. PGI, which was founded in 1990 as an event production company, launched a dedicated meeting planning unit, Meeting Services Plus, last February.
The shift to meetings management increasingly has put PGI more directly in competition with some of its customers. While McCormick downplayed any sug- gestion that PGI's destination management business was hurt by that situation, it's clear that many meeting and incentive companies are reluctant to award business to a competitor.
"We stopped working with PGI because they got more into the meetings-management business," said Alicia Feito, vice president of industry relations for meetings-management giant Maritz Travel, which manages more than 2,000 meetings and incentive trips annually on behalf of clients.
"They worked both sides of the fence, and that always seemed curious," Terry Epton, executive vice president of USA Hosts, in New Orleans, said of PGI. "The idea of competing with your customers is not a comfortable thing."
Without naming PGI directly, Epton said third-party planners have dropped preferred DMCs that were acquired by companies which the planners considered direct competitors.
"There were some situations where companies that purchased other DMCs lost some accounts, and we picked them up," he said.
USA Hosts competes directly against PGI to win preferred-supplier arrangements from large companies that seek to leverage their total spend for volume discounts, according to Epton.
PGI's potentially troublesome relationship with third- party planners put it in a more vulnerable position when the weak economy depressed the destination management business. Despite the rebound in meetings last year, incentive trips, which DMCs heavily rely on for business, lagged as salespeople failed to achieve their sales goals the year before.
"We viewed the slowdown after 9/11 as the winter that culled the herd," said Epton.
USA Hosts itself did a bit of belt-tightening, Epton acknowledged. The company consolidated its Phoenix and Scottsdale offices into one, and it closed a one-person office in Baltimore that had served as a satellite of its Washington office. USA Hosts owns 13 offices throughout the country and maintains affiliate relationships with 19 other DMCs.
Laura Rednour, president of PRA Destination Management in Carlsbad, Calif., which franchises 15 offices nationwide, said PGI's diversification — event production, meeting planning and destination management — may also have contributed to the company's problems.
"They purchased DMCs across the country," she said. "That kind of expansion, along with production and meeting planning, is a lot to take on and sustain in a challenging economy."
Rednour doubted the ultimate success of PGI's stated strategy to continue serving clients in destinations in which it closed offices.
"Critical to a DMC is expertise in a local market; that's what clients are coming to you for," she said. "You need to be involved in your community and know what's going on. It's a difficult strategy to manage things from a remote location."
Rednour said it was too early to predict how many groups and third-party planners, if any, will drop PGI's destination management services where PGI closed offices.
However, she said, "I suspect it will mean additional business for existing companies."
PGI's retrenchment followed by just a few weeks an attempt to merge with or be acquired by another company.
McCormick declined to identify PGI's negotiating partner, but industry speculation had centered on Minneapolis-based Carlson Marketing Group.
In November, a Carlson manager neither confirmed nor denied that the two companies were talking, saying only that Carlson was not ready to make an announcement at that time.
Said McCormick, "Sometimes two parties don't come to an agreement. We have decided to stay an independent company for the foreseeable future."
In the management shakeup, David Kahn, PGI's former group vice president in the automotive marketplace and general manager of the Detroit office, was named executive vice president of sales for PGI The Strategic Events Agency.
Matthew Sheppard, who had been chief operating officer of Destinator by PGI, was appointed executive vice president of operations. McCormick retains the title of chief operating officer of PGI The Strategic Events Agency, along with his new position as president.
Darryl Hartley-Leonard continues as chairman and chief executive of holding company PGI Inc., and Cynthia Engel continues as president and chief financial officer.