Incentive Travel Report

Every summer, Successful Meetings’ sister publication, Incentive, hosts an industry roundtable that brings together a group of the most knowledgeable and experienced industry veterans to discuss everything that is affecting the incentive business. What follows are excerpts from the portions of that discussion that focused specifically on incentive travel.  

Fay Beauchine: It’s exhilarating that the incentive travel industry is once again viewed as a very viable business and tool. We went through a period where there was so much doubt about it, having to prove its economic value to the economy. But corporations realized that when it was absent, they really missed engaging their top performers or their channel partners. We’re back to a new level of appreciation and it’s very exhilarating to see.  

Cindy Hoddeson: As somebody who markets a destination, I see that as more and more people work at home and work remotely, the need for face time and getting together — sharing ideas with one’s peers — is essential. I think that this is another reason why  motivational travel recognition trips are so important: Having that time with the top management, face to face, is so key. 

Tom Ernsting: Last year was a record year for us. It was like this snowball that just kept growing — the optimism, the energy. I think a lot of it was the pent-up demand from the previous years. I think that there was more acceptance [of moving corporate incentive travel programs] into the luxury category. 

This year started out strong but it’s definitely steadied a bit. The European crisis has made for more caution. There’s also some caution around the election year. [Incentive business] probably has slowed a little bit, but we’re having a phenomenal 2013. 

Hoddeson: Working for a very niche destination [Monaco], I’m pleased to say that since 2008, luxury no longer is a negative term. I think many people are seeking that luxury although, in terms of programs, I would agree that there is a bit of caution. The economy seems to be somewhat back even though unemployment is still a matter of major  concern. I do notice a little bit of “wait and see,” but we’ve had a very good 2012. I think group size has remained stable or has perhaps gotten slightly smaller, even though programs are back. I think the duration is even going up a little bit. Programs are back, but perhaps the inclusions are a bit less. 

Some companies that had canceled or  postponed their incentive travel programs have reinstated them, and some of those who decided to remain domestic for a couple of years are now reinstating programs to  international destinations. I think this is for a number of reasons. The perception issues have disappeared, and I also think many [companies] poll their people and ask them, “Where would you like to go?”

Doug McLain: I see continued growth and strength. But I will say, the luxury incentive travel side dropped very far down in 2009. Going back to 2006 and 2007, 25 percent to 30 percent of [Palm Beach hotels’] group business was incentive business. My hotels actually reported that that percentage dropped as low as 5 percent in 2009, and in some of our luxury resort hotels, it had dropped as low as 5 to zero percent. But we are crawling back. What I’m hearing from them is [that incentive travel] is back to 15 percent to 20 percent of their group business. So, back to 20 percent is good, for group business.  

My hotels are saying that they’re seeing that groups are a bit smaller but the content is richer. They are including more activities, more spa, more unique gifts for the attendees. They may drop a night or a group dinner.

Rodger D. Stotz: The people who have  always used group incentive travel are still  using it. They still see the value and they don’t want to abandon it because it does provide benefits to them. In some cases the group size is somewhat smaller, due to the economy. And organizations are still sensitive to the word “extravagance.” Not to the degree that they were right after AIG, but with the  recent government emphasis on it again — the General Services Administration (GSA) went through a situation with a lot of  negative publicity — there is a sensitivity to where [companies] go. So they’re trying to be cautious about that again.

Beauchine: In terms of group size, we think they’re bigger for 2012 than they were in 2011. The programs have come back in size. We’ve seen some open-ended programs where the quota was set, and if 800 people achieved it instead of 400, we’re going to get more hotel space. But we don’t see frivolous spending at all.

McLain: I’m up 30 percent over my target in number of groups booked and only up 10 percent over my target in room nights. There’s the math for you. We’re booking more groups to get to our numbers — clearly group size is shrinking.  

Ernsting: Speaking from a Mandarin Oriental point of view — and we are based in Hong Kong — there was very little [incentive travel] coming out of the U.S. for Asia and Europe, or actually anything outside the U.S. I think we all saw a lot of business being held back in the United States, except for some industry-leading companies that knew they had to be present globally. We are seeing more going toward Europe and slowly but surely more business going to Asia. Our hotels there are all ahead of pace. Europe is not as strong because of what they’re going through right now with the economy. Latin America, with the exception of Mexico, is also strong. There’s definitely a trend of increased travel and increased adventure. [Groups are] heading over the water.

We’ve seen growth in more sophisticated travel, more adventure travel to places like Marrakech, Istanbul, South Africa, and in Asia, beyond Thailand now to include Vietnam and Laos. But for every adventure travel [program] like that, there are companies that are just beginning incentive travel, so they’re starting out with the Caribbean.

Stotz: In terms of international versus domestic, in [the IRF’s] latest survey, we actually saw a lot of organizations continuing what they’ve always done. About the same amount say they are adding international as those who say they are staying domestic. A few companies are venturing out into the international market for the allure and the need for their top performers to have a unique experience. 

Some others say they are going to stay domestic, and the reason for that is the concern about going overseas, because of the media and terrorism, as well as the cost. European markets have been expensive. The need to monitor budgets and cost had companies going back to domestic areas — Hawaii, the Caribbean, Puerto Rico, and so forth. A number of organizations have looked at Mexico. It’s a great deal. After talking to a number of travel planners recently, they are saying whether it’s Cancun, Puerto Vallarta, Los Cabos, or the Riviera Maya, the amount of criminal activity is less than in most major U.S. cities. They’ve taken people there and just had great times.

If you’re looking at top performers, there is tremendous interest in Asia, and particularly China. It has that allure, as do Australia and New Zealand. All of those have a high interest and value to the participant, but they also have high costs between the flights and the time involved to the sponsoring company. If you normally run a four- to five-night incentive trip, maybe even a six-day trip, going to Asia from the U.S. is almost impossible. You can do it, but between the jetlag, getting there, and getting back, you’re probably losing at least two if not three days. There’s interest; it’s just a logistical issue of how many days I’m out of work, out of the field. And every day adds cost.

Hoddeson: A huge issue at the moment is  related to air transportation because the escalating costs of airline tickets — much of which stem from fuel surcharges and taxes — is impacting the global cost of an incentive travel  program. So, some  companies that perhaps previously included all transportation costs are now restricting that only to the airline ticket.  

Beauchine: Those companies and corporate cultures that are really focused on what the participants want will put golf back in the program. The same with spa. You know if you’re going to spend money on your top performers, you might as well get it right. So yes, we see that happening, and we see that creates a higher ROI, because you’ve hit the sweet spot on what motivates the employee, in addition to picking a destination that is important to them. We definitely see that trend — the participant’s point of view really matters.

The [incentive travel] industry reset itself in a very good way. There is no waste in these programs, there is tight negotiating, there is exacting delivery, and there is tight measurement [of whether] it met the participant’s view and the buyer’s view on what was right. I think overall, the industry’s even been lifted up a level because of the recession.

McLain: [Palm Beach hotels] have seen a  lessening of the flair in terms of food and  beverage. That’s been a common trend across our resort hotels, a bit more back-to-basics on the meal functions, a little less spending on amenities in the rooms — as opposed to [room gifts] each night.

Stotz: Yes, but not to the extent that we saw before.  What’s happening is that your top performers — maybe on a sales meeting where you have top performers being recognized — might have extras. They might have room gifts, or they might have spa privileges or something as part of their program that the general participants do not. In terms of the [room] gifts, having spoken to some of the [industry] suppliers, I’ve learned that they’re finding that [room gifts] are starting to come back. 

McLain: [Palm Beach hotels] are finding that incentive planners are personalizing and customizing the itineraries a little bit more. If jumping in a kayak in the Everglades turns somebody on, they’re allowing it. I think that’s a positive thing. We have to start delivering those options in that customized format. To give you an example, we have a vendor supplier that we use who designs specific tours of Palm Beach — not just the generic tour. We have an architectural design elements tour, a museum tour, an antique row tour, an Everglades kayaking/eco-adventure tour.  

Beauchine: More and more of the clients we talk to know they have to start to measure ROI if they haven’t done so already. One of the better studies was a [2012] Site Index survey where three quarters of the respondents [said they] believe that measurements of their incentive programs will be a requirement in the next six months to three years’ time. It will be an absolute requirement. So, it’s coming. It was accelerated because of the recession and because many of the companies who wanted to continue their programs had to demonstrate where they got them. 

We also see more people asking us for  studies and for research, not necessarily just on ROI, but on communication elements of the programs. Is the communication effective, is it motivating people enough, is it getting them to enroll correctly? Do they think the incentive programs in the company are fair? They’re starting to care about those upfront dollars to promote the program because that’s part of the ROI.

For many years everyone thought ROI was: Did you meet your budget and did you like the program? And if you did, are you going to be a more motivated person? But it’s much more complicated than that now. 

Hoddeson: I find people in corporations with different perspectives on this depending on their role within the corporation. I think many of the marketing people see the programs as an investment rather than a cost, whereas many of the procurement people see the money as a cost rather than the investment. More education is needed, and it is happening, but perhaps not quickly enough.

And I think that there are measurables, [such as] increased sales or retention. Many of the programs that I work on with clients, whether they are corporations or incentive houses, are not for direct employees of the company, but rather for [channel] brokers and dealers, who could be selling other products. To keep them faithful to the company, or get them selling more of their product, these trips are key. 

McLain: With all that we know today and all the technological tools we have available to us, I’m quite frankly surprised at how many planners aren’t asking [these questions] or don’t have those answers and these ROI tools.

I’m surprised — and I’m talking about the majority of the industry — at how slow we have been to adapt simple, very inexpensive, technological tools to measure the ROI. It’s as simple as a small extension to the incentive, asking 25 questions of the attendees prior to and maybe after [the trip]. And that conversation could be year round on that same platform. It doesn’t have to stop at the end of the incentive, or a month after the incentive. It can continue.

We need to start thinking, in this industry, that the incentive program is part of a year-long conversation using the technological tools that are available now. It’s not expensive anymore. Cost can’t be the issue. It’s got to be, “are you seeking out the tools, and do you have a way to even begin the process?”

Hoddeson: We see more events becoming paperless. [Incentive planners are] communicating final program details to people’s smartphones. The typical exploration, walk, scavenger hunt, or whatever you want to call it — now they’re using smartphones and  tablets in these programs. 

McLain: What our hotels are saying is that Millennials want to be given more free time to explore on their own, rather than locking them into a group reception. The format, the logistics of putting together a group experience, is changing. Millennials have much more of a sense of independence from the normal group experience. 

I think we’re in this transitional phase and that makes it a little more challenging. Even though we do have some mixed attendance, the Millennials are pushing up our attendance percentages. It’s coming quick. I heard a  statistic recently that just 10 years from now, 75 percent of attendees will be Millennials, or people that came up through the Millennial generation.

Beauchine: They’re living a mobile lifestyle, so you can’t bring them to a program and hand them paper and expect them to be happy. Communication with them has to be participatory. It’s not a one-way street: They expect to be tweeting, communicating back and forth on everything. Applying that to an incentive program, you better be thinking about hashtags and places they can comment.  

It’s no longer, “Here’s the program, here’s the agenda from beginning to end and then we’ll send you a survey at the end of the program.” That, to me, is old style. New style is, “We’re talking to you throughout the entire experience, getting feedback, getting your views, letting you tweet about things, letting you comment.” 

I think you want them to say, “Boy, it was cool last night talking to the CEO at the  party.” That’s what they expect because  that’s how they live their lives today. So it’s pretty hard to crunch them into a group  program without some of those aspects  accompanying them.