These are rainy days for many segments of the economy. But if you ask Robert Schron, president of New York City-based Robert Schron Associates, a meeting and incentive travel planning group, the incentive industry can, and should, blossom under gray skies. "People don't need incentives when products are flying off the shelves," he says. "Sure, there may be a slow down. But our more enlightened clients are realizing that there's more reason now than ever to use incentives."
Indeed, 35 percent of total budgets for motivational items will increase this year, according to A Study of the Incentive Merchandise and Travel Marketplace, released in December 2000 and based on the results of a mail survey sponsored by The Incentive Federation, an alliance of incentive product manufacturers, industry suppliers, and associations.
Findings also show that non-cash incentives, including individual and group travel, have picked up momentum, surpassing cash as a motivator. The powerful—and lasting—effects of non-cash incentives are being felt industry-wide. Sixty-nine percent of respondents, who are executive-level incentive users, strongly agree or agree with the statement: "Travel and merchandise awards are remembered longer than cash payments."
"The study showed that the 'cash is king' mystique has finally been shattered," says Peggy Whitman, president-elect of the Society of Incentive & Travel Executives (SITE) and Western regional sales manager for Washington D.C.-based Marriott International's Incentive Awards. Merchandise topped the list of motivators respondents say they use; cash, which had long been at the top of the heap, slid to second place. Group travel programs rose to 42 percent, while individual incentive travel reached 47 percent. "Since the last study in 1996, we've gone from just twenty-six percent all the way up to thirty-two percent of the nation's corporations using non-cash motivators," says Whitman. "That's a nice increase and very good news for all of us."
The question that remains, though, is, "Will these attitudes hold in a revised economic climate?" Schron, for one, believes travel is the most rewarding thing a company can give. "Cash brings instant gratification and is forgotten," he says. "But a trip brings memories, camaraderie; [things with a more] lasting effect." For Schron and his clients, it's the one-on-one, human element that makes incentive travel the right choice.
Despite the sunny outlook depicted by the study, the coming months still present a challenge to the incentive industry. "I do think that some companies will cut back on incentive travel," says Carolyn Dow, president of SITE and head of sales & marketing for the Scottish Convention Bureau, "because unfortunately it can be seen—quite erroneously—as unfair to give some employees a plaudit while cutbacks are taking place elsewhere."
While some companies may opt to cut off their incentive arm, others are being reorganized or sold to an organization that doesn't subscribe to the incentive theory. "Incentives are a management philosophy," says Steve Aasgaard, division vice president, incentive travel, at Minneapolis-based BI, a marketing company that specializes in performance improvement programs. "If management doesn't buy into it," then you may be faced with cancellations or revisions in the program. "We've all been on an economic roller coaster," he says. "And we're all suffering."
But the fact remains that incentives provide a solution to keep businesses competitive. "The return on investment is still there," says Aasgaard. "Companies need to sell more product and retain top-level management." And a well-planned travel program may be just the answer.
Travel Trends
So how are businesses finding the right balance between cutting costs and motivating employees?
In the past six months, Aasgaard has seen a difference in the kinds of trips requested by clients. "Pre-viously, customers have gone to fabulous destinations all over the world," he says. "Now, with prudent spending programs, more customers are staying closer to home." They still want to offer trips to give them a competitive edge, but rather than going to Australia, New Zealand, or Asia, clients are traveling to Mexico, Canada, and Hawaii.
Shorter trips, too, are becoming more common. "Companies are more reluctant to let people out of the office," notes Schron. "We're seeing more weekends at spas, first-class weekend trips to New York City, and short cruises. Long weekends are becoming a little more popular because more than a week or ten days is just too much."
Joyce Landry, president and CEO of Miami-based Landry & Kling, a cruise specialist, says new ships that were ordered more than a year ago are being launched now. Because of the abundance of vessels, prices are stable, or in many cases lower, than a year ago. "There's extremely attractive pricing even on the quality ships out there, which makes it more enticing."
One of Landry's clients, a technology company, opted for a non-cruise incentive last year, but ended up going over budget by 1.4 million. "There were extra banquet costs, AV costs, taxes, and service charges they weren't anticipating," she says. "With a cruise you can control your budget. All the people are there for you, with no overtime charges, no extra food costs, no tipping."
Aasgaard's company plans a lot of programs that use cruises as rewards. He sees that incentive choice remaining strong due to the wide selection of cruises available and their affordability. "Because of their value," he says, "they're a major part of incentive travel."
Making trips shorter or buying packaged deals isn't the only way companies are stretching their money. An informal survey conducted last year by Successful Meetings' sister publication, Incentive magazine, found that 93 percent of respondents have some type of meeting—guest lectures, breakout sessions, recognition ceremonies, and so on—as a part of their incentive itineraries. The survey also found that meetings typically eat up an average of 10 to 25 percent of an incentive's agenda. And, of course, that makes the program tax deductible, at least in part.
Before the 1990s, incentive trips often had award ceremonies or brief lectures as part of the agenda. But things have since shifted. "New tax laws set the tone for having at least a half-day meeting attached to an incentive," says Whitman. "Now we're seeing that expand into product launches and formal sessions accompanying incentives."
The opportunity to have all top producers in one place at one time adds to the desirability of merging meetings with travel. "It's rare that we have a pure incentive anymore," says Landry, "because it's a missed opportunity to share a corporate message with employees and to motivate them with that message." Business is changing at such a velocity, she says, informal encounters with executives or formal meetings in a casual atmosphere help to alleviate concerns people may be having. For instance, on a cruise, people have the chance to mingle with key management. "Standing over a railing talking to a CEO is less intimidating," says Landry. "The leveling experience is an unexpected surprise."
While some companies are bringing business elements into the mix, others are trekking in the opposite direction. "There is a marked trend toward (soft) adventure incentives," says SITE's Dow. "While Europeans have long had a strong activity or adventure element, it's more recently that these elements have been included in North America-originating programs."
A camel ride in Egypt or a whitewater rafting trip down Idaho's Snake River might once have been reserved for the young, the brave, or the foolhardy, but people's horizons are expanding considerably. "As the world gets smaller and people are traveling more in their daily lives," says Dow, "they're seeking the out-of-the-ordinary in incentive programs."
To motivate employees and keep them happy, businesses are looking for more interesting incentives. "In the past twelve months we've seen an increase in international destinations," says Landry, "because you have to really find more exotic, more enticing places for the top talent."
So, rather than trimming days off a trip, many of her clients are expanding their incentive programs in order to encourage star performance. Companies are considering the Aegean, the Baltic, and other destinations farther afield. And taking into account meals, activities, and other expenses, says Landry, international cruising still offers a good value because you're paying one price for everything in domestic currency, eliminating the risk of currency fluctuations. "Basically, you're buying an international destination in U.S. dollars," she says.
Soft adventure travel continues to be in demand for some of Aasgaard's customers, too, despite the economic climate. "Clients who have gone to places like Africa are continuing [to seek exotic destinations]," he says. "They've set the bar so high they can't lower it now."
Recreational activities have also increased, both on deck and on land. It's not uncommon to see rock-climbing walls or in-line skating activities on a cruise. Some ships are offering programs allowing cruisers to rent golf equipment on board or arrange tournaments at ports of call. "Cruise lines are awakening to the fact that passengers are more active and younger," says Landry. "They're not just interested in shopping anymore."
Still, whereas some people are motivated to go on an exotic trip abroad, others are more inspired by the promise of a visit with relatives in Syracuse. The option of individual travel allows people to find what motivates them, which helps them work toward a goal.
The jury is still out, however, on whether we'll be seeing more solo ventures. Audience members taking part in a survey during SITE's recent international conference in Hong Kong were split in their opinion on the subject. Forty-seven percent saw no evidence of change in individual programs, while 22 percent reported a small increase; 17.6 percent reported substantial increases in this area.
What You Can Do
For those clients who realize the long-term benefits of an incentive program, it's up to the planner to demonstrate to them ways to maximize their investment. "It's important that clients know exactly what they get for their money," says Schron, "so we go into very great detail with them." A good incentive means a company should make money, he says, with an accrued increase in sales (or motivation, retention, and so on) to offset the price.
If you're not part of a large incentive house, there are still ways to get a good bang for your incentive buck. Aasgaard suggests looking at places that market themselves as value destinations, booking during shoulder season, or seeking destinations that may not be as heavily used, such as resorts that don't have big names. Flexibility in travel dates is also a way to cut down on costs.
Sometimes planners have a lot of influence regarding the where and when of a travel program; sometimes they don't. And no two companies want the same thing. But the more options you offer a client, and the more detailed cost comparisons you draft, the more valuable you become to them.
So will you—and the incentive industry—weather the storm? "I think anybody in our industry would probably see incentives increasing in an economic downturn," says Whitman. "People try to drive employees or associates harder—to reach harder goals. And to do that you have to incentivize. [The time is ripe] for the incentive world."