Incentive's 2012 Annual Roundtable
By Leo Jakobson
September 1, 2012
Fay Beauchine, President, Business Loyalty, US, Aimia
Tom Ernsting, Director, Group Market Sales, The Americas, Mandarin Oriental Hotels
Keith Fenhaus, President and CEO, Hallmark Business Connections
George B. Delta, Esq. – Legal Counsel, Incentive Federation; Gary Regenhardt Goldstein Wade, P.C.
Peter W. Hart, President and CEO, Rideau Recognition Solutions
John McArthur, President, Maritz Motivation Solutions
Dave Peer, President, Hinda Incentives; President of the Board of Directors of the Incentive Marketing Association (IMA)
Cindy Hoddeson, Director - Meeting & Incentive Sales, Monaco Government Tourist Office
Doug McLain, Senior Vice President, Global Sales, Palm Beach County Convention & Visitors Bureau
Pete Mitchell, Director, B-to-B Sales – Samsonite, Corp. and Immediate Past President of the Incentive Manufacturers and Representatives Alliance (IMRA)
Rodger D. Stotz, Chief Research Officer, The Incentive Research Foundation (IRF)
The State of the Industry
To start off the 11th Annual Incentive Industry Roundtable, we asked each of our panelists how they thought the industry was doing. Here are their responses.
John McArthur: In my view the prospects for the industry, and certainly for [Maritz] as a part of that industry, are very good over the next several years. We see the industry in a cautiously healthy state. We are definitely seeing significantly increased customer activity, especially compared to the last couple of years, and we also see some resurgence in budgets supporting that activity.
Dave Peer: I agree with John's assessment; we’re seeing budgets returning. Quite a few of those budgets were impaired after the 2008 recession, and now I think there's enough emerging confidence — cautious confidence — in terms of recognizing that there’s a need for the kinds of services that our industry provides. There's some caution, though, heading into the election.
We're also seeing as a result of that recession a certain shakeout in the industry where some weaker players are fading. Those that have stayed the course, and have been good stewards of their business, are benefiting now.
George B. Delta: Talking about this issue with my clients, there is some cautious optimism. Budgets are returning, there are more and more programs that are being green-lighted. The question is, as always, sustainability and what will happen if there is any weakness [in the economy] but for this year, anyway, so far, so good, especially compared to what happened after 2008.
I do sort of wonder whether this nascent recovery is sustainable, however, and what plans are in place if these [incentive and recognition] programs start to slow down again. I have seen programs that were put on hold or canceled being restored, and I'm just wondering whether that's sustainable or not
Cindy Hoddeson: Working for a very niche destination like Monaco, I'm pleased to say that since 2008 luxury no longer is a negative term, 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 seem to see a little bit of wait and see, but we've had a very good 2012.
Pete Mitchell: We experienced a recovery to some extent in 2011, and so far in 2012 we've been able to defend and slightly improve on that.
Our business is changing a little bit — for the longest time, we were very strong in what I call program business, meaning clients would put [Samsonite luggage] into a program, and watch it redeem over a period of time. Our business is starting to morph into more of a transactional business — [clients asking], “How many of these can you ship in this timeframe, because we have an event-specific thing that requires your product.”
There are plenty of suppliers in our channel who have always been transactional but we haven’t so this is a bit of a sea change for us. This is driven almost exclusively by the casino business, but the inquiries and the customer activity is very strong, and we have a good portent for the second half of the year — with all of the caveats in place about the election and what Congress chooses or doesn't choose to do.
Fay Beauchine: The state of the industry is getting much better. Spending is returning. Budgets are healthier than they were in 2009 and 2010. We see meetings, event, and incentive travel tied quite directly to business travel, and business travel spending shows — depending on what research you're looking at —anywhere from 3 percent to 6 percent growth each year in the last couple of years, and is trending upward.
We also see that the understanding of the importance of the meetings and events industry to the economy is in a much better state than it was in 2007 and 2008.
So in general we feel pretty good, notwithstanding the problems we have in Europe, which I would say put us in a mode of extreme caution on what will happen in Europe. Our business is primarily U.S. company-dominated, but it is impacted by issues in Europe because our clients are global manufacturers and producers of goods and services around the world. So in general we feel better than last year at this time.
It’s exhilarating that the incentive travel industry is once again viewed as a very viable business tool. We went through a period where there was so much doubt about it, proving it’s economic value to the economy, but also the corporations had to realize 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.
I think there is a new level of sharpness in this industry, because there was so much focus on how to design and deliver [incentive programs] and get through the tough times. And everybody learned from that. It really took partnering across the value chain to deliver this business in a cost efficient way that still achieved the outcomes that our clients needed. So I’m pleased at where we are today and I see a good future.
Once we get through the election in the fall, it will be pretty clear what's happening in Europe, too, and then we'll see what the next crisis is. But for sure we're getting good at motoring through crises, all of us. [During the crisis] we talked about how there’s got to be a silver lining in this. Well, I think we know now that it made us all tighter and better at what we do.
Rodger D. Stotz: What we’re seeing in recent polls and studies is that there is a return to what we saw in 2008. Extravagance in the area of incentive travel has reduced in importance. It was a huge issue after AIG [was lambasted by politicians and the media for running a luxury incentive trip days after receiving an $85 billion government bailout], That’s come back down, so that’s an indicator that there is some sort of normality coming back. Also what we’re seeing is a return of some confidence.
Now, this is from a couple of months ago so with the economy slowing down [this summer], and what we’re hearing in the news media, it might have changed. But [this spring], we were seeing an upturn in confidence in the business community, which then reflects back into the incentive arena.
Peter W. Hart: I think that there is more optimism. I think that people who were on the bench [about running incentive and recognition programs] are coming off the bench. I think things are definitely picking up.
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 [hotel] category.
This year started out strong but it’s definitely steadied a bit. The European crisis has made for a bit 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.
Doug McLain: I'll agree, continued growth and strength. But I will say, the incentive travel, luxury incentive travel side dropped so far down in 2009. Going back to 2006/2007, 25 percent to 30 percent of [Palm Beach hotels’] group business was incentive business. My hotels actually reported that dropped as low as 5 percent in 2009, and in some of our luxury resort hotels it has dropped to flat, as in zero.
But we are 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, of group business.
They have seen a lessening of the flare 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, it’s down to amenities one or two nights.
We’re 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.
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