by Leo Jakobson | September 01, 2012

Incentive Travel

Incentive: Are companies returning to incentive travel in a big way?

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 it’s 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.  

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 of 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. 

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 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. 

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 seem to see a little bit of wait and see, but we've had a very good 2012. I think group size has remained stable or perhaps gotten slightly smaller, even though programs are back.  I think the duration of programs 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 they like to go to?”

McLain: I agree; 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 dropped as low as 5 percent in 2009, and in some of our luxury resort hotels it has 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.

Stotz: The people who have always used group incentive travel are still using it, and 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.  

Incentive: Are companies going further afield? Where are they going?

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 — 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 towards Europe and slowly but surely more business going to Asia. Our hotels there are all ahead of pace. Europe is not as because of what they're going through right now with the economy.  Latin America, I think with the exception of Mexico, is also strong. There's definitely a trend of increased travel, increased adventure. [Groups are] heading over the water.

We’ve seen growth in more sophisticated travel, more adventure travel to places like Marrakesh, Istanbul, South Africa, and in Asia — beyond Thailand now, to Vietnam and Laos. But for every adventure travel [program] like that, though, 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 are continuing what they’ve always done. About the same amount say they are adding international as those who says 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, 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. Talking to a number of travel planners recently, they are saying whether it’s Cancun, Puerto Villarta Los Cabos, the Riviera Maya the amount of criminal activity is less than in most major US 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 it also has high cost 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 are fuel surcharges and taxes — is impacting the global cost of an incentive travel program, and so some companies that perhaps previously included all transportation costs are now restricting that only to the airline ticket.  

Incentive: Are golf, spa, and other amenities coming back as well?

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 recession caused people to be thoughtful about what they're doing with their money. We see spending targeted to what participants want to do, and that’s where the individualization comes in. The [incentive travel] industry reset itself in a very good way. There is not waste in these programs, there is tight negotiating, there is very tight, 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, it’s down to amenities one or two nights. 

Stotz: Yes, but not to the extent that we saw before.  What’s happening is 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, talking to some of the [industry] suppliers, 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.  

In our 2012-13 sales and marketing plan, one of our objectives and goals is to create customized itineraries for groups and meetings —obviously we're going to target the consumer segment as well. Palm Beach is a very large county, the largest county east of the Mississippi and the size of the state of Rhode Island, so we have 15 tourism districts. We’re creating micro sites for each individual districts, so if the attendee or their planner decides they're going to be in north part of the county, we'll have a separate micro site on the assets and tourism options of Jupiter.

Incentive: How’s individual incentive travel doing?

Fenhaus:  We're seeing good movement — it’s all individual, we don't do any group travel. We have some wonderful partners in the hotel and travel categories, [including] airlines and cruise lines.  We also have some wonderful hotel organizations that are part of our roster of retail partners. That is also showing an uptick — not huge, not double digit growth, but nice single-digit growth. It’s very, very popular, because again, [the recipient] can take those dollars or take those points and can go exactly where [he or she] wants.  

Stotz:  In our latest surveys, we’ve seen that individual travel —which started really coming into play when the recession hit — has stayed. Most of the organizations responding to our surveys that have introduced individual travel have kept it. One third of the merchandise award program managers surveyed in the IRF’s Spring 2012 Pulse Study expect to include the use of individual travel awards this year. It has found a place in the traditional merchandise [catalog] offering.

There’s been a push by many travel suppliers to provide packages and or gift cards that can be redeemed for individual travel. What you’re seeing is some organizations packaging Marriott cards, for example, [with] a gas card, or a dining card, and an airplane ticket — or some cash for an airline ticket.

Hart:  I think that individual travel and experiential travel has got its place in the rewards mix. I think certain things are going to grow faster than others, [and] individual travel is one of those things.