1/ Fay Beauchine
President, Business Loyalty,
2/ Jeffrey Broudy
Executive Vice President and COO, United Incentives;
Chairman of the Board, Incentive Research Foundation
3/ Gregory Canose
President, Award Marketing Services
4/ Jacqueline Goldy
Vice President of Sales, MGM Resorts International Operations
5/ Paul Gordon
Senior Director of Sales, Rymax Marketing Services
6/ Matthew Harris
Vice President, Marketing, InteliSpend Prepaid Solutions; Vice Chairman, Incentive Research Foundation
7/ Jane Herod
COO, Maritz Travel Co.
8/ Lynn Pavony
Director of Incentive Sales, Four Seasons Hotels and Resorts
9/ Anne Platt
Senior Director Marketing, Gifting Solutions, Best Buy
10/ Laura Saeger, CMP, CMM
Business Tourism Manager USA, South African Tourism
11/ Jane Schuldt
President, World Marketing Group; Vice President and Research Committee Chair, Site International Foundation
Every year, Incentive convenes a panel of experienced professionals from every sector of the industry to talk about the state of the incentive business. On June 9, our 11 participants gathered at Apella, an airy, modern, high-tech event space located in the Alexandria Center for Life Sciences overlooking Manhattan’s East River. For the first time since 2008, there was genuine, if still somewhat cautious, optimism around the table. Rather than a discussion of budget cuts and companies fleeing incentive travel as in recent years, the talk was of restoration and return, of Millennials and social media, and of the excitement around two big new travel trade shows.
INCENTIVE: The incentive business has lagged behind the broader meetings business in the recovery, but it seems to be catching up this year. How strong is the recovery, and what areas is it strongest in?
Fay Beauchine: We see a conservative comeback of the market. It all depends on the sector. Some of the incentive programs such as those in high tech never left during this recession. We see auto incentives coming back because Detroit’s building cars that people are excited about. We do see that some corporations are still sitting on funds and are a bit nervous about jumping into the market with both feet. There’s a lot of room to convince them that incentive programs are still a great business tool.
Jane Herod: We are seeing good movement across all sectors. I would estimate about 90 percent of the clients that canceled programs previously have brought their incentives back.
Jeffrey Broudy: We’ve finally determined that the light at the end of the tunnel is no longer a train coming our way. Most of the growth we’ve seen is in the dealer channel, because everybody’s trying to hold onto their customers and are not so worried about holding onto their salespeople. We’ve seen a 20 percent increase there. And in new business, we’ve seen about 25 percent growth over the last couple of years.
Jane Schuldt: On the show floor at IMEX in Frankfurt recently, there was a lot of activity that was like the trade shows of old, where people would walk up and lay down an RFP and say, “This is a sold program and I need a quote.” [One had] a very, very good budget and the comment along with it—which I was present to hear—was, “I want you to spend it all.” I think many of us on the supplier side have become so sensitive to the need for cost containment and cost efficiencies that we are shy about recommending full-on programs, and that was a little bit of a wake-up call: Let’s come out of our shell and lead the
Jacqueline Goldy: I have a great example of an incentive coming back. We just had a major insurance company bring a major incentive program into Las Vegas at Four Seasons and Mandalay Bay. They’re not going out broadcasting it, but they are trying to lead the financial and insurance industries by making the statement: “Yes, we need to reward our people and we’re going to Las Vegas.” They’re going to help us, as an industry, to get more people aware.
INCENTIVE: How motivated are employees? And are top salespeople starting to move?
Herod: Employee engagement is definitely at an all-time low. Maritz Research recently did a poll and [found] a quarter of the employees actually trust their management less today than they did a year ago, so it’s not getting any better. I think employers are getting to the point where they understand they’ve got to build trust.
Beauchine: Will the top salespeople leave? All the data we’re seeing says that when the economy returns, one in four will leave their employer. Gallup says that; Human Capital Institute says that. That’s why incentive programs and rewards are so important as part of an employee engagement strategy.
Paul Gordon: This economy created a very cancerous environment within business. You sit there across from an executive discussing his workforce and he says, “Well, they’re lucky to have a job.” I always think that’s the first guy that should be removed from the company because he’s missing the point. Human capital is the greatest resource they have. It’s going to be interesting over the next year or two to see what industries have stability, growth, and an environment that attracts talent. Companies do have to recognize the people who have stuck it out, who really worked those extra hours, and have programs to support them for that.
Gregory Canose: Top sales performers are motivated. They may move, but they’re motivated. What we’ve got to worry about is not the top sales performers but the other 80 percent of people that you want to motivate. Will they leave? Are they burned out? Are they not being motivated? That’s what our industry and our clients need to understand.
INCENTIVE: Is it time to put the AIG effect to rest? Is perception still an issue?
Beauchine: It depends if the company is still paying back TARP money. They still have to be aware of public perception. In general, we don’t hear a lot about it anymore, and I think it’s because people did learn how to assign specific business objectives to their travel incentive programs. That was the major way people reclaimed their budgets. When you do that, even if there is an “AIG” perception problem, your company can be successful. A corporation can still celebrate its achievers through incentive travel programs because you have established qualification rules and have demonstrated your ROI.
Herod: That will prevent it from coming back if everybody does that.
Broudy: I think what everybody calls the AIG effect, while painful in the short term, was a real blessing for our industry because it had a tremendous impact. It reminded the industry to repurpose and recommunicate the value proposition. So now people are pretty much back on board with the understanding that this was a good idea. There’s still a tremendous sensitivity to extravagance, though. That’s going to continue for a bit longer.
Laura Saeger: We’re finding that people aren’t nearly as concerned about the perception that they are going to a luxury destination. When they’re considering South Africa, they’re still looking at five-star properties and five-star game reserves. I haven’t seen any significant downturn in that.
Canose: I don’t think we can put the AIG effect to rest because it has affected not only travel but merchandise because of our association with travel in terms of pillow gifts, luggage, sunglasses—all kinds of things that were associated with us selling merchandise along with the travel programs.
INCENTIVE: Are companies still focused on motivating Millennials the way they were a few years ago?
Herod: One of the biggest challenges is when you’ve got three generations on one program. It’s all about how to design for that—not only at the marketing, communications, and the promotional level, but when you’re trying to get them participating in the program itself, and how you’re designing that product at the destination to satisfy those three different generations. I know the Incentive Research Foundation had a study that found people want to be able to do their own thing on programs, they want it tailored to what their needs are.
Matthew Harris: In a recent survey that [the Incentive Research Foundation] just did, there’s no doubt that there is pressure toward choice. Individual travel versus group, open [prepaid] cards versus filtered [gift] cards versus merchandise. We haven’t broken it out, at this point, by generation, but intuitively I think it is a lot of that younger crowd coming up that is used to having a phenomenal amount of choice in their lives.
Broudy: The older command and control generation [that says], “This is the program, and this is what we’re doing,” is moving on. One of the things that really is striking [about Millennials] is they’re no longer willing to accept that. The communication and the way the Millennials buy is almost all by pure reference. They don’t really care what we have to say, but when the buzz goes around their friends that’s what they’re interested in.
Herod: One of the things that meeting planners grapple with is how you integrate social media.
Gordon: The tool is the key thing. Once the mainstream embraces a site such as Facebook, the early adopters and cultural movers are on to something new. Whether it’s foursquare or any emerging social media site, you really have to be cognizant of what people are tapping into and how they’re using it, and then start to integrate it within the programs.
I think any employer who thinks that their employees are not looking at social media while they’re working because they’ve got filters on the computer is delusional. Everybody has a smartphone, certainly within those age groups. They can very quickly go onto Facebook or Twitter and do whatever they want to do. So being able to communicate the objectives of a program utilizing those tools, I think, is something that is critical, and internal sites should mirror sites that create engagement.
INCENTIVE: What will be the impact of the two new hosted-buyer group travel trade shows, AIBTM and IMEX America, on the incentive industry?
Lynn Pavony: I’d say there’s tremendous excitement about AIBTM and IMEX America coming to the States. I think everyone would agree on that. Many believe those two shows are going to bring great competition to other existing shows.
Schuldt: I think that it’s imperative that we have strong shows to help rebuild both the meetings and the incentives space. I’ve been going to the European [versions of those] shows [EIBTM in Barcelona and IMEX in Frankfurt] since the day they were founded, and there’s always been a sense of excitement on those floors, and a momentum and an energy level. And once that gets imported here, I think it will go a long way to helping rekindle interest from buyers and third parties, into the product that we have.
INCENTIVE: What about the Motivation Show?
Goldy: The show seems not to have embraced the change to an appointment-driven model similar to the successful IMEX. The industry is not supporting it to the same degree this year. For example, back in the show’s heyday, MGM Resorts had over 50 salespeople in Chicago for the show, and this year, I will be the sole representative from MGM Resorts.
Canose: I’m a very strong supporter of the Motivation Show, but I think the decline in commitment for travel at that show is going to affect us quite a bit because there’s crossover selling done many times. The same buyers that are going to buy travel many times are buying merchandise. And it’s difficult sometimes to justify a trip to a trade show if you’re not going to accomplish everything that you want to accomplish.
Anne Platt: In many cases, the only time we get to talk to our customers face-to-face [is at trade shows]. I think that’s true of a lot of the gift card suppliers, because gift cards are something that’s really easy to call up and order over the phone or online. There’s less personal contact, so we believe [the Motivation Show] is really important.
INCENTIVE: How’s the merchandise segment of the incentive business doing?
Canose: I see a conservative return to some normalcy. It certainly was not normal for several years, but there’s a lot more activity in the marketplace. People are asking about merchandise a lot more and have decided to use it a lot more. Orders are flowing again. The earthquake and tsunami in Japan have affected business somewhat.
Gordon: We’ve seen steady growth over the last few years, which is sort of counterintuitive to what is happening in the overall economy. The employee side has come back strongly in the fourth quarter of 2009 and all of 2010. Once organizational cuts were made, they had to do something to re-energize the employee base and keep the good people from going someplace else—because good people are always going to find jobs. The largest area of merchandising growth is in loyalty programs that retain, reward, and initiate trial. We have seen huge movement in the casino industry.
INCENTIVE: What are the hot products?
Broudy: At one time it was large TVs. That lasted for five years. Now, there’s a new product every couple of months. Whenever a new product gets excitement, like the iPad, it could be a game-changer. But in two months, three months, six months, it’ll be something else that everybody has to have.
Gordon: It’s not so much products but categories. From our standpoint in 2008 and 2009, anything that had to do with home products went through the roof—tools, cookware, you name it. Why? Because the economy tanked. It still is a strong category.
Electronics will always be the sexy product, and I put iPads in with big-screen TVs and everything else that plugs in. What’s interesting is the manufacturers that now want to play in our world: the David Yurmans, the Michael Kors, the Salvatore Ferragamos. We were not the channel they wanted to be in for many years and now they realize the power of building the brand and increasing sales through rewards programs.
Beauchine: The other thing that came into being was downloadable content. Music, movies, books became mini-awards for people because they now have the devices on which to download them. So you score a few points, get easy, fast, instant gratification, especially for the Millennials—that’s the stuff they like.
Canose: E-readers are very popular. Another hot product that’s out: Sony has a Google TV. You watch TV and simultaneously can go online. And it’s very hot.
Herod: Another category is the healthy living, the performance bikes, the heart-rate monitors, those kinds of things.
Gordon: But going back to the Millennials and everybody else, it has to be a name brand. And if it’s a line by a celebrity in that brand, it’s even stronger.
INCENTIVE: How’s the incentive gift card sector doing?
Platt: At Best Buy we have seen continued strong growth currently and the past two years. Customer loyalty and product promotions are the big opportunities for us, and we’re seeing nice movement in the customer acquisition and retention area. There’s a lot of momentum around trying to drive sales.
Harris: We had about 20 percent growth last year coming off of negative growth during the downturn. We’re seeing a decent amount coming back in dealer [channel programs], a little less in sales incentives. We’re actually seeing more growth coming out of the human resources side than we have in the past.
The other place that we’re getting a lot of energy from is wellness. [Program administrators] are starting to pay attention to screenings and how to get people to actually sign up and to stay engaged.
INCENTIVE: What trends are you seeing?
Platt: The thing that we see in the marketplace and that we’re going to be launching soon is the digital gift card, or egift card. I think there’s a lot of interest, and a lot of clients are asking us for it. And there’s another aspect of it, that social responsibility piece. We’ve been doing recycled gift cards for a long time, and some of our clients really like those. [Digital gift cards] will be another opportunity to talk about social responsibility.
Harris: You don’t have as many dedicated incentive professionals on the client side as you used to. It’s a smaller part of people’s job. And they’re making the mistake, in a lot of cases, of deciding on the award by asking the participants what they want as opposed to what will work. Research shows, if you ask people, the closer they can get to cash, that’s what they’re going to pick. We get that a lot when we try to upsell from an open card [usable anywhere a credit card is accepted] to a filtered card [usable only at selected merchants who deal in aspirational products or services]. An open card is easy and simple, and people don’t complain. But there’s less of a conversation going on about how well the vehicle works.
Platt: Eighteen months ago, there was a lot more focus on utility types of cards, like gas and grocery. As the economy has come back, people are asking for the treat-yourself brands where you can get something you want and share it with the whole family. What we always try to help our customers understand is the trophy value of it all. And that’s one of the downsides of the gas and grocery [cards]. The trophy value of that goes away very quickly.
INCENTIVE: How about individual incentive cards? For awhile, the retreat from group travel was driving that market. Is that still true?
Broudy: There is a lot of individual travel for demographic and economic reasons.
Beauchine: Due to perception and sometimes budget, there were a lot of people that didn’t want to run group travel programs, so they did convert to individual travel awards. It seems that group travel has bounced back, but individual travel awards may remain as one of the tiers.
Pavony: Four Seasons entered into this arena a year ago, when we launched our Unforgettable Experience Awards card. We’ve had some very nice success with it, but I have to say it hasn’t replaced group travel with any of the customers that we’ve been working with. We’ve seen it as a supplement to group travel platforms that they already have in place, or for running a short-term incentive program to motivate sales of a certain product line.
INCENTIVE: Is luxury travel coming back? Are companies willing to be seen in luxury destinations and hotels?
Pavony: Four Seasons’ traditional customer is back in the group segment. I think some of our clients tried other brands and found that that did not quite bring the results that they wanted. For 2012 and ’13 we see a significant increase in our incentive business. It’s refreshing to see a heightened demand on space.
INCENTIVE: Are clients still staying closer to home or returning to long haul?
Beauchine: China and South Africa are up there in the top 10. People really want to go to these places. The other thing is when the automotive companies came back, they skipped domestic and went right to international.
Herod: Brazil, Argentina. Costa Rica is on our top international list.
Pavony: I agree, Costa Rica and Buenos Aires are very popular. In addition, we’re already starting to see greater interest from our clients who want to go back to Bali, to China, to Thailand. Eastern Europe is popular. Prague was very hot five years ago, and is back in demand.
Schuldt: China is still at the head of the pack. Asian destinations are three out of the top four, and Dubai was the fourth. I did a poll of some of my DMCs and, interestingly enough, North America is the slowest in recovery for incentives into Asia.
Saeger: I would say that, all in all, we’re definitely seeing a recovery. We’re seeing an increase in RFPs. We’re seeing an increase in the number of people who are willing to consider a longer haul destination. South African Tourism’s research at the end of February showed a 27 percent increase in travel overseas, which is the biggest reported since 2007. We have a very strong base in automotive and financial programs this year, so South Africa is very optimistic about the incentive market, especially out of the United States.
INCENTIVE: How’s Las Vegas doing?
Goldy: We’re seeing a steady recovery. Lead volume is up, business is up. The perception is changing. Financial groups are coming. Pharmaceuticals are coming. We’re excited about the momentum, and we’ve virtually seen no cancellations right now.
INCENTIVE: After Hurricane Katrina there was a lot of effort to take programs to New Orleans. Will the same thing happen for Japan?
Beauchine: I don’t think that a lot of incentive groups will go until the nuclear situation is cleared up there, but meetings with pharmaceutical companies are happening there because you have to sell drugs in Japan. That’s another country that I think this industry really wants to support and get behind.
INCENTIVE: We’ve seen a lot of cutting around the edges in the past few years in terms of room gifts, F&B, and golf and spa. Are those coming back?
Herod: I think golf and spa have come back. It’s the room gifts. It’s the top-name entertainers. It’s those kinds of things that they cut out, not the luxury day-to-day things that make them very happy.
We’ve seen a little more free time incorporated into programs and an effort to cut costs. We are also seeing more of the budget placed into the food and beverage events to elevate the culinary experience. With the growing popularity of Top Chef and Food Network, more people are becoming engaged in food, wines, and preparation. There are high expectations for the culinary experience.