Cos. Deploy More Sophisticated Incentive Travel Programs

Some corporations again are offering travel as an incentive to top performers, but trips are shorter and closer to home, according to consultants. Such purchasing strategies used in corporate meetings management as multi-event deals with hotel chains have yet to enter the incentive travel market, but consultants said it's only a matter of time.

The nature of incentive trips has changed over the past four years, said Steve Smith, director of sales for meeting and incentive management firm TQ3Navigant Performance Group. Companies now require trips to be focused on results, he said, and buyers have become more strategic.

"The buyer has become much more sophisticated. The buyer has become more of a businessperson than just a travel planner," Smith said. "That's a big shift."

Buyers are under more pressure from their companies to prove return on investment, he added.

"Many companies have budgets to spend and they want to reward their employees, but they don't want to waste money anymore," Smith said.

Although budgets for incentive trips have loosened this year, Smith said there are tighter controls on spending. Resort destinations remain the preferred choice over cruises, he added.

"One reflection of this increased cost awareness is a lot more of what we call 'meet-centives,' " said Carol Krugman, president of Coral Springs, Fla.-based global conference and incentive planning firm Krugman Group International. "Fewer pure incentives and our corporate clients are trying to pack in as much value for not only the money they're spending but the time that is being spent."

Many incentive trips now include a clear business goal and some type of meeting component, Krugman said. For example, a resort vacation may include one brief meeting a day to discuss business. "In many cases it's very subtle, it's not a very strict program," she said.

Krugman said the average incentive trip has been shortened from seven to 10 days to an average of four to five days. "That's been developing over the past few years and I'm not sure if that's security-related as much as economic-related." Budget concerns and security concerns are often tied together, she added.

Smith said some companies once again are offering travel as an incentive rather than cash and merchandise, but that preferred destinations have changed over the past four years.

"There's a safety factor with domestic locations, such as Hawaii, California and Florida," Smith said. "American corporations don't want people traveling to parts of the world that are subject to problems."

Krugman said she has seen more corporations choosing Latin and South American destinations. "The A.B.C.—Argentina, Brazil, Chile—10 years ago these were considered not very safe areas. In the past couple of years, there has not been any major terrorist event in South America and, in terms of that all-important value for the dollar, it remains extraordinary in these places."

Safety and security are always a factor in site selection, Krugman said, but practical economics and budgeting also affect the decision.

As U.S. corporations stick closer to home, availability is becoming scarce and prices are going up, Smith said.

"Prices are going back up because for so long after Sept. 11, 2001, people were cutting deals left and right to fill beds and resorts when people weren't traveling. Now, all of a sudden it seems like we're in fast-forward," Smith said.

Demand for incentive travel has risen so sharply that Smith said negotiations have become difficult. Companies often avoid going to the same destination each year, so NPG often is unable to leverage a multi-year deal with a property, he said.

"The difference with incentives versus meetings is that the allure of an incentive trip is 'Where are we going to go next year?' " Smith said.

Chainwide hotel and resort deals can be a solution for companies looking to leverage greater volume, Smith said. However, there have been few indications that buyers would shift to chain deals, despite the fact that hoteliers "would love it," he said.

"We can negotiate a three- or four-year for somewhere in that chain in the United States, Caribbean or Hawaii. That's a great way to do it," Smith said.

Krugman said it's just a question of time before procurement techniques used for corporate meetings cross over into the incentives market. "I haven't seen it, but that doesn't mean it's not right around the corner," she said. "It's worth being proactive and to look for strategies that work in that new structure."

According to a client survey released last month by WorldTravel BTI (see story, page 22), 18 percent of respondents said their companies offered travel as a reward. Most client respondents, 90 percent, said their companies offer fewer than 10 incentive programs annually. Fifty-four percent of respondents said the average size of incentive trips is between 50 and 200 attendees and another 15 percent said the average size was greater than 200 attendees.