Financial Firms Raising The Level Of Incentive Travel

Incentive travel among financial corporations seems to be on the rise—some analysts estimated more than a 20 percent increase in such travel during the past several years—due to a strengthened economy, an increasing emphasis on global business and a growing comfort level with federal regulatory requirements.

"There's an increased demand. It's not to the 1999 to 2000 level, but it is certainly improving from the 2002 and 2003 fiscal years," said Bill Boyd, president of the Society of Incentive and Travel Executives and president and CEO of Sunbelt Motivation and Travel Inc.

Financial and insurance companies slowed their use of incentive travel around 2003 after high-profile corporate controversies led to increased scrutiny over how corporations spend money. "Nobody knew what action a CEO could take," Boyd said. Financial and insurance companies had a particularly difficult time because regulatory changes were directed toward them. Now, they've started to adapt, Boyd said.

With the growth in incentive travel have come changes in the way it's used. For example, every one to two years, financial corporations that use incentive travel typically host a single large event at an exotic location. Such events usually cost at least $1,500 to $2,500 per person and have headcounts ranging anywhere from 150 to 400, depending on the size of the company and the event. Now, however, those companies often will schedule more frequent smaller trips for specific groups—in addition to large companywide excursions every 12 to 24 months.

"They'll have the one big gathering every year or every two, but almost once a quarter, they'll have meetings of different practices," said Peter Klebanow, president and CEO of New York-based Ultramar Travel Management. Those smaller meetings typically involve headcounts of 35 to 50 and are more likely to be scheduled at domestic, as opposed to international, locations.

Corporations also have shifted toward using high-end resorts that offer such popular diversions as golf and spa treatments, and have cut back on airfare expenditures, length of stay and scheduled activities, consultants said.

"At the same time I'm saying venues are moving upscale and flights are deflationary, I would also say that more often than not I see coach travel to these meetings," according to Ultramar's Klebanow.

The greatest cost increase in incentive travel can be attributed to hotel expenses. During the past two years, hotels in such popular destinations as New York City have hiked prices by up to 35 percent, Boyd said. Even so, the most popular resorts fill up quickly.

"The better resorts are selling first and are in most demand," Klebanow said. "I've even run up against availability problems in some of those more deluxe resorts."

To counter hotel costs, corporations are making concessions. For example, they're shortening stays. A typical length of stay used to be seven to 10 days; now, three to four days is more common. Buyers also are planning events at locations that are just as attractive during off-peak seasons.

Many financial firms are focusing their incentive travel resources on domestic destinations. "The demand is for domestic, primarily, but international is also growing. International would be growing a lot faster if the dollar were a little stronger in Europe," Boyd said.

One factor pushing international travel is an increase in "global play," Klebanow said. "Many of these companies are worldwide and have greater need for these meetings than ever before," he said. "They're merging across the globe."

For such groups, international meetings often represent the only chance employees have to come face-to-face with their counterparts, Klebanow said.

On the other hand, domestic destinations grew in popularity after the terrorist attacks of 2001. Companies suddenly wanted to make sure they scheduled events at locations where, if something went wrong, they could get everyone home, Boyd said. "Instead of Vancouver, they'd go to Scottsdale. Instead of Bermuda, they'd go to Orlando. People were comfortable with that and budgets were less because it doesn't cost as much to go to Scottsdale or Orlando," he said.

"If you're in the mountains, you're in the mountains. You don't have to be skiing," Klebanow offered.

At the same time, companies are adjusting to the demands and interests that accompany having a younger workforce. "To respond to younger generations, there's a lot more individual activities," SITE's Boyd said. It's not unusual for corporations to steer clear of such structured group events as tournaments and dinners, opting to issue cash allowances and rental cars instead.

Dave Sonricker, senior vice president and general manager of WorldTravel Meetings & Incentives, said his company hasn't seen the same spike in financial or insurance travel that other consultants reported, but he has seen shifts in how clients use travel programs.

"From the buying perspective, particularly in the financial services industry, they're looking at incentive programs as a whole across the organization, not just incentives for one division," WTMI's Sonricker said.

To drive savings, financial companies often seek out purchasing arrangements with hotel chains rather than with single properties, he said. Companies have also changed the face of the typical incentive traveler. It's not just for top sellers anymore, Sonricker said, adding that it's not unusual for companies to offer travel rewards to customer-service employees.

"That's a little bit of a change in focus," he said. "It's more costly to get customers than to retain customers. They want to keep their market and grow their market."

Consultants expect incentive travel growth to continue, even though hotel prices are skyrocketing and jet fuel prices are expected to continue to remain at very high levels. Corporations are exercising cautionary tactics that allow them to continue purchasing trips while staying within their budgets.

That's because the benefits of incentive travel are unique, and the payoff is worth the extra effort, SITE's Boyd said. "If you give cash, no one will remember where that cash came from," he said, "but if you take an incentive trip to Cancun, you'll always remember that incentive trip to Cancun and you'll always remember who took you there."