Incentive Buyers Tighten Budgets

Incentive travel buyers are trying ways to keep budgets in check, including bringing fewer attendees and being more open to alternate destinations, and increasingly are looking at external and internal return-on-investment measurements to determine the most cost-effective trip, industry consultants and executives said.

Unclear at this point is the impact recent financial turmoil will have on incentive travel. Some consultants are planning for or have had discussions with clients about future trips cancellations.

"We anticipate questions from customers who want to know where their contracts stand," said Paul Salvatore, president of event and meetings management for HRG North America. "Everybody will explore whether to cancel a meeting if it's not appropriate, given future circumstances."

Rick Buer, senior vice president of sales and solution design for Maritz Travel, said clients now are "asking us to help quantify if they were to send less participants or, in a few rare examples, given companies that have been hit hard lately, what their exposure is for complete cancellation. We are starting to have those discussions, along with them asking for our consultation around how would we recommend approaching that type of partial or total cancellation." Neither Salvatore nor Buer had yet seen any cancellations.

Patrick Sullivan, president of PRA Destination Management New York and president-elect of the Society for Incentive Travel Executives, also said he had not yet seen any cancellations, but "a lot of the clients are being very cautious with the spend and wanting to get more value out of the dollars they're spending."

Outside of current financial-industry troubles, incentive travel buyers are angling to keep costs in check.

"The incentives are pretty well-budgeted. They're not changing the agendas, they're not cutting back from a what's-been-committed perspective," said Peter Moen, vice president of business development for Carlson Marketing. "They might be looking at future year's programs and evaluating destinations based on current airfare costs and projected costs."

He said planners who can leverage certain markets based on cost and availability can "get a little more for their money in some cases."

"We have not seen any significant drop-off or shift in our customer's business or marketing goals," said Mary MacGregor, vice president of marketing and business development for BCD Meetings & Incentives. "If we've seen anything, it might be just some fluctuation with regard to the size of the groups, maybe the length of travel."

MacGregor said clients had looked at such options as booking shorter programs or changing criteria to make it harder to qualify for trips, though the latter is not common.

"If they're looking at the number of travelers as a potential way to offer an incentive travel program yet maintain budget levels, it would involve tightening the qualification level criteria," she said. "It's one of several strategies customers are using."

Sullivan said companies generally have not increased goals to reduce the number of people who qualify for a trip.

"They may have increased the quota, but usually they would not do it exorbitantly," he said.

However, some incentive trips have fewer attendees because employees are not meeting goals. "There's less winners just because their sales might be down," said Buer. While he said incentives have held steady, "one of the biggest challenges is that a much bigger percentage of the budget is going to the air costs." He added that companies are looking at the land portion of the budget to offset that increase in spending (see story, page 3).

Companies also are taking a more analytical look at the options for an incentive program. "They're tracking and measuring the impact of the meeting on future performance and how it links back to the performance of the employees who are attending these meetings versus the ones who are not," according to Frank Schnur, vice president of advisory services for American Express Business Travel.

"Moving forward, companies are looking for proof of their investment," Buer said, "so they're taking a much more scientific approach around choosing destinations—what would happen if I reduced it from five days to four days? What happens if we go to a North American destination and save on air?"

Planners more often are limiting destination options to domestic locations to decrease costs.

"Certainly, we have U.S. customers who are looking more at North American destinations, although we still have U.S. customers who are traveling to Europe," said MacGregor. "Taking into account the impact of delivering a quality incentive experience within their budgets, they're finding they can do that better by focusing more on domestic destinations. The dollar continues to lag behind the euro, and it is more expensive to consider some international destinations."

Several consultants said companies were looking to hold business meetings during their incentives due to having several people in one location, but this not been happening with any more frequency than in the past several years.