The Stakes Are Getting Higher in a Tight Economy
As economic bad news continues to batter the U.S., companies of every size in every industry are taking a hard look at what cuts they can make to remain profitable. Planners might be fearful that incentive programs might be on the chopping block, but smart executives may want to think twice before using that red pen to slash the incentive budget. After all, what could be more important in these times than to keep employee spirits high, reward exceptional effort and show employee appreciation?“Incentives are basic to taking care of employees,” says Kevin Barosso, director of national sales for Englewood, Colo.-based Destination Hotels & Resorts. “Most companies are not in a position to start cutting things yet.”
Companies are, however, asking planners to “sharpen the pencil” on ancillary spending on food and beverage and activities, according to Barosso. That pencil may be as sharp as a knife as companies look to programs scheduled for next year or 2010, he says.
Associations—whose attendees typically pay their own way—are facing similar situations. Cindi Williams, CMP, director of events for the Western Home Furnishings Association in Sacramento, says her organization is moving to incentive-style programs to entice its retail owner members to come, have fun, connect with peers and learn in a casual environment. “We ask ‘who motivates the motivator?’” Williams says. The group also offers discounts to members who bring employees as a reward for performance.
Williams says the group already has suffered some loss of membership as retail outlets close in the wake of the housing market meltdown. But instead of letting members hunker down and brood, the group is trying to position its programs as a much-needed getaway. “The board might talk about reductions, but we have to keep the value to the member and be creative internally,” Williams says. “If we start reducing food and beverage (functions), breakout sessions or fun, that’s when I’ll see attrition.”
WHERE’S THE BEEF?
A number of studies and surveys have examined the state—and value—of incentives. According to the Trends in Employee Recognition survey by WorldatWork released in April, 90 percent of responding organizations said they planned to continue or increase existing recognition programs. Half said they planned to launch new programs. Seventy-nine percent of all recognition programs reward performance—which are also the programs most likely to use travel or special events as the reward.
As proof of the value of incentive programs, the 2007 industry profile put together by the Incentive Research Foundation indicated that 50 percent of all companies use incentive meetings and 55 percent use special events to reward or recognize superior performance. More than half of those companies said they expected budgets to at least remain the same through 2010. The caveat is that the study was conducted in late 2007—before the spike in fuel costs that has put a bite in everyone’s budget, from the individual consumer to state and local governments and companies of all sizes.
Even last fall, there were a few doubters. About a third of senior management respondents to the WorldatWork survey said they didn’t have any budget for a recognition program—the highest number since 2002. And the number of those senior executives questioning incentive programs also had risen compared to previous surveys.
Planners trying to convince their boards, executives or clients that tough times call for incentives have additional support. According to a study by the International Society of Performance Improvement, incentive programs can increase employee performance by as much as 44 percent for teams and 25 percent for individuals.
Another study—this one by the Forum for People Performance Management and Measurement at Northwestern University—showed there is a direct link between employee satisfaction and customer satisfaction, and that customer satisfaction can be directly linked to a company’s financial success. So, the bottom line is that happy employees do a better job of increasing sales. That should put a smile on the faces in the board room.
Still, there’s some sensitivity to staging incentive trips in a down economy. “The word ‘incentive’ is difficult to present to the board of directors,” says Elaine Macy, director of global incentive sales for Chicago-based Preferred Hotel Group. More groups are combining incentive programs with business meetings—particularly in the financial services sector. Other companies are calling the programs by more obscure names like President’s Club or Gold Circle. But industries that are reliant on independent dealers or agents—like the auto industry or insurance—are still boldly touting incentives, she says, though there may be fewer people making the required sales goals to qualify.
INCENTIVE TRENDS
Incentive planners, companies and suppliers interviewed for this story noted some consistent trends for incentive programs that are likely to affect this sector at least through next year. Some of the trends will impact what incentive programs include as well as where they’re held.
At a meeting of the Society of Incentive & Travel Executives in Malaysia last spring, members identified a focus on corporate social responsibility, voluntourism, lifestyle travel with a health and wellness component and maximum value for dollars spent as key factors in future programs.
Corporate social responsibility—already known more commonly as CSR—was mentioned by every planner interviewed for this story. Bike-building as a team-building activity that benefits children’s charities seems to hold the most favor this year, with projects for Habitat for Humanity also getting quite a few nods. That holds true for hoteliers as well as the groups they host. Mark Barnes, area director of sales and marketing for Marriott Resorts Hawaii, says the first day of every Marriott corporate meeting is dedicated to philanthropy, and that incentive groups coming to the Marriott often work with kids, paint schools or take on other community projects. “I see it on a regular basis,” he says.
Value is king in the U.S. today, according to Peter Yesawich, partner in Y Partnership, an Orlando-based tourism marketing firm. Status is often conveyed on those who get the best deal. So it’s no surprise that thinning coffers only add to the desire to maximize value for every dollar spent.
To that end, incentive trips are getting shorter as well as smaller. They’re also staying closer to home. “More people are staying in their own backyard to get high attendance and keep costs down,” says Michelle King, owner of Divine Event Management in Mesa, Arizona. That even applies to the local MPI Chapter. King says the group was going together by bus to an educational forum in Laughlin instead of hoping people would drive separately.
Some groups are taking advantage of local events like the recent Long Beach Grand Prix or adding an educational component geared to personal growth to create value with fewer dollars.
Another trend focuses on the need to do more than simply be in a particular place. “People are looking to experience the environment they’re in and get a better flavor for the location,” says Kevin Barosso. In Colorado it might mean jeep tours, river rafting, horseback riding or biking.
Preferred’s Macy reports that recent requests included a cattle drive, a float trip for which participants were dropped by helicopter onto the river bank, a wagon train and an urban warfare school of military training. Mountain guests also might want skiing or ice skating followed by cigars and cognac in a lakeside tent. In Southern California, they might charter a yacht and in Northern California there’s sure to be a wine-tasting event. “People rely on destinations to provide what’s unique to that area,” Barosso says.
Regardless of what incentive groups are doing these days, they decide on it almost at the last minute. Marriott’s Barnes says that Hawaii’s lead volume has remained about the same, but groups are taking much longer to sign contracts. “The biggest trend I see is hesitancy (to commit),” he says. “It’s the most dramatic I’ve ever seen.” There’s also an upside to short-term booking at times when a short booking window results in last-minute deals offered by hotels looking for incremental business.
CONSIDER ALTERNATIVES
While there may indeed be deals even in the highest-cost markets, if the airfares are now too steep for the company’s wallet, then alternative destinations might be in order. For instance, if you want a gaming destination but with lower costs than Las Vegas, Reno/Tahoe might be an alternative—particularly for regional planners whose clients can drive without breaking the bank (see our Reno story on page 111). Reno is less than an hour from outdoor adventures at Lake Tahoe’s north shore and a jumping-off point for river rafting on the Truckee River, fly fishing, culinary adventures or touring artist studios—all at reasonable rates.
In Hawaii, most resorts offer on-site programs that may be incorporated into an incentive program at no or low cost. The Fairmont Orchid on the Big Island offers a Big Island Adventure package, while a three-night adventure package at the Waikoloa Beach Marriott Resort & Spa features a waterfall hiking tour, spa treatments and other amenities.
Brett Jarvis, partner of International Site Alliance in Laguna Beach, Calif., has seen some groups head to Tucson for an Arizona destination as an alternative to typically higher rates in Scottsdale. “Rate caps take some high-cost cities out of the equation,” he says.
Mesa, Ariz. planner Michelle King, of Divine Event Management, suggests another option: stay in a nearby community like Tempe or Mesa and take the group to dinner at one of Scottsdale’s top restaurants.
All-inclusive resorts—often found in Mexico destinations—are gaining popularity, says Elaine Macy. “Companies like the buyout idea (at independent resorts) and all-inclusive resorts,” she says. While California destinations remain popular, Macy says that places like Santa Fe, Utah and Montana also are gaining ground among Preferred Hotel’s independ- ent properties.
In Southern California, Newport Beach-based Broughton Hospitality—which typically targets the leisure market for its boutique hotels—has combined a gas incentive with a “cruise the coast” theme that features four area hotels in Santa Monica, Santa Barbara, Solvang and San Simeon, each of which has its own must-do activities associated with the destination. Small incentive groups or those focused on individual itineraries could do a rotating group at the hotels, or hold a meeting at one and then move on to another for a recreation component nearby.
“You could build in wine tours, spas or golf,” says Steve Buckler, Broughton’s vice president of marketing. “It plays to the trend of customizing.”
Corporate cruises are coming back, too, says Robb Thornsberry of Infinity Events in Anaheim. “It’s a relatively inexpensive way to have exclusivity for your group (and) cruise lines are offering major packages to get the corporate market back,” he says.
But, despite today’s economic turmoil, most planners and suppliers remain upbeat, certain that things will turn around. “The industry goes through peaks and valleys,” Macy says. “This is a valley.”
Cut Costs Without Being a Scrooge
During sluggish economic times, there may be closer scrutiny of incentive budgets with red pens at the ready to slash any item that even appears to be over-the-top. But incentives that seem cheesy to recipients aren’t likely to garner many takers.
“Clients still want a valuable quality incentive/reward experience for their groups, but they do not want it to look like they are spending money,” says Elizabeth Bussing, director of sales for USA Hosts/Key Events in San Francisco.
So what’s a planner to do? Here are a few things to consider to make your incentive programs fun and exciting without breaking the bank—or having your budget slashed to peanuts.
Stay local and look for unique experiences in your own backyard, says Robb Thornsberry of Infinity Events in Anaheim. That might mean VIP access to local celebrity events, backstage passes at a concert or one-on-one opportunities to meet with celebrities. “It’s all about giving them something the public doesn’t have access to,” he says.
Add a philanthropic element, which may provide a tax deduction for the company along with meeting corporate social responsibility goals of both the company and the attendees, says Elaine Macy, of Chicago-based Preferred Hotel Group.
If your incentive program also includes a business meeting, add in extended free time instead of planned activities. “The company doesn’t have to pay for that,” says Michelle King, owner of Divine Event Management in Mesa, Ariz.
Can’t afford the higher-cost resorts? Explore lower-cost alternatives within the same region, says Kevin Barosso, director of national sales for Destination Hotels in Englewood, Colo. He says the variety of properties Destination offers in the mountains helps plan-ners pick a budget-friendly location.
Partner with your hotel to take advantage of free programs like naturalist walks or guided hikes, says Cindi Williams, CMP, director of events for the Western Home Furnishings Association in Sacramento. Or find out what new local programs or activities are avail-able at little or no cost. “That’s where I love CVBs,” she says. “They’re a great partner in a down economy.”
Sandi Cain, a regular contributor to Smart Meetings, is a freelance journalist who has covered the meetings, hospitality and tourism industries for more than a decade.