PERFORMANCE LEVEL: Are overseas incentives bouncing back?

Against a back drop of global recession, you may think that incentive travel is a thing of the past. While the industry has indeed been having a tough time, both in terms of perception and performance, the meetings and incentives market is far from down and out.

Amid frozen salaries and slashed bonuses, many might assume that staff motivation was no longer in fashion. In fact, the reverse is true. Organisations that have undergone restructuring are inevitably left with staff unsure about their futures. As a result, these companies have to look at how to restore morale to get the best from a slimmed-down workforce.

Consequently, motivation programmes are back on the corporate agenda, and companies are turning to tried and tested methods, including the overseas incentive. Research among buyers who attended 2009’s IMEX found that the recession could actually benefit the incentive travel sector. Nearly half of the 1,000 delegates polled agreed that motivational programmes now matter more if corporate performance targets are to be met.

Kathryn Hulse, communications consultant at Grass Roots, points out that “when it comes to travel incentives, a trip ‘abroad’ is almost always seen as having a greater value than one in the UK".

"The prospect of getting on a plane signals an escape from daily life and a sense of anticipation," she says.

“When a sales incentive runs for several weeks or months, the build up generated by ‘teasers’ about the destination through an on-going communication programme can play a huge part in motivation to achieve targets, as can the ‘brag factor’ of wanting to be able tell friends and colleagues about a place they have not visited before.

“Choosing somewhere a little more unusual works well and can often be less expensive, such as Andalucia instead of Marbella, or Croatia instead of the French Riviera.”

Although images of exotic beaches seem incongruous against a background of corporate cost cutting, incentives make total sense. After all, the whole purpose of an incentive is to improve performance, making them the perfect example of return on investment. Indeed, a 2009 survey by Corporate Meetings & Incentives (CMI) found that group travel remains the most popular form of reward in dealer programmes.

Des Mclaughlin, managing director of Grass Roots, explains why. “These are well thought-out projects that are meticulously planned, and not staged for frivolous purposes," he says. "In this respect, it is not about being seen to spend money needlessly. International travel has always been an integral element of incentives and the programme needs to truly impress the recipient to ensure they work hard to attain their place.”

The appeal of incentives
Despite the tough times, leading buyers remain in an upbeat mood. “This year's incentive is definitely going ahead,” declares Jackie Brew, senior conference manager for Shire Pharmaceuticals. “The budget, group size and duration are the same (as 2009), because it's such an important recognition and motivation event. In a recession, it is particularly important to retain your top sales performers. Individual reward points are not an appealing alternative – the formula we have is tried and tested.”

Ron Pike, communications manager, events at Goodyear Dunlop UK, adds: “We're not cutting budgets in 2010. We are aware of a difficult trading year ahead, but we're trying to show the trade we have faith in our dealers and want to reward them with quality programmes. I've decided not to go down the route of reward points because it doesn't necessarily offer dealers a unique proposition.”

This story is not the same everywhere. Axa Life head of events Patti Heaven, says: "From the perception of the greater general public, financial institutions are viewed very much in the same way as banks, which are not enjoying good media coverage. To host overseas incentives together with big production conferences in this global economic climate would create the wrong image. This would be insensitive and could potentially be interpreted as a lack of respect for individuals that have been made redundant."

The airlines’ view
An upturn in the overseas incentive market spells good news for the airline sector too. With combined operating losses of €2.9bn for 2009, 50% worse than 2008, the carriers need help filling their 299.9 million available seats. Last year a number of carriers took the plunge into the incentives market once again.

“Revenue from incentives for the UK market alone is approximately 10% of our overall annual revenue,” says conferences, events and premium products manager at Lufthansa, Matilda Goes. “Year-on-year until 2008, revenue grew by between 10% and 12%, although for 2009 we are expecting a decline of 5% compared to 2008. This is an even better result when compared with overall sales revenues in the region.”

There is no doubting the reality of the downturn, as Pete Mills, senior sales executive – MICE and specialist sales for Emirates Airline confirms. However, the depth of the recession, compared to other sectors of the meetings and incentives market, seems to have been lessened.

“Emirates has seen some clients cancel trips due to the perception of them spending money during a recession, but we are seeing strong forward bookings from all sectors,” he says.

Brad Flynn, key account manager for bmi, reports that business through its meetings and incentives department was up 40% in 2009 over 2008. However, a key factor in this has been the airline’s decision to invest.

“After having virtually ignored the market for many years, carriers like bmi have been listening to what corporate clients and the larger event agencies are telling us,” he explains. “We’ve become more proactive in developing business in this segment.

"For us, incentives travel accounts for more of our business than conferences, and we are receiving more enquiries every month. However, the market remains very price-driven and we have had to become more flexible on terms and conditions.”

Among the long haul carriers, Cathay Pacific’s James Hancock echoes Flynn’s thoughts.

“We haven’t had a high base to start with, but it has been something we have built upon," he says. "When the recession hit the incentives stalled, but the conferences have continued, especially to Hong Kong and Singapore.”

There is no doubt that incentive travel is fighting back, and that its motivational benefits are once again being embraced by corporates. Agencies saw 25% of the incentives on their books for early 2009 cancel, but since August the number of enquiries has risen steadily.

Companies may not allow their staff out of the office for more than a few days in the current climate, however this is not necessarily stopping them booking shorter-stay exotic incentive trips. Only time will tell if incentive travel will fully return to the levels of activity experienced before this recession. The signs in the meantime are definitely encouraging.

This article is an edited excerpt from The Grass Roots Meetings Industry Report. Click here to download the full report.