Introduction & Purpose

Incentive programs are a vehicle to stimulate and motivate people to improve their performance. (Tepper, 1993) This special report analyzes the business strategies and plans of members of the incentive travel industry during periods of strong economic fluctuation.

The International Dictionary of Event Management supports Tepper’s definition by stating, “The incentive event is a corporate-sponsored meeting or trip to reward performance, motivate work effort, and create company loyalty.” (Goldblatt, Nelson, 2001). Furthermore, the editors of this book define the incentive travel company as “an agency that designs, sells, and coordinates incentive travel programs.”

According to Julia Rutherford Silvers, the psychologist Frederick I. Herzberg challenged assumptions that people are motivated solely by money and other tangible benefits. Herzberg’s research showed that employees need to attain a feeling of achievement, of responsibility for their own work, and of allowance to work with minimal supervision. (Silvers, 2004)

Nathaniel Branden’s psychological approach also supports Herzberg’s research. David Rich, an executive with the George P. Johnson Company, a major event-marketing firm, stated in Corporate Meetings and Incentives magazine that Branden’s research confirmed, “There is no more important psychological need than self-esteem.” (Corporate Meetings and Incentives, 1998) Therefore, one of the critical questions this study seeks to answer is how do U.S. incentive travel professionals provide a high level of quality and achieve the greatest possible outcomes for their clients during periods of strong economic fluctuation.

Professionals whose responses are included in this study have confirmed that despite significant economic fluctuation the incentive travel industry appears to growing despite a pre and post September 11, 2001 period of decline. One of the reasons for this growth is the universal need for recognition and camaraderie among employees in order to continually promote productivity.

Similarly, Patrick Delaney notes that hard objectives for incentive programs include increased sales, increased profits, product awareness, and raised productivity. Soft objectives include camaraderie and team bonding, peer recognition, company loyalty, and education or training. (Silvers, 2004)

Within the tourism and marketing scholarly and professional literature, there is little evidence of the incentive travel industry as a significant economic driver for destinations. In fact, some destinations such as Hawaii, the U.S. Virgin Islands, and others derive a significant amount of economic injection from incentive travelers.

Within the tourism and marketing scholarly and professional literature, there is little evidence of the incentive travel industry as a significant economic driver for destinations. In fact, some destinations such as Hawaii, the U.S. Virgin Islands, and others derive a significant amount of economic injection from incentive travelers.

This report seeks to uncover the forces, trends, forecasts, and insights that incentive travel professionals are utilizing to produce extraordinary performance during periods of strong economic fluctuation. The findings from this report provide general guidelines for incentive travel professionals to use to promote business health, as they are likely to encounter future periods of strong economic fluctuation.

How This Report Was Developed

The general goal of this report is to shed light on strategic activities conducted and/or envisioned by incentive travel executives. This report is the product of three distinct quantitative and qualitative research studies. First, an in-depth interview of 20 incentive travel executives was initiated in September and completed in December 2004. Second, a focus group with fifteen representatives of incentive travel companies and suppliers was performed in November 2004. Third, online and traditional questionnaires were completed by a sample of SITE members during the last trimester 2004 and first trimester 2005.

The goal of these different methodologies is to “triangulate” the data obtained from each for more accurate and reliable results overall.

How To Use This Report

This report is intended as a guideline for multiple future scenarios. Incentive travel organizations and suppliers should consider it as a resource to assess their future strategic decisions in light of new business forces. These forces represent the basis for a decision support system specifically geared towards the needs of incentive travel organizations. A variety of competitive methods and core competencies are also included as likely reactions of industry players to future forces and trends.

In short, this report aims at providing answers to those interested in creating future oriented competitive methods as a response to external forces and events, such as strong fluctuating economic times. In reading this report, forward industry leaders will be able to understand answers to such questions as:

  • What types of changes have shaped the incentive travel organizations?
  • How do external events and trends affect the incentive travel business?
  • What are the best strategies that are likely to be developed in the next five years?
  • What are the most appropriate core competencies needed to be successful in the future?
  • What are the most successful alternative incentive programs that could be implemented to respond to a faltering economy or political instability?
What Is The Incentive Research Foundation?

The Incentive Research Foundation funds and promotes research to advance the science, enhance the awareness and appropriate application of motivation and incentives in business and industry globally. The goal is to increase the understanding, effective use and resultant benefits of incentives to businesses that currently use incentives and others interested in improved performance.

How This Report Is Organized

Shown below are the major sections of this report.

Section Key
Page
Executive Summary
1
The SITE Member Profile
7
Performance of Incentive Travel Firms
9
Environmental Forces Affecting the Incentive Travel Business
13
Response of The Industry – Competitive Methods and Core Competencies
27
Most Successful Programs Implemented During A Period of Strong Economic Fluctuation
35
Brief Assessment of the Feedback of International SITE Members
39
On the Way To the Future
41
Appendix
47

 

Your Questions and Comments Are Welcomed!

In order to ensure that your efforts are fully supported, please feel free to contact us. In addition, your feedback is most welcomed. Please direct your comments or questions to:

Melissa Van Dyke, President
The Incentive Research Foundation
100 Chesterfield Business Pkwy, Suite 200
St. Louis, MO  63005
Telephone: 314-473-5601
Email: m.vandyke@theIRF.org

Limitations

The overall research consisted of two qualitative stages and a quantitative survey. In-depth interviews were held with 20 incentive travel executives and a focus group was held with 15 representatives of incentive travel companies and suppliers. An online and traditional survey was conducted among 1,584 SITE members worldwide. The total number of U.S. respondents to online and traditional questionnaires was 103, while 29 international members responded. This represented a total response rate of 14 percent.

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Executive Summary

Introduction

Within this section, you will find overviews of significant findings from online and mail questionnaires, in-depth interviews, and one focus group.

Note: For the reader interested in learning more about the methodology or specific details of data gathering and analysis, please refer to the Appendix. Additionally, the next section of this report offers an in-depth detail.

Performance of Incentive Travel Firms

Significant findings from online and mail questionnaires, in-depth interviews, and one focus group reveal that:

  • The number of customers, participants, destinations, programs will continue to grow. Margin per participant showed a relative stagnation in the past; however, it is expected to increase in the next five years. Conversely, the length of a participant’s stay could decrease in the next five years.
  • During the last five years (2000-2004), the most significant organizational changes resulted from technological developments, especially due to variations in reservation systems, communication technology, and application of expert/decision support systems.
  • Las Vegas and Hawaii will continue to lead as the “hottest” incentive destinations in the next five years. Other leading destinations are Orlando, San Diego, Scottsdale, Phoenix and San Francisco. Outside of the U.S., Vietnam will be the most popular new destination, followed by China, and Cuba.
The Environmental Forces Affecting the Incentive Travel Business:
1) External Forces

The first Gulf War had such a deep influence on travel that 1991 is now known as the worst year in the history of travel. Environmental forces cannot be controlled by businesses but they can often be predicted. The purpose of this section is to identify the most significant forces that have affected the incentive travel business in the last—1998-2003—and next five years—2005-2009. For the convenience of the reader, the external environment includes economic, socio-cultural, technological, ecological, and political segments.

Economic
Past: A period characterized by instability and recession, and a progressive weakening of the U.S. Dollar.

Future: The threat of recession will remain, and the recovery of the economy will depend more on the global economy and will be increasingly influenced by safety and security issues. Corporate mergers will increase in this industry.

Socio-Cultural
Past: It showed more cultural diversity and increased importance on family values.

Future: The demographic profiles of incentive travel customers and managers will continue to change. Immigration from the developing countries will solve problems such as aging population and cultural, language and religious barriers. Families taking incentive trips and healthier eating habits also increased.

Technological
Past: This was the most significant force. Technology has forced incentive travel professionals to reshape their business, especially with online registrations, programs, and paying methods.

Future: Remains the most significant force. Information technology and the Internet will lead the changes in this field. Wireless systems will entirely manage incentive businesses. Online bidding methods will substitute the current pricing methods. Clients will be more powerful and will have direct access to suppliers.

Ecological
Past: The word suffered a dramatic spread of disease and an increase in natural disasters.

Future: Natural disasters will continue to be a major threat to the incentive travel industry. Increases in climate change will cause more environmental instability and shorten booking time.

Political
Past: 9/11, Iraq war, and the anti American sentiment abroad have had a great impact all over the world.

Future: There will be an increased importance of safety and security, resolution of the Middle East conflicts, stronger relationships with the European Union and more emphasis on business ethics.

2) Internal Forces

External forces have direct consequences on the environment and thus, affect how our businesses are managed. The internal environment is grouped into four major segments. They are finance, marketing, human resources, and operations.

Financial
Past: Significant profit margin pressure has encouraged incentive travel executives to cut costs and be more financially conservative.

Future: Profitability will be a key factor in determining financial success in the incentive travel business. Incentive travel executives will need more expertise in cash flow management, multitasking, cost sharing with suppliers, improvement of negotiating skills, and procurement.

Marketing
Past: More competition, increased web marketing, streamlining customer base characterized this sector.

Future: Information about the client will be considered increasingly relevant. Central offices and outsourced companies will offer more marketing functions. Customers will demand aster transactions while competition will continue to grow.

Human Resources
Past: Business grew through increased hiring and outsourcing. Also, it was difficult to find professionals in the field. Flexible working schedules help retain qualified workers.

Future: Finding, hiring, training and retaining qualified labor will be paramount. Ethical issues will be equally important. Staff will be more specialized, diverse, multilingual, creative, and dedicated.

Operations
Past: Technological changes brought about restructuring and reorganization of firms.

Future: More technology will be part of the systems improvement and process changes, as efficiency will guide the incentive travel business. Innovation will be the key to success.

The Response of the Industry:

As a response to the forces operating in the external and internal environment, incentive travel businesses have created competitive methods, or strategies. The following are the most popular:

Competitive Methods
Marketing is the leading area for future competitive methods. Particularly, face-toface interaction, speed of program execution, referrals, multimedia marketing, pricing, quality service, new products and trade show participation.

Strategic Partnerships and Alliances will be developed with suppliers, Destination Management Organizations, consulates, and airport authorities.

Internet Marketing guarantees a faster execution of all the aspects of business operation, from pricing to program packaging.

Core Competencies: Where to Allocate Resources
Core competencies are the elements that enable businesses to implement their strategies.

Creativity is the key to success of the incentive travel industry because it provides an infusion of new ideas and strategies.

Financial Knowledge, specifically cash flow management, will be critical in determining a more appropriate resource allocation strategy.

Excellent Personnel and Sound Training Programs are necessary ingredients in the creation of a long-term vision and effective implementation.

Education of Procurement Representatives, who often ignore the products and services offered and have little knowledge about the destination and its attractions.

The Most Successful Programs Implemented During a Period of Economic Fluctuation

Successful programs are divided into three groups based on their purpose and focus.

1. Programs created to respond to a major international crisis—terrorist attacks, SARS, hurricanes—changed the incentive travel destination without financial or marketing consequences. Success was based on organizational flexibility, negotiation abilities and partnerships with suppliers.

2. Programs based on the uniqueness of the activities offered—Native American spiritual building techniques or outdoor gastronomic events—created unique experiences. Preparation, multiple site inspections, and professional destination management organizations (DMOs) are key ingredients to the success of these programs

3. Programs based on the uniqueness of the destination—a castle in the Jordanian desert or a jungle lodge in the Amazon—are likely to attract more thrill seeking incentive travelers. These programs need similar core competencies to those based on offering unique activities, such as strong partnerships at destinations, creativity and preparation.

Based on the results of this study, the following is a critical checklist to create the foundation for a better business performance.

A Brief Assessment of the Feedback of International SITE Members

1. Carefully monitor the external forces selected by the incentive travel executives. Collect information about those forces and identify their evolution. What do they mean to you? What is their likely impact on your organization? What must you change because of those forces?

2. Assess the characteristics of your finance, marketing, human resources and operations’ departments. Do they have the elements identified as essential by the majority of your colleagues? If not, why? Are your internal departments responding to the forces in the external environment? For example, technology was named as the force having the strongest influence on your business. What have you done to adapt your business in response to the latest technological trends?

3. Analyze your competitive methods or strategies. Are they based on the environmental analysis? Do you have a full-fledged wireless online system capable of responding to the requests of your customers and creating a personalized program and pricing structure in one day? Do you have ongoing partnerships and alliances with suppliers, DMOs, airport management firms and consulates?

4. Assess your creative assets. Who is in charge of the creative function in your organization? How would you rate the creative skills of your organization from one to ten? Would it be better to outsource it? How many effective and tested training programs do you have to create outstanding employees? How many foreign languages are spoken in your organization? How would you rate your expertise in information technology? Do you know where your cash flow is coming from and where you allocate your resources? Are they allocated to support the most important revenue generators?

5. Evaluate program successes. What is the basis of your most successful program? If it is based on the uniqueness of the site, how many site inspections have you performed? How long was the preparation and how professional is the DMO you are working with?

 

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