Fledgling strategy defies recession, higher costs, effects of gulf war

INCENTIVE TRAVEL STAYS ALOFT DESPITE DOWNTURN IN INDUSTRY

February 04, 1991|By Tom Belden | Tom Belden,1991 Knight-Ridder News Service

Recession, high costs and worry over the Persian Gulf war are a triple whammy for the travel business.

They are having a depressing effect on both leisure and business travel, causing many people to postpone trips, and companies to tell employees to stay close to the office. Some travel agents report declines of up to 25 percent in air travel this year compared with 1990.

But one of the fastest-growing types of travel -- offering elaborately planned and executed trips to exotic locations as incentives to meet sales or other performance goals -- may not get hurt as much as the industry overall, according to some in the travel business.

In recent months, incentive travel programs appear to be holding their own even as many other types of corporate meetings and conventions have been curtailed in various ways, including limits on the number of people attending from a particular division.

"The meetings business has been hurt by the recession . . . but incentive programs are not as affected," said Christine Duffy, marketing director for McGettigan Corporate Planning Services, a major Philadelphia incentive and corporate travel agency. "Some people think this is the time to get the sales force motivated."

Using incentives, such as merchandise or cash, to try to increase sales has been around in many industries for years, but incentive travel is still in its youthful growth stage, according to those in the business.

The Gallup Organization, in a 1989 study, found that 7.7 million, or 11 percent, of the 68.5 million individuals who took airline trips were on incentive travel. That compares with 3.2 million, or just 6 percent of the total, in 1988.

In another study, done by Premium/Incentive Business magazine, total spending on incentive travel increased at a faster pace than that of other types of travel in the late 1980s. The category grew 17 percent in 1988 and 12.6 percent in 1989, the magazine found. Total 1989 spending topped $5.1 billion.

The auto industry and other big manufacturing segments, including auto parts, electronics, heating and air conditioning and farm equipment, are the biggest users of special incentives to dealers as inducements for increasing sales. The food industry was the biggest user of incentive travel in 1989, spending about $732 million on it.

The travel programs can reward anywhere from a few dozen top salespeople to several thousand individuals who meet sales or other productivity goals.

In the late 1980s, the insurance business and, especially in the Northeast, the pharmaceutical industry increased their use of incentive travel.

Although insurance companies indicated in the Premium/Incentive Business survey that they expected to spend less on incentive travel in 1990, other industries, including pharmaceuticals, wholesale non-durable goods, book publishing and housewares, expected substantial increases.

To those who plan incentive programs, the industry's growth is a clear indication that companies find the lure of going to a luxury resort or other interesting destinations among the best ways to increase sales.

"It's growing because, at its core, it's a reward based on performance," said Michael Hurwitz, president of United Incentives, a Philadelphia incentive-marketing firm, and immediate past president of the Society of Incentive Travel Executives. "It's a very sound business practice to reward people based on their productivity."

Winning a trip to Europe or one of Hawaii's most expensive resorts publicly singles out an individual among his or her peers in a way that winning merchandise or cash doesn't, Hurwitz added.

"It's like getting an Oscar in front of all your peers," he said.

To be successful, incentive travel programs can't simply be employee-giveaway schemes, according to Richard Graham, chairman of Graham Marketing Group, an incentive-marketing agency in Eagan, Minn.

That means that if incentive travel programs work right, "they're self-liquidating," Graham said. "They pay for themselves, especially as people get more productive. Increasing productivity has to be tied to the program."

A good incentive travel program will include a thorough marketing effort to get employees motivated.

"If you can get six nights in St. Thomas, with air fare, hotel and a rum swizzle included, for $400, then you can't use the same thing to motivate" the sales force, Hurwitz said.

"You have to offer something the individual can't duplicate -- at any price," he said.

That regularly leads incentive travel companies such as United and McGettigan to go to elaborate lengths to find the best new, plush hotels and to plan programs that winners will talk about when they return home.

The agencies also must hire the right speakers if there is an educational or business component to the meeting, or plan memorable parties and outings as part of the reward trip.

For McGettigan, in recent years that has meant that more and more of the agency's 200 employees have to know not only how to arrange efficient transportation for 1,000 people between their hotel and a dinner party, but also how to choreograph an evening program with professional entertainment.

For instance, the agency recently arranged to have tuxedos available to all 1,000 people attending a meeting, Duffy said. The task verged on a nightmare when it was discovered that the rented tuxes didn't come with shirt studs, she said.

The key to creating such memorable events is "Never say no," Duffy said. "You figure some way to get it done."

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