Incentive Travel Overview: Resources & Statistics

This article provides an overview of the incentive travel field, highlights the critical issues, and lists such information resources as publications, trade shows, seminars, etc.

STATISTICS

In 1999, the Incentive Federation conducted a study which was designed to determine users' objectives, practices, costs and results across all levels of American business. The survey revealed that using merchandise and travel to motivate can be highly effective and cost-efficient. (See Research for more details on the study.) The first phase of that study, conducted in 1997, reported that $22.8 billion was spent by U.S. businesses on incentive travel and merchandise in 1996 to motivate consumers, employees, dealers, and salespeople as a means of improving performance. Incentive travel primarily is used in programs to increase sales, purchases, or, in the case of employees, productivity or quality. The official Society of Incentive & Travel Executives definition of incentive travel says that it rewards people for specific results in formal incentive programs, but many companies that offer travel use it in more loosely structured programs in which employees or customers are singled out to attend a motivational meeting. One study, "Does Incentive Travel Improve Sales Productivity?" (see Research), conducted in 1997 for SITE at the University of Luton in the United Kingdom, examined employee attitudes at a leading insurance company and found a direct link between the incentive travel program and improved performance.

What distinguishes incentive or motivational travel from traditional travel is the focus on creating an extraordinary experience for the winner, or one that builds morale, communicates the corporate message, or fosters improved communications between employees and/or the company and its customers.

Businesses use incentive travel to: motivate employees to work toward a common goal; recognize employees for performance; get people to make a purchase they might not otherwise make; reinforce a marketing message. Noncash awards such as travel are used to avoid the pricing or compensation issues raised by the use of cash.

The use of individual incentive travel has grown increasingly popular at companies that want to let their winners travel independently. If you're interested in this option, ask major incentive companies, airlines, hotels, or cruise lines. They have developed individual award programs that sometimes add some bells and whistles not available to the usual traveler. Most, however, are simply certificate programs that individual winners can redeem at will. (For more information about individual incentive travel, see Article 4040, Individual Incentive Travel: Steps to Success.)

CRITICAL ISSUES

1. Determine goals. What, in specific terms, do you want to accomplish: e.g., increase sales 10 percent in a given period; specify what the increased sales would mean in profits.
   
   
2. Determine how much to invest in your incentive programs.
   
   
3. Determine specifically whom you are targeting: consumers, salespeople, dealers/distributors, customer service employees, etc. Understand their demographics, tastes, and lifestyles, through surveys, if possible.
   
   
4. Determine what type of incentive award will get the attention of your audience and be clearly distinguishable from your compensation or pricing strategies.
   
   
5. Decide how to track performance.
   
   
6. Make sure that what you are asking your audience to do is reasonable in light of past performance or behavior.
   
   
7. Determine obstacles to achieving your goals that may exist because of market conditions, employee morale, etc.
   
   
8. Determine what incentive travel award will reinforce your message, fit your budget as well as your targets' tastes/demographics, and be commensurate with the action you are requesting.
   
   
9. Determine whether you will manage your program internally or use an outside agency.
   
   
10. Determine the tax implications. Travel can be taxable to recipients under certain conditions, and use of tax forms may be required (see Legal/Tax Issues).
    
    
11. Develop a clear way to measure results.
    
    
12. In selecting travel suppliers, make sure they can deliver precisely what was promised at the cost budgeted. Make sure you understand their cancellation policies in case your program doesn't generate as many winners as planned.
    
    
13. When completed, carefully measure the results and impact of your program against your objectives. Survey winners and non-winners, if possible.

LEGAL/TAX ISSUES

The most critical regulatory issues affecting incentive travel involve taxation of awards. Generally, a trip offered to employees in a qualifying program is treated as income to the employee and should be reported at its fair market value on the employee's income statement. A 1099 form must be issued to employees and nonincorporated customers for travel awards with a fair market value of greater than $600. The program can be deducted by the company. If the primary purpose of the travel event is a meeting, then it may be deducted as a business expense by the company and is nontaxable to the employee. However, tax regulations contain increasingly strict definitions as to what is a meeting, and such tax advantages do not apply to meetings held outside North America, except in select destinations in the Caribbean, or on foreign-flag cruise lines. Tax laws have become more strict about the deductibility of guests' travel to such meetings. See Article 4030, Travel Tax Laws.

Federal Trade Commission regulations forbid offering travel awards in contests or sweepstakes requiring people to make a purchase. Many states have strict regulations on the way travel awards are used in consumer sweepstakes, including full disclosure of the precise travel award.

Society of Incentive & Travel Executives attorney Jim Gossett will answer simple questions for free; there's a fee for more complex consulting.

THE ART OF SELECTING YOUR INCENTIVE TRAVEL AWARD

Although many companies will deny it, destination and award selection remains a highly unscientific process, even though this is one of the most important steps in developing your incentive program.

Most companies use one of the following methods for determining the destination: what the spouse of the chief executive likes; what the chief executive likes; what the incentive travel planner likes, etc. You will get better results if you use a more systematic approach.

1. Determine the exact nature of business and pleasure in your program and choose a destination with resources and attractions suitable to your agenda.
   
   
2. Look carefully at cost, but don't rule out international programs based on misconceptions. Generally, if you are planning a pure incentive travel program, you can use offshore or domestic destinations freely without regard to tax considerations. Many international destinations have rate packages that make them competitive with domestic sites, so call the tourist board in the country you're looking at to find out about such pricing before you make any final decisions.
   
   Don't rule out such distant destinations as Asia or Australia without closely considering flight schedules. The airlines often have convenient flights allowing the group to arrive in the Orient at a reasonable hour and to return home the same day it left (local time).
   
   
3. Look at the demographic mix of your target audience, as well as its travel experience. If the audience travels a lot, you may have to be more inventive when selecting your destination. If it is an audience with little travel experience, you may want to stay closer to home.
   
   
4. Look for a destination with plenty of experience with incentive travel. You can often determine this by asking if the tourist board has a specialist for incentive travel and meetings. Find out if that tourist board, in turn, can recommend suppliers with specific incentive travel experience.
   
   
5. If you must travel close to home for budgetary or other reasons, don't worry. With a creative destination management company (otherwise known as ground operators), you can often create interesting events in the most familiar of places.
   
   
6. Look at what your competitors are doing. Many companies that offer incentive travel to dealers and distributors must realize that their competitors are doing the same thing. You want to make sure that your destination is unique and different, especially from a competitors program operating the same year.

ASSOCIATIONS

The Incentive Federation was formed to protect the rights of organizations to motivate customers and employees through the intelligent and ethical use of incentive programs. Comprised of the leading associations, trade shows, and some of the top suppliers in the incentive field, the Federation monitors Federal regulations that could affect the proper use of incentive programs and lobbies against proposals that could hinder the ability of businesses to properly use incentive programs. As part of its industry services, the Federation also conducts the only regular research on use of incentives by U.S. organizations, and manages the Incentive Performance Center, the industry-wide effort to promote professional use of incentives and that underwrote this Web site. For information, call 312-923-7606 or e-mail mailto:hhenry333@aol.com. The Incentive Federation's publications can be found at the Incentive Marketing Association's website. Go to http://www.incentivemarketing.org/ or call 630-369-7780

Society of Incentive & Travel Executives (SITE), the only organization devoted strictly to the field, has chapters throughout the world. Its primary mission is to increase the professionalism of users and suppliers of incentive travel. It offers an educational program (see Seminars) as well as seminars at the Motivation Show (see Trade Shows). 401 North Michigan Avenue, Chicago, IL 60611. Call 312-321-5148; fax 312-527-6783. Go to http://www.site-intl.org/.

KEY SUPPLIERS AND HOW TO FIND THEM

The type of supplier you use depends on your budget and what extra services you need. Note that many incentive travel users now buy on a "cost-plus" basis. They require suppliers to submit proposals showing the actual cost of the travel components plus a markup. How much of a markup you are willing to pay depends on how much in the way of extra support service you need, such as pre-trip telephone contact with winners, on-site tour directors, and promotional extras. While agencies do get commissions from travel vendors, additional markups are applied to cover the labor involved with planning and handling a group trip. Beware of companies willing to work on razor-thin margins. A poorly run trip can easily erase the positive morale benefits of the program.

Some incentive travel users have expressed interest in finding companies that sell software for incentive program measurement and tracking. To our knowledge, no such services exist.

You can obtain industry directories (usually annual), which include listings of most of the types of suppliers described below, from Incentive magazine (646-654-7604); Successful Meetings magazine (847-763-9050); Meetings and Conventions magazine (201-902-2000); Corporate Meetings and Incentives magazine (847-427-2072), and the Motivation Show in Chicago. Incentive has probably the best directory for incentive companies and travel fulfillment companies. To find out the name of suppliers knowledgeable about incentive travel, call Society of Incentive & Travel Executives for the names of suppliers in the destination of your choice. (312-321-5148).

• Incentive companies range from full-service agencies offering travel, merchandise, training, communications, reporting, catalogues, gift certificates, travel, etc., to small shops offering specialized services. You will pay more for travel purchased through these companies in exchange for the full range of services. There are probably no more than 100 incentive companies in the U.S.--and only several dozen that have sales of over $10 million. You are unlikely to get much help from an incentive company if your company spends less than $50,000 on its incentive program.
  
  
• Travel fulfillment companies provide purely the travel portion of an incentive or meeting program. They don't provide much promotional support, can't help much with development of program structure and performance measures, and won't be able to help if you also need merchandise in your program. Often these companies are small or are associated with corporate travel agencies. These companies are listed in industry directories in the same categories as incentive companies. You can distinguish the differences only by careful questioning.
  
  
• Corporate travel agencies often have group divisions that handle incentive travel. However, make sure your agency has experience with motivational travel before using their services. Travel designed to recognize performance must be clearly distinguishable from a typical vacation or meeting experience. These companies also are lumped with incentive companies in most industry directories. Most corporate travel agencies seriously involved with incentive travel belong to SITE. Call SITE 312-321-5148 for names and addresses.
  
  
• Destination management companies are an often overlooked but critical resource for companies with incentive groups too small for incentive travel companies to service. These companies, based in popular travel destinations, can arrange everything from rooms and ground transportation to elaborate events, special meals, and unique experiences most travelers can't obtain on their own. The largest of these companies is relatively small, so expect to deal directly with the owner or senior management. Look for a company in business for several years or one run by management with extensive experience in the particular needs of motivational travel. Membership in SITE often is a sign that the company has targeted incentive travel as a market segment. These companies are listed in the annual directories above, generally under the location where they operate.
  
  
• Hotels active in the business travel arena often have a meetings/incentive travel department that can assist with the special requirements of incentive users: room comparability for winners, group check-ins, volume pricing, and special events such as theme parties. Talk directly with an incentive salesperson if possible. The most comprehensive directories for this category are those published by Successful Meetings and Meetings and Conventions magazines.
  
  
• Cruise lines active in incentive travel also have special departments to handle the needs of incentive users: cabin comparability, special events, entertainment, promotional material, meetings with the captain, etc. If a cruise line doesn't have a meetings or incentive department, you'll probably want to consider another cruise line. Cruises are particularly appropriate for smaller incentive groups in that they make logistical planning easier than a ground program. The cruise line can supply all of the necessary services from the beginning until the end of the cruise, and can even sometimes offer economical fly/cruise packages. Caution: many such packages are not flexible enough for incentive programs where the winners come from different locations around the country.
  
  
• Airlines often have meetings/incentive departments that can provide group pricing, promotional material, and a few special inflight amenities (although the last have become harder to obtain). If you are planning an incentive trip using a major airline, call its headquarters and ask for the incentive sales department. This person will be among the few at the airline able to tell you what special services, if any, the airline can offer your winners.
  
  
• Tourist boards are one of the most valuable, but often overlooked, resources for your travel planning, especially if you have a smaller group. Most overseas destinations and many domestic offices have someone familiar with incentive travel who can provide you with promotional material, off-the-record recommendations of hotels and destination management companies, and information about the destination that you can supply to your winners.

KEY RESEARCH

Relatively little research exists in the field of incentive travel, but the quantity is growing. Several magazines conduct annual reader surveys that report on the attitudes and practices of incentive users, as well as estimates on the incremental sales achieved when incentive programs are used (10 to 20 percent).

• The Incentive Federation conducted a survey in 1999 among current users of merchandise and travel items for motivation/incentive application, which was designed to determine users' objectives, practices, costs and results across all levels of American businesses. The study revealed that incentive programs are both highly effective and cost-efficient. The 1999 survey summary was featured in the August 1999 issues of Incentive and Potentials magazines. For reprints of the summary and full study, call The Incentive Federation at 312-923-7606.
  
  
• "Does Incentive Travel Improve Sales Productivity?" This 1997 study, conducted for SITE at the University of Luton in the United Kingdom, examines the commercial value of incentive travel within a "live" business environment (a leading insurance company). The case study model examines employee attitudes before and after the introduction of a tiered incentive campaign and presents statistical evidence of the direct link between motivation programs and improved performance. The study found that the incentive travel program motivated the top performers, and also found a correlation between the launch of the program and an increased rates of sales increases. On the other hand, new and less senior salespeople expressed less enthusiasm for the program, especially because the design allowed only for the best performers to participate in the travel event, rather than a tiered event allowing room for middle-level performers who significantly increase their performance. A fundamental of professional incentive program planning includes a focus on the "middle 60 percent" of performers; yet, research indicates that many incentive programs focus primarily on the top 20 percent of people who would win anyway. Call SITE at 312-321-5148; or go to http://www.site-intl.org.
  
  
• Incentive Travel Fact Book is a compilation of annual research conducted by Incentive, Meeting News, Incentivare (an Italian magazine), Meetings & Conventions, Successful Meetings, TW (a German publication), and SITE Hong Kong. This research quantifies reader attitudes about the value of their programs, how they plan and book their programs, how much they spend, how they spend it, what kinds of results they get, and popular destinations. $25 for nonmembers, free to members. Call SITE, 312-321-5148.
  
  
• The Attractiveness and Effectiveness of Incentive Reward Options measures employee attitudes toward incentives at a leading insurance company and ranks employee preferences. Conducted by Clemson University for SITE. Call SITE, 312-321-5148.
  
  
• The Long-Term Impact of Incentive Travel in an Insurance Organization tracks the actual impact of various types of incentive programs at a top insurance company. Call SITE, 312-321-5148.
  
  
• The Trouble with Money shows what happened when the Goodyear Tire & Rubber Company did a test comparing cash and non-cash incentives. Free from B. I. Performance. Call 952-835-4800; fax 952-844-4033.
  
  
• Understanding Incentive Travel: U.S., Great Britain, Singapore editions are three separate research reports documenting incentive travel buying practices and trends in these markets. Each report provides an in-depth analysis of how companies buy, why they use incentive travel, and for whom. Call SITE, 312-321-5148.
  
  
• Master Measurement Model documents how to develop measurement criteria for non-sales employees in incentive programs. It shows how to use involvement techniques to obtain objective information that can be used to qualify winners and also to improve the quality of sales and operations. Prepared by the American Productivity and Quality Center for SITE. Call SITE 312-321-5148.
  
  
• Office of Travel and Tourism Industries (OTTI) is a federal agency that conducts research on U.S. and international travel patterns. This agency tracks travel trends that may help with destination selection and activity planning. Call 800-USA-TRADE. Go to http://www.tinet.ita.doc.gov.
  
  
• Travel Industry Association of America has information on domestic travel trends, including the economic impact of travel and travel trends. Call 202-408-8422. Go to http://www.tia.org/.

BOOKS/ARTICLES

• SITE's Research Library has a collection of articles and resources available for $5 each for SITE members. Subjects cover everything from contracts and negotiations, to international currency issues, motivation, program design, dealer incentives, and buy-in options. For an index of articles for sale, call SITE 312-321-5148.
  
  
• How to Conceive, Set Up, and Manage Successful Incentive Travel Programs is a comprehensive self-study course created for SITE by the MGI Management Institute. The 25-hour study program covers every aspect of program design and is useful for anybody who plans incentive travel programs. Call 800-932-0191 or 914-428-6500.
  
  
• The Essentials of People Performance Management outlines the steps involved with planning incentive campaigns for salespeople and other employees, dealers, and distributors. (914-591-7600, ext. 230).
  
  
• Kiss, Bow, or Shake Hands: How to Do Business in Sixty Countries, by Terri Morrison, Wayne Conaway, and George Borden. It is useful for companies planning a program overseas, although it contains some oversimplifications. $13.57 through Amazon.com. $13.96 through Barnes and Noble.

SEMINARS

• SITE University of Incentive Travel is an annual education program designed for people who sell or use incentive travel. There are three separate regional universities. Call for dates and locations; the 2001 European University and University of Asia dates and locations are TBD. Pre-and post-university tours are also available. Call SITE at 312-321-5148; or go to http://www.site-intl.org.
  
  
• The Motivation Show Buyer Education Days are seminars held during the Motivation Show (see Trade Shows). Topics include how to run an incentive program, trade incentive strategies, and using certificates for travel and merchandise. Call SITE at 312-321-5148.
  
  
• SITE seminars are customized programs that can be held at the location of your choice. Subjects range from basic training in incentive travel planning to budgeting, trip delivery, and incentive travel selling strategies. Call 312-321-5148.

TRADE SHOWS

For a list of Industry Events, go to #9510, Calendar of Industry Events.

MAGAZINES

No publication writes exclusively about incentive travel, but several have regular features on the subject. All of these publications are available free to businesses that use incentive travel. Subscription prices apply to nonusers.

• Incentive magazine focuses on all aspects of motivation in business, with a special emphasis on noncash awards such as merchandise and travel. Its features include an annual directory in March, and a survey on incentive travel. 12 issues/year. Call 212-592-6263. Go to http://www.incentivemag.com.
  
  
• Corporate and Incentive Travel --12 issues/year. Call 508-677-3000.
  
  
• Meetings & Conventions --12 issues/year. Call 201-902-2000. Go to http://www.meetings-conventions.com.
  
  
• Successful Meetings --12 issues/ year, including directory. Call 874-763-9050. Go to http://www.successmtgs.com. The Web site has current articles and some ability to search for facilities and past articles.

ONLINE SERVICES

• Incentivecentral.org is a true portal to the incentive business sponsored by top associations involved with incentives and by leading suppliers. Incentivecentral.org was created to provide business management with objective and thorough information on all aspects of the incentive industry, including critical issues, resources, case studies, incentive benchmark tools, and how-to and reference articles. For more information call Karen Renk at 630-369-3772; go to http://www.incentivecentral.org.
  
  
• The Incentive and Loyalty Marketing Depot, at http://www.incentivedepot.com, is designed to bring suppliers and incentive users together in an industry-specific format. You can post free classified ads, participate in discussions, ask questions, offer advice to those who need help, and sign up for the "Incentive Depot News." Three options are available for listing your website: basic listing ($25 one-time charge), premium listing ($70 per year, per category), and preferred listing ($175 per year, per category.) Limited banner ad space is also available. Call 866-943-3768.
  
  
• http://www.IncentivesAtWork.com is a joint initiative of Incentive and Potentials magazines. This comprehensive site includes information on the status of the industry, how to motivate employees, increase company productivity, and generate new business. There is also a section on incentive travel, plus job market sources, suppliers, event calendar, and industry resources.
  
  
• TravelChoices, at mailto:tracklink@@http://www.travelchoices.com, features a Supplier Databank containing information on more than 10,000 service providers to the meetings industry worldwide.
  
  
• Two meetings information malls (in addition to the Web sites of the magazines above) offer limited abilities to search for facilities as well as some articles: http://www.mmaweb.com and http://www.mim.com.
  
  
• Travelfile is an Internet service that claims to have 100,000 suppliers listed: http://www.travelfile.com.
  
  
• PlanSoft Network has merged with Uthere, and is now OnVantage. It is a comprehensive multimedia information and communications network for the meetings and hospitality industries. It allows you to search databases of meeting facilities and industry suppliers. With its Ajenis Planning Software, it enables you to view guestrooms and meeting space, select your audio/visual, food, beverage, and equipment needs, and communicate your specifications in a standard format usable by the hotel system. Go to mailto:tracklink@@http://www.onvantage.com.
  
  
• International Currency Express helps provide participants in incentive tours with the added convenience of being equipped with local currency before they arrive at their foreign destination. Rates compete favorably with those offered by competitors both in the U.S. and abroad. Check out their convenient mail-order service, Currency Rush, at http://www.foreignmoney.com (or call 888-278-6628).
  
  
• Visit Getting Through Customs' Web site at http://www.getcustoms.com for information on their seminars, online database, and book, Kiss, Bow, or Shake Hands (see Books).
  
  
• If you're looking for a job or for a job candidate, check out The Meeting Candidate Network, at http://www.meetingjobs.com, which offers a highly targeted approach to executive search for meeting, incentive, and special event professionals.
  
  
• Doctor Travel, at http://www.doctor-travel.com, provides advice and resources--and even answers individual questions--about travel.