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The return of incentive travel

As the economy begins to return to health, companies are looking again at incentive travel as a way to motivate employees to work harder.
/ Source: The New York Times

Incentive trips — all-expenses-paid excursions offered as a reward for outstanding performance — almost disappeared after the American International Group was widely criticized for the lavish spending on one such trip in September 2008, less than a week after it got $85 billion in government bailout money.

But it now appears incentive travel is coming back. “The burn-at-the-stake attitude toward incentive travel is gone,” said John Tichenor, president of World Heritage Travel Group, an incentive travel company in Angels Camp, Calif.

Incentive trips were long used by companies to motivate employees to sell more, make fewer errors or otherwise contribute to the bottom line. But in the depths of the recession, as millions of workers were being laid off, companies generally avoided any signs of excess. Now, as the economy begins to return to health, companies see a need to give their employees an incentive to work harder.

'Employee engagement is at stake'
“There’s much higher degree of comfort in using these tools to drive business performance and also to talk about it,” said Steve O’Malley, president of Site International Foundation, which does fund-raising and research for the incentive travel industry. “You have to,” he added. “The industry’s taken two years off and now employee engagement is at stake. Many companies, if not most, are saying it’s safe to get back in the water.”

Mr. O’Malley, who is also a senior vice president of Maritz Travel, an incentive planning company in Fenton, Mo., said Maritz data showed that the volume of incentive trips was increasing. “We have 92 percent of the 2010 volume already booked just two months into the year,” he said. And programs are also larger. “Overall attendance is up 13 percent in terms of the number of people per program,” he said.

The new attitude comes after much effort by the meetings and incentives industry, which began a public awareness campaign in 2009 to fight what it considered to be misperceptions about its practices.

Public criticism of the A.I.G. event and of incentive programs in general stemmed from a misunderstanding of how the trips are paid for, said Brenda Anderson, a former chief executive of Site, an organization of incentive travel executives, who is now a consultant to the industry. The money for travel comes from the incremental revenue generated by salespeople,” she said.

“By the time the travel happens, the company has already gotten the money,” Ms. Anderson said. “In fact, if incentive programs are done right, they can increase revenue.” According to a September 2009 study by the U.S. Travel Association commissioned as part of the incentive industry’s awareness campaign, the return on investment for incentive travel is four to one.

Winning over Obama
Government lobbying was another component of the industry’s campaign. In March 2009, the industry’s leaders arranged a meeting with President Obama to defend incentive and other forms of corporate travel as legitimate business tools.

“That meeting was a watershed moment,” said Vincent Alonzo, editor in chief of Incentive, a magazine that covers the industry. “Obama had criticized the A.I.G. trip during his campaign, but after the meeting he shifted his rhetoric.”

Capitol Hill soon followed suit.

But even with public perceptions shifting, many companies were reluctant to return to the use of luxury travel as an employee reward — or, at least, to admit it publicly. Texas Roadhouse, a restaurant chain based in Louisville, Ky., was a rare exception in 2009. Its chief executive, G. J. Hart, appeared on CNBC at the time defending his incentive program.

“I didn’t have anything to hide,” Mr. Hart said in an interview later. “We do this for the right reason — to recognize and reward the people who work hard every day to take care of our guests.”

Most companies continue to tone down their incentive programs because they do not want to appear too lavish, incentive planners said. “They’ll go domestic instead of international, or stay at a Hyatt instead of a Four Seasons,” said Harith Wickrema, an incentive planner in Willow Grove, Pa., who also teaches tourism and hospitality at Temple University in Philadelphia. A company may opt for a four-star hotel even though it is more expensive than a five-star hotel offering a deal, he said, because “perception is more important than reality.”

Do-good travel
In another nod to economic reality, more clients are requesting that community service activities be included in their incentive programs.

Whatever the public perception of these programs, the companies running them say they derive many benefits beyond the extra revenue generated by people trying to qualify.

“We get back so much more than we invest,” said Gary Read, chief executive of Nimsoft, a software company in Redwood City, Calif., that sends its top 10 salespeople and their spouses on an incentive trip every year. “The relationships the winners build, the camaraderie — plus there’s the factor of other employees looking at these trips and saying, ‘Next year I’m going to be there.’ ”

Kevin Lambert, who traveled to St. Barts last April as one of Nimsoft’s incentive winners, said he was a big fan. “All our income is from commissions, and having that trip as the big carrot you’re aiming for keeps you going during the low points.”

Mr. Lambert added that bringing along his wife was a further benefit. “I’m on the road three out of every four weeks and my wife has to put up with it,” he said. “Now she has a broader appreciation for what I do, and it feels more like we’re in this together.”

This story, The Return of Incentive Travel, originally appeared in the New York Times.