Incentive Travel During A Recession: The Benefits
by Anne Thornley-Brown, President
Executive Oasis International
Whenever there is an economic meltdown, one of the first things that many companies cut is non-cash incentives such as incentive travel. This is short sighted. When times are tough, it’s much more difficult for your team members to “make their numbers”. Therefore, it’s even MORE important than EVER to have strong incentives to motivate your team and reward top performers.
Article & Video 1: Texas Roadhouse CEO defends Employee Appreciation Event
If your company is performing well, there is no better time to schedule an incentive trip than during a recession. It’s simple. Due to reduced occupancy rates, many hotels are offering deep discounts. Your company can now stay at even 5 star resorts in locations like Canada, Jamaica, Dubai, Oman, and Abu Dhabi for a fraction of what they would normally spend. Even 6 and 7 star resorts are now offering special rates. These bargains will disappear when the economy picks up.
Incentive Travel Pays for itself
Incentive travel is particularly effective because it pays for itself. How? Incentives are given at the end of the year AFTER successful results have been produced. For incentives to be effective, careful planning is needed.
At the beginning of your fiscal year:
- set your target, the minimal level of financial performance both in terms of profits and earnings per share
- identify the level of sales that each member of your business development team needs to reach for your organization to meet its target
- allocate a percentage of the sales generated by each member of your business development team for incentives.
Individuals should qualify for the incentive based on 2 criteria:
- the company’s level of performance
- the individual’s level of performance
Why companies Cut Incentive Travel
So if incentive trips pay for themselves, why do companies tend to eliminate them when the going gets tough? The answer to that question is complex but part of what is going on right now is “the AIG effect”. Some of the companies that received bailout money in 2008 have still organized luxury junkets and lavish corporate events. They seem to have forgotten that incentive trips and luxury corporate events are rewards for EXCEPTIONAL performance, not an entitlement to be bestowed even when there is failure of epic proportions. We’ve all read the headlines:
American International Group Inc. spent $440,000 for a spa retreat for AIG executives just days after the company received a federal bailout.
AIG executives had spa treatments, banquets and golf outings, according to lawmakers investigating the insurance company’s meltdown.
- AIG Executives Help Themselves To $86000 Hunting Trip
- Reps blast Bank of America over Super Bowl fan fest
Bailout recipient Bank of America is drawing fire for its five-day fan fest at the Super Bowl.
“From exclusive spa retreats, to million-dollar executive bonuses, expensive corporate jets, and now, lavish Super Bowl parties, Wall Street demonstrates time and time again that they just don’t get it,” said U.S. Rep. Edward Markey (D-Malden), rattling off other ways bailout recipients have spent money after they got taxpayer funds.”
- Wells Fargo defends, then cancels Vegas junket
- B of A’s Super Bowl bash – bailout firms ‘just don’t get it’
Wall Street firm Morgan Stanley, fresh off a $10 billion bailout, held a three-day conference for clients at a five-star oceanfront resort in Palm Beach.
For the life of me, I don’t understand how Morgan Stanley could have been planning an incentive to Monte Carlo when 7,000 employees were laid of last year and more lay-offs are planned.
The poor judgement of some organizations and the risk of negative publicity is now making even organizations that are doing well nervous about spending ANY money for incentives. This is throwing the baby out with the bath water.
When Rewards Have Been Earned
When your company or members of your team beat the odds and produce outstanding results, they deserve to be rewarded. Make the rewards proportional to individual and company performance. One size does not fit all and it should not have to.
For example, if some members of your team have gone above and beyond the call and your company is still struggling, by all means reward them. However, this is not the time for gambling junkets or stays at lavish resorts. Keep it simple. Maybe a dinner at a really nice restaurant for the team members and their spouses will have to suffice for this year.
However, companies that are doing well should not be afraid to pull out all the stops. Go ahead and reward employees who have gone the extra mile and produced exceptional results and show appreciation for your best customers. This will encourage them to do even more next year. The key is to ensure that organizations that are doing well do their share in terms of giving back to the community and contributing to local charities.
You can set up a simple matrix to determine the non-cash incentives and corresponding dollar value of the incentive to which each member of your team will be entitled.
Your PR department should also ensure that the word gets out about your company’s outstanding performance and the success strategies that you and your team used to produce results. Heaven knows, we could all use some encouraging news.
Incentive Travel: A Triple Win
Incentive travel and events such as awards galas can be viewed as a triple win. The company wins because a motivated team produces higher results. The individual sales professionals win as they reap the rewards of their efforts and receive recognition from their peers. The economy also wins. Even if you simply have a modest gala or in your hometown, it’s a ripple effect. A simple event produces work for:
- event planners
- restaurants, caterers or banquet halls
- waiters, waitresses, hosts, and hostesses
- transportation companies if you use busses or limousines
- the drivers
- the printers who produce the invitations, signage and programmes
- grocery stores that supply the food
- retail stores that sell the clothes that members of your team will wear to the banquet
- hairdressing parlours and barber shoppes
- AV companies
In addition to this, an overseas incentive will also produce work for:
- airline crew, staff and suppliers
- travel agents
- luggage stores and manufacturers
- the stores at the airports
- hotels and resorts
- companies that manufacturer and supply linen, cutlery, etc.
- dry cleaners
- uniform supply companies
- landscaping companies
- tour operators
- local attractions
….and so on…and so on.
So, Should you Eliminate your Incentive Travel Budget?
If your company is facing challenging times, postpone the parties and luxury junkets. This is just not the time. Instead, take a portion of the money you would have spent for an incentive and invest in consultants and business facilitators with a proven track record that can help you get your company back on track. When company performance improves, there will be plenty of time to celebrate.
If your company is doing well, don’t be afraid to splurge a bit. After all, you and your team have earned it.
Anne Thornley-Brown is the President of Executive Oasis International, a Toronto based consulting firm that regularly organizes incentive travel and executive retreats in Dubai, Abu Dhabi, Oman, Jamaica, Malaysia, Singapore, and Canada. They provide one stop shopping service with a personalized approach to incentive travel for corporate groups of up to 40. Customized itineraries include travel, transfers, hotel, business facilitation, tours, excursions, team challenges, and luxury corporate events.
- The AIG Picture: Why it’s Worse Than you Think
- ‘AIG Effect’ Leaves Companies Wary of Incentive Travel: But trading a significant revenue driver for safer public perception may not be worth it
- Incentive Compensation and Total Reward Strategies During a Recession
- Travel Insider: Incentive Travel During Economic Crisis
An Update – February 9, 2009
Now this seems to be a responsible approach by our industry:
U.S. Travel Groups Issue Guidelines for TARP Recipients
Susan Davis reports on politics.
A coalition of eight travel groups released a series of suggested guidelines today for how companies receiving Troubled Asset Relief Program funds should spend their money for business-related travel activities.
“General policy statement: The CEO shall be responsible for implementing adequate controls to assure that meetings, events and incentive/recognition travel organized by the company serve legitimate business purposes and are cost justified,” the guidelines state, which include encouraged policies to justify any trip exceeding $75,000 with a written statement for its purpose, not allowing expenses for such travel to exceed 15% of the company’s sales, and limits on how much you can spend per employee on “recognition events.”
The groups involved include: the American Hotel and Lodging Association, Destination Marketing Association International, International Association of Exhibitions and Events, Meeting Professionals International, National Business Travel Association, Professional Convention Management Association, Society of Incentive Travel Executives and the U.S. Travel Association.
The move comes amid public backlash over reports of corporations continuing junkets and other events even though they’ve benefited from taxpayer TARP funds.”
Suggested Guidelines for TARP recipients