Tag Archives: AIG Effect

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Incentive Travel: Reversing the AIG Effect

Incentive Travel & Event Planning: The AIG Effect - What Caused it & How Do we Reverse it?

by Anne Thornley-Brown, President, Executive Oasis International

It’s been almost a full year since my article “Should companies cancel incentive travel during a recession?” was printed in Incentive Magazine. In view of more hotel closures or bankruptcies that have recently been announced in Las Vegas, it’s  to re-visit this issue.

These issues are vital and have a direct impact on the economy. Please tweet about this article, link to it, reprint it, Stumble Upon it, and share it with every executive you know. Please also share the other articles and resources that I have listed. Please add your comments and join the conversation in the Q & A section on LinkedIn.

As we all know, a dramatic chain of events has had a devastating impact on the business travel, hospitality and team building industries.

What in the world were they thinking?

At least Morgan Stanley took the high road.

Morgan Stanley Won’t Entertain Clients at Its PGA Tour Event

We all know, what happened next.

The Reaction

Some of my colleagues blame statements like this by Obama for the problems that followed:

I see it differently. I agree with my colleagues that there is an important role for sales incentive trips, luxury corporate events, and recreational events for teams. However, I think that Obama definitely “hit the mark” when he said that the companies that accepted the TARP bailouts had no business planning lavish trips and corporate events. I believe that Obama, other lawmakers, and the media were justified in their comments and that they should not be blamed for the troubles that have plagued our industry. In fact, I have been sounding the alarm for years about:

  • companies behave as if they are country clubs and recreational centres rather than businesses
  • companies that opt for strictly recreational events as placebos and pacifiers rather than bonafide business team building to get to the root of the problem and generate solutions when they are having trouble
  • companies trying to pass off entertainment and recreation as “team building”

It’s a matter of remembering why we are in business, balance and priorities. I have been cautioning that an eventual backlash would come and we would see severe cutbacks in this sector. This is one time I wish I was wrong. The scenario that has unfolded is even worse than what I predicted.

The White House made its support for business travel clear:

So it is hard to understand the way in which some companies with a solid bottom line have responded to the criticism of AIG and other TARP fund reciplients. In a knee-jerk overreaction, even companies that are doing well and that had earned the right to reward their people have hit the panic button & cancelled incentive travel and retreats.

One of the most mind-boggling decisions in recent months was AXA’s decision to cancel its overseas incentive travel programme for the next 2 years in the same week that it received recogniition for its outstanding performance. Despite solid performance:

Axa Life head of events Patti Heaven, says: “From the perception of the greater general public, financial institutions are viewed very much in the same way as banks, which are not enjoying good media coverage. To host overseas incentives together with big production conferences in this global economic climate would create the wrong image. This would be insensitive and could potentially be interpreted as a lack of respect for individuals that have been made redundant.”

Sorry, I don’t get it. It certainly sounds like AXA events were WAY over the top and needed to be scaled back:

Heaven’s first foray into the events world was taking a group of 60 plus partners overnight to a hotel down the road. It was so successful that in the following years the event was held in Amsterdam, then Switzerland, Monte Carlo, Mauritius, the US and Bangkok.

“They just kept getting bigger, and more frequent,” says Heaven. ” And now there’s all kinds of different events every year, from conferences to product launches to overseas sales incentives.”

Events run by Heaven have always had an edge of excitement. She once found herself in trouble with Florida police after a mix-up with
passports as ID at a Miami nightclub. “I grovelled so much I made Uriah Heep look like Osama Bin Laden,” she says. “They loved it. Everything was fine then.”

Other stand-out events – but this time for the right reasons – include a recent incentive to Venice where the group had a private tour and recital at St Mark’s Basilica. “The tour was divine, although it was 35degC and we were all in black tie – tourists were taking photos of us,” she recalls.

“But the recital was electric. The room was dark except for candles. The music was extremely atmospheric. It was an amazing experience – it reduced some grown men to tears.”

Patti, what in the world were you thinking? A backlash to this type of excess was inevitable. However, to go from one extreme to the other – overkill to cutting incentive travel completely is a clear case of throwing the baby out with the bathwater. It makes absolutely no sense.

If anybody reading this is in touch with AXA executives or Patti Heaven, please share this blog with them. They are welcome to give their side of the story. I hope that someone from AXA will answer the following question that I throw out to executives from all companies that have decided to scale back despite the fact that they are doing well:

How do you expect the economy to ever recover if you don’t spend money and if you make decisions that are contributing to the deminse of many organizations?

Please don’t think I am just picking on AIG and AXA.  In one of my other blogs, I  have previously written about some of  the bizarre ways in which companies were spending money on recreational activities and passing them off as “team building.   The problem with corporate excess is that there will ALWAYS  be a backlash and innocent people eventually have to pay for the poor judgement of executives by losing their jobs.

The Consequences:

The latest:

Since we released this article, there has been another one:

Luxury hotels like the Ritz-Carlton have suffered from the backlash from the so-called “AIG effect.”

Just days after the federal government committed $85 billion of taxpayers’ money to a bailout of insurance giant American International Group (AIG) in September 2008, senior execs from the troubled company headed to the swanky St. Regis Resort in Monarch Beach for a week of wining and dining of 100 top salespeople.

The uproar was deafening.

“The whole demonization of luxury meetings and companies’ pulling back on having their high-end meetings in luxury hotels–. this has had a tremendous impact on Las Vegas,” Ritz-Carlton spokeswoman Vivian Deuschl reportedly said.

Last year, revenue for U.S. luxury hotels fell nearly 17 percent, outpacing the 14 percent drop in the overall industry, according to an analysis by PricewaterhouseCoopers LLC. Revenue per available room, a fiscal measure of health in the industry, plummeted about 24 percent, compared with a 16.4 percent drop for the industry overall.

Deuschl did not comment specifically on the Ritz-Carlton Las Vegas occupancy levels, other than to say it is lower than the company would like, but she did have an opinion about the ripples from the AIG effect.

Fallout in Canada

The AIG effect does have an impact on companies in Canada and around the world:

Still think AIG effect has no impact on Canada?

Here is the latest:


  • Inn at Manitou Closes Doors After 36 Years (Ontario)
    • Reversing the AIG Effect

    A Landmark study has revealed the ROI of business travel so there is no justification for companies that are doing well to continue to put the lid on spending in this area.
    PERFORMANCE LEVEL: Are overseas incentives bouncing back?

    It was the poor judgement of some corporations that triggered the AIG effect. It is the selfishness, short-sightedness and cowardice of other corporations that is prolonging it. Sound decision-making and decisive action can reverse the AIG effect.

    The time to act is now! So here is the bottom line:

    • If your company is in trouble, don’t schedule a luxury junket or corporate event. Instead, hire a consultant and have an on-site team building or brain storming session to generate solutions to your business challenges

    Here are some ideas and guidelines:

    • If your company is doing well, don’t cancel your incentive travel programmes or retreats.

    Ideas & Resources

    How to Add Value to Your Meetings & Other Complimentary Resources

    Let’s stop this madness before we do permanent and irreversible damage to the global economy. Your team has worked really hard, beat the odds and generated outstanding results. They deserved to be rewarded. Let’s learn from excesses of the past, reward teams and expess appreciation to clients in a way that shows good judgement.  At a time when there are so many in need at home and abroad, devote part of your sales incentive trip or retreat to a project that gives back to the community. Help boost the economy and save jobs by booking a sales incentive trip or retreat today.

    I join the following organizations in urging executives from companies that are doing well to reactivate their incentive travel programmes before even more hotels go bankrupt, more employees lose their jobs and companies in the hospitality and business travel industry are forced to close their doors for ever.

    Great minds think alike. It looks like this blog entry is timely. Just saw this in the current issue of Forbes:

    AIG Effect

    Executive Oasis International is a Toronto based consulting firm that helps organizations succeed even in the midst of turbulence. Core services include consulting and on-site facilitated business team building and off-site team building reatreats. They also offer incentive travel and corporate event planning to help organizations reward their people when business objectives have been achieved.

    You are welcome to reprint this article as long as you keep the by-line intact and ensure that all links are live.

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Incentive Travel During a Recession: The Benefits

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

Video 2: Texas Roadhouse CEO defends incentive travel & employee recognition citing R.O.I.

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.

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.”

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.

Sample Sales Incentive Matrix

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
  • entertainers
  • musicians
  • AV companies

In addition to this, an overseas incentive will also produce work for:

  • airlines
  • airline crew, staff and suppliers
  • travel agents
  • pharmacies
  • 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
  • florists
  • 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.

Resources

Incentive Travel
Luxury Corporate Events

Other Articles

Video

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

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