Companies Wary of Incentive Travel. SalesForceXP magazine Monday, 9th February 2009

Democrats may have dominated last fall's elections, but a conservative tidal wave hit corporate America about that same time, and it's expected to reduce the number of off-site meetings and incentive travel programs that companies sponsor through 2009.

The Incentive Research Foundation, an industry group that promotes the effectiveness of incentives in business, surveyed corporate incentive buyers and suppliers last October, and a whopping 78 percent of respondents stated they expect incentive program budgets to decrease in 2009.

That has certainly proven true, says Steve Aasgaard, vice president of the Travel Group at BI, a Minneapolis-based provider of business improvement services. Corporate spending on off-site meetings and incentive travel, which had declined during the first half of 2008, fell of a cliff in late September, Aasgaard says.

The tipping point for most companies was the negative fallout in the media that resulted from a $442,000 week-long executive soiree held by American Insurance Group at a posh resort in California in late September, less than a week after the federal government offered an $85 billion bailout to keep AIG afloat.

"It's all about perception," says Aasgaard. "Our entire industry is suffering from the 'AIG Effect.' Companies - primarily publicly held companies - don't want to be perceived as wasting money."

But Aasgaard warns that many companies may be cutting off their nose in attempt to save face. Any well-planned incentive program, travel or otherwise, can prove a positive return on investment - often a substantial one.

"One of the tenets that the incentive travel business was built on is demonstrating the return on expense. At every company we do business with, someone has to justify the cost of the program," he says. "These things have to be sold all the way up the line. We have a separate department that proves the cost-effectiveness of our clients' incentive programs."

Managers' nervousness about how trips and incentives will be perceived when cutbacks are being made elsewhere in their company means that program providers like BI are having to work harder to relay the value of these programs.

Aasgaard says companies reacted similarly during a recession in the early 1980s and again in the early 1990s, as well as after 9/11. The current recession is deeper and broader, however, and he expects it to take longer for most businesses to feel comfortable treating top salespeople to well-deserved trips. He says some companies are substituting merchandise rewards for travel programs because it's less visible and less likely to be scrutinized and criticized.

"We have to say the same things more often and louder, and the top guy has to embrace it," says Aasgaard. "But if you've proven to him that for every dollar he spends he's getting $50 in top-line revenue, why wouldn't he do a trip? In this market, what's wrong with a 20- or 30-to-1 return on investment, or even a 10-to-1?".

Reprinted with Permission of SalesForceXP magazine.  Copyright 2009.  Mach1 Business Media, LLC. www.SalesForceXP.com