By Charisse Jones and Roger Yu, USA TODAY
Even during the recession, Jay Hagan refused to stop rewarding his top performers with free hotel stays.
"It's really a relatively small part of our total employee budget and has such a big impact," says Hagan, CEO of DriveSavers Data Recovery in Novato, Calif. "It seemed even more important to continue to do it when things were slow."
Now, travel industry experts say, many of Hagan's peers are again rewarding employees as corporate profits have started to rebound and the avalanche of bad publicity about employee-incentive travel has dissipated.
But while reward travel is returning, they say, the trips may not be as long or as lavish as they were before.
"The reality is, it's back because these programs work, especially in decentralized organizations," says Melissa Van Dyke, president of the Incentive Research Foundation.
"The programs are still motivating," she says. "They're still creating experiences that are memorable and meaningful. But some of the incentives that were there before, like round-trip transfers or room gifts, aren't there anymore."
Fading backlash
While business travel was slashed across the board when the global economy was in recession three years ago, incentive travel was hit particularly hard following news reports of companies and government agencies spending lavishly on retreats at fancy resorts.
The public backlash reached a boiling point in October 2008 when executives at insurance giant AIG spent more than $400,000 for a trip to the luxurious St. Regis in Monarch Beach, Calif., a week after the firm received an $85 billion bailout from taxpayers.
The backlash has eased, and industries have started to take the clamps off incentive travel. "If we had to put a score on it, it's probably 85% to 90% back," says David Peckinpaugh, president of Maritz Travel, a meeting management company.
Resorts that traditionally have relied on incentive travel groups are reporting higher sales.
At Atlantis Paradise Island in the Bahamas, group sales are about 20% higher than a year ago, and incentive meetings comprise about 65% of all group sales at the resort. Sales will increase again in 2012, says Mark Benson, the resort's vice president of group sales.
"Incentive travel is showing the fastest rate of growth in all group business," Benson says, adding that the resort sold about 200,000 group room nights this year vs. 146,000 a year ago.
Corporate meeting planners also see business picking up.
"Until this year, I haven't had a call in years — going back to pre-2008 — from a new client who said, 'Can you do an incentive (trip)?'" says Christy Lamagna, president of Bernardsville, N.J.-based Strategic Meetings & Events, which plans meetings for corporate clients.
One of her clients, a pharmaceutical company, increased its incentive travel budget by 20% this year. After sending top salespeople on a modest trip to Maui in 2010, she says, the firm this year is heading to "a very exotic destination" overseas.
Selling points
Free trips for the family, rubbing elbows with top executives and bragging rights have always been touted as the selling points for incentive travel.
Industry veterans say businesses have returned to the realization that rewards and incentives can get their sales forces to be more productive and distributors working a little more aggressively on their behalf.
"For the group that it applies to, it definitely has that ability to give them something to focus on that's different than just the paycheck," says Paul Hebert, managing director of I2I, a company that does incentive program design.
Contrary to the image projected by the so-called AIG effect, industry experts say, it's not top executives who benefit most from the rewards.
"It's been oftentimes discussed as bankers and those types of individuals who go on these trips," Van Dyke says. "But it's more often your local insurance agent or your retailer … in your hometown."
Studies indicate that for every dollar spent on incentive travel, $3 to $5 are added to a company's bottom line, says Steve O'Malley, senior vice president of Maritz Travel and president of the Site International Foundation, which supports the incentive travel industry.
And with only 12% of employees believing that their companies listen to and care about them, according to a Maritz poll released earlier this summer, "Companies are realizing they really need to recognize and reward their employees," Peckinpaugh says.
'More common sense'
Still, reward trips have changed. Recipients may now fly coach and stay in the USA, industry experts say.
The Incentive Research Foundation has found that spending now averages about $2,500 a person, and 67% of trips include some type of meeting or business aspect. Only 22% of trips cover all the costs of flying, such as the extra fees for checking bags, Van Dyke says.
"They're applying a lot more common sense to it," Hebert says. "They're still doing room gifts. But it might be a travel kit with interesting and fun things in it or it might be an item that's indigenous to the location, a carving you can fit in your luggage that (is) … not worth that much."
O'Malley added that a social-responsibility component often is part of the new incentive travel programs. "We've seen the content of these programs shift over time as well to reflect what's going on in the culture, this idea of giving back," he says.
Whatever the incentives, Hagan says they're worth giving. He rewards his 80 employees with one-night certificates to stay at a Fairmont, Ritz-Carlton or Hyatt hotel. And it seems to keep them satisfied.
"The average tenure of our employees is more than 10 years, so we have very few people who leave our company," he says. "I guess that's probably the best measure I can think of."
This article originally appeared in USA Today.
