In these days of investigating corporate excess and indicting greedy CEOs, luxury can be a messy topic. Meeting planners operating in the glare of publicly traded companies are being scrutinized more than ever. And for those who plan incentive travel or purchase gifts for top salespeople, dealers, and distributors, that scrutiny is complicating an already delicate high-wire act.
Is there still a place for that famous seafoam-green Tiffany's box, or a pair of first-class tickets to Paris? Or have luxury incentives gone the way of WorldCom?
You might be surprised at the answer. When we spoke to suppliers who service high-end incentive trips — everyone from the high-end cruise lines to high-frills party planners to the purveyor of the world's most luxurious chocolates, Godiva — we expected to hear that business was way off this year.
Then, in came the results of our 2002 incentive survey (we'll offer a full report in our January issue), which showed that the mean amount companies are spending per person on incentive trips was actually up from last year, to $2,394. And — here's the kicker — a full 41 percent of our respondents are spending more than $2,500 per person on their incentive travel programs.
If you think about it, it makes perfect sense. Just look at Jaguar, which, with the introduction of the XJ, sold 100,000 cars for the first time this year. High-end incentives will remain high-end.
So when companies are cutting back, they're doing so in a way that doesn't change the perception of luxury. The key is to make sure that the winners' experience stays the same. For example, they might trim costs by altering what it takes to qualify for a trip (so that fewer people do), or shortening the length of a trip, or negotiating discounts that were unheard of in the past — but the award is just as much of an incentive as it always was.
Where the Free Booze Flows
On Seabourn cruises, every cabin comes with a fully stocked liquor cabinet. “And I'm not talking airline-size bottles, either,” says Tanya Barnette, director of charter and incentive sales. “I'm talking full, 1 liter bottles.”
Wine is served with lunch and dinner. If travelers tire of sipping on the fruit of the vine, a fresh fruit basket in every cabin is replenished daily. They can munch while lounging in the standard-issue fluffy terry robe and slippers. But don't eat too much lobster and caviar; there'll be plenty more tomorrow.
According to Barnette, bookings picked up at their brisk, pre-9/11 levels by the spring and have not flagged since. Bookings for 2003 are strong. It's the same at Silversea Cruises, which is booking more incentive travel business than ever. “We now have shorter segments more suitable for the incentive market,” says Jan Loeff, director of incentive sales and charters.
How does he explain business' strength in these times? “We cater to the very pinnacle.” Also, 60 percent of Silversea's incentive business comes from the insurance industry, for which annual incentive trips are a way of doing business. No trip, no sell.
The Hotel Is the Incentive
Ritz-Carlton is to hotels what Seabourn and Silversea are to cruises. There, too, Mark Ferland, vice president of sales, reports “a dramatic increase in the number of RFP requests from incentive houses in the past three months.”
Companies that have used Ritz-Carlton properties in the past appear not to be going with less luxurious properties, says Ferland. “Our RFPs are increasing because they want to make the luxury hotel the incentive. They're cutting back the number of incentives, but they're not trading down.”
The way companies are cutting back is to opt for a single, luxurious final event, for example, instead of three events during a hotel stay. There's also more freedom for people to do what they want during their stay, meaning less F&B costs to the host company.
At Four Seasons Hotels & Resorts, June Locke, the national insurance sales manager, reports a cautious marketplace, but says that the incentive business “is moving forward … . Our '03 and '04 bookings are pretty steady.”
Locke's insurance clients are being careful, looking at their financial commitments, but not to the point of reducing expenditures. “They are looking at budgets and buying wisely,” she says, “but they still have to incent their sales force to sell their product.”
U.S.-based insurance companies, like many other industries, are keeping their incentive trips primarily in North America for the foreseeable future. “Instead of an exotic destination such as Sydney, Australia, or Asia, they might be staying closer to home, such as a property in California,” she says. “The perception [of staying stateside] is that they're not being frivolous. But they're still doing nice, upscale programs. It's just the perception.”
Biz Bashes Just Got Bigger
Rappelling martini and cosmopolitan bars (cold mixed drinks come “rappelling” down a giant ice sculpture and into your glass), larger-than-life ice sculptures. Elvis impersonators.
Special events are happening — and in a big way. Our sister magazine Special Events surveyed 1,183 of its readers in May and found that more than 30 percent of companies had increased spending on their events in 2002, and more than 40 percent expect their expenditures to increase next year.
Harith Wickrema, president of Harith Productions in Philadelphia, and co-chairman of SITE's 2002 Crystal Awards, reports that some of this year's winners (see article on page 37) spent $10,000 to $15,000 more on their programs than they did last year. “Where they spent the most money was on entertaining clients,” he says.
“The New York marketplace is back,” confirms Richard Aaron, president of New York-based BizBash (www.bizbash.com). “The designers and event producers are busy. People want to get on with it. They want to celebrate the success they're having. They're not going to want to look back.”
There's a need to energize and focus marketing events, launch parties, and galas, Aaron says. Like the rappelling martini and cosmopolitan bars. “It adds a level of fun and interactive delight to the guests rather than being poured a regular drink. People grab one of these big ideas and say, ‘I can create lavishness with these big ideas.’”
GQ magazine, for example, produced a week of parties at Pressure, a nightclub in New York. It branded every wall in the club with photo blowups of the magazine's supporters and its people of the year. “They created an exciting visual position,” Aaron says. “The entire party had great detailing. They could have just used the nightclub.”
In Las Vegas, Cheryl Fish, vice president of MGM Mirage Events, reports that many of the companies that participated in the COMDEX Show aren't being as bombastic as in previous years. “If they can promote a product or get a big bang for a company's buck, that's what they're looking for.
“Those companies still having lavish events are still doing them first class,” she adds. “The difference is how. Today, they want a party with warmth and charm. They don't want ‘Viva Las Vegas.’ They don't want Elvis. They want friendly entertainment. They want the ballroom warm and charming in a way that positively highlights their company.
“The goal is definitely not to have attendees walk out and say, ‘Gee, they're not having a good year, are they?’”
At the Pinnacle
The 35th Ryder Cup matches aren't until September 14 to 19, 2004, but the private chalets have been sold out for a couple of years.
“These [chalets] accommodate 50 to 100 people and range from a couple of hundred thousand dollars each to $500,000, depending on location and the number of people,” says Andy Odenbach,director. Buyers get a climate-controlled private facility on the golf course. The price includes all tickets, but not food & beverage. Add-ons include menu planning, decor upgrades, big screen TVs, and a wood floor instead of Astroturf.
Companies use the chalets for multiple purposes. During the event's practice rounds, some businesses donate their use to charity as fund-raising opportunities. They're also used for meetings for a corporation's top performers.
“Then we have Champions Club tables for 10,” Odenbach continues. “These include tickets, F&B, and full bar service every day of the tournament. And even though we just started selling these at $60,000 each, we only have about 25 percent of our inventory left.”
It's clear that, with two years before the first shot tees off, the last thing Odenbach is concerned with is selling companies on the Ryder Cup. “A lot of companies scrutinize the events they participant in,” he says. “If they did 14 golf events last year, they will evaluate them on the basis of ‘Which did we get the most out of?’ The Ryder Cup tends to rise to the top.”
Picture this as an incentive: 25 hours of flight time per year on a sleek Lear jet all your own, to use as you choose.
Incentive awards don't get much more high-end than the Marquis Private Jet Card, and even in this economy, companies are using them, according to Randy Brandoff, vice president of Marquis Jet Partners in New York, which works in partnership with NetJets.
The card is also becoming increasingly popular as a reward for hole-in-one competitions. And Neiman Marcus just selected the Marquis Private Jet Card for inclusion in its prestigious Christmas book.
There's nothing wrong with a timeless, special gift. But many people would just as soon have a box of fine chocolate on their desks.
Now. Right now.
Kim Westhoff, director of corporate sales for Godiva, reports that inquiries are up for the manufacturer of premium chocolates, and the dollar value of gifts being ordered is also increasing. “While our corporate clients' budgets may be less, they want the higher-perceived value products,” she says. “They want the same brands — they just don't want to pay what they used to.”
The average year-round gift of Godiva is roughly $12. But the high end includes a “Godiva of the Month” program that costs a smooth $400 annually. “We place those in plateau programs,” Westhoff says. “I also have a $125 basket at the highest end. Seventy-five dollars is where I see more of corporate America coming in.”
Not bad for a slow year.
Where the Cuts Are
While money is being spent on incentive travel and events, belts are being tightened somewhere in the supply chain. Somewhere, as in, in the air.
George Coyle, product manager for American Airlines group and meeting travel, says first-class travel isn't being used like it used to be for incentive groups.
“A lot of first-class products that airlines offered are being pulled back,” Coyle says. “We still do a large amount of incentive business with groups like Maritz, but they're looking at coach travel.
“We're still selling it,” he adds. “But we are carrying more people in coach from all groups than [ever before] in our history. From the incentive marketplace, they're just not buying.”
Many companies are no longer suggesting that their people are automatically entitled to first or business class. To make things special, “We still use the Admirals Club facilities for groups,” he says. “We also will work with local airports to inform them of a group's arrival and departure to arrange special check-in.”
At least it's something.