The "multiplier effect" of incentive spending has an enormous impact on the community where it's held.
Just one incentive trip can make a huge impact, not only on the qualifiers’ performance, but on the local economy where it’s held. That’s the conclusion of a recent white paper by the Incentive Research Foundation.
The paper was based on a study of a single anonymous company (“XYZ Corporation”) with several thousand employees that has had its incentive travel program in place for 18 years. The research was built around interviews with management and qualifiers, but for the economic impact section, researchers also conducted interviews with service providers who worked on the program—site selection pros, destination management companies, hotels, airlines, and ground transportation firms. The original goal was to explore the impact of corporations canceling their programs on this group.
“Measuring the economic impact of incentive programs is difficult,” the researchers concluded, because many destinations don’t track a specific dollar amount spent on incentive travel; they lump it in with corporate travel.
However, the white paper cited recent economic studies that were able to show a multiplier effect that varied based on the specific region and the development of tourism in that region. This range is typically 1.3 to 1.7, “which means that if an incentive travel program spends $1 million in a particular destination and the region has a multiplier effect of 1.3, then the multiplier effect on the local economy would be $300,000; if the region has a multiplier effect of 1.7, then the multiplier effect on the local economy is $700,000. This means that in addition to the $1,000,000 spent in the destination, there is an additional $300,000 to $700,000 benefit to the destination” in spending that occurs as people and companies use the income they have made (known as the "multiplier effect”).
Not surprisingly, the researcher were able to show that well-rewarded employees tend to perform better and stay with their company longer than their peers. Of the 105 employees who attended XYZ Corporation’s incentive trip, 55 percent had top performance ratings and tenure of four years or more, and 88.5 percent had a performance level of 1 or 2 (on a scale of 1 to 4, with 1 being the highest score).
To download a free copy of the survey, visit the IRF Web site.
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