Incentive Roundtable Reveals Travel Trends and Challenges

What are the current trends and challenges facing incentive companies in 2021? Four top executives shared their experiences — and extremely candid insights — at a recent roundtable discussion, held during Incentive Live: 2021 GMID Edition. The panel, moderated by Lisa Grimaldi, Northstar Meetings Group editor, destinations and incentives, included: Julie Branstrom, owner and founder of Visita Meetings & Incentives; Brad Hecht, vice president of travel for Motivation Excellence; Chris Herzberg, senior business development director with ITA Group; and David Peckinpaugh, president of Maritz Global Events. Following are highlights from the lively discussion, which can be heard in its entirety in our post-event coverage. 

How has the pandemic affected your business?

David Peckinpaugh: We saw almost 90 percent of our gross profit disappear. When you lose that kind of revenue, the human carnage is significant. Eighty-five percent of our cost base is labor, so we had to make a lot of really difficult decisions.

The outlook for the future is much, much brighter. We're at a tipping point right now, where the positive news around vaccines and the positive decisions our clients are making are really going to turn the tide. But we're now facing the difficult task of getting our people back and trying to pair that re-resourcing with the realities of the marketplace.

Julie Branstrom: I was very lucky, because my client base postponed vs. canceling. I was able to really stop, regroup and do a lot more research and development on my company and my clients. Now that everything's shaping up, I feel like I'm teaching more than anything, especially clients that may have lost their executive admins who were doing meetings.

Chris Herzberg: We had to repurpose some jobs, and we formed a Covid task force to really play out different scenarios. I wanted to constantly keep the team's vision looking forward through the windshield, not in the rearview mirror. I think we’re going to come out of this as a very different company, but better for it.

Peckinpaugh: We made the digital transformation within 30 days. We took our design studio practice, which had been 100 percent face-to-face focused, and transitioned it to two full-time teams that have now executed about 240 digital events so far. But the reality is the revenue is not the same, and that obviously has an impact on the business. 

Internally, we've used this as an opportunity to really re-engineer how we approach our business. And that's going to pay dividends as we emerge. You do what you have to do — stay in the bunker to get through it — but also keep the keep the eyes looking forward.

Brad Hecht: We cross-trained so many employees, and it made us a lot stronger. It helped people in our organization understand what some of the other groups are doing, how it works and where we make money in those areas.  

Can you tell us about your recent incentive events?

Peckinpaugh: We had an incentive program in the Caribbean about two weeks ago. The government was involved in the decision to allow a group to come back onto the island, and every individual guest had to sign an agreement that they would not leave the property. Around midnight, after a few cocktails, some of the guests decided to go to this great bar off property. This is how the Darwinian theory works. They had wristbands on that identified them as guests of the property. And, of course, they got caught and they got arrested. These people spent 14 days in jail.

It’s a telling story, because the group had all the right intentions, did all the right things. And then a few wayward individuals ruined the experience for everybody. This was a huge stress for the local government, for the property and for the client. I think that's something we have to watch for, particularly in the next six to 12 months, as we're evolving. Let’s be careful; let's make sure we're really educating and communicating and stressing the importance of adhering to the policies. 

What changes are you seeing when working with hotels?

Branstrom: In the past four weeks, everyone I’ve talked to on the hotel side said they’re getting so many RFPs and they're so busy. But remember, hotels laid off a lot of their sales forces. So, who's running the ship? You might have one person trying to manage all that inventory. And they're probably doing a great job managing as much as they can… But now that you don't have that talent in hotel sales, how are we truly going to be able to book business as much as we need to?

Peckinpaugh: The leisure market is the one that's coming back and driving pretty significant rates. But it's a Thursday-to-Sunday sort of pattern. So, the hotels are really dying Monday through Thursdays…. I think this transition of the mix of business is going to be a big challenge, because hotels have to be convinced that the group business is going to be there and it's actually committed to be there. How many times have we all gone through a second or a third move or rebooking? It’s just been ongoing. I think that's created a sense of apprehension on the supplier side of the of the equation. 

We’re trying to get commitments from clients by saying, “Look, this is the X number of times we've gone through this; are you fully committed now? And can we communicate that to the property?” Because otherwise, I think there's still going to be this battle of how much inventory they apply to leisure. 

Once business travel comes back, that’s the other big factor that starts impacting the mix as well. And all that comes down to this compression or availability issue that we have. So, if your clients haven't already rebooked and have confirmed dates for some point in the future — if they're now trying to search for dates or it's a new event — it's going to be a tough one. They’re going to have to look at destinations they had not put on their top list.

Hecht: We do a lot of businesses in Vegas, and what we're finding in future years — whether it's 2023, '24, '25 and even '26 — is that a lot of the higher-end resorts are keying in on their total resort buyouts. They're trying to work in groups that have come back year after year after year, to get those in place before they're committing to other groups. My groups are about 800, which is substantial but it's not a buyout. So we're having difficulty, in some cases, getting space.

Herzberg: You get a response [from a property], and then you reply, and there might not be another response for a week, so you have to keep following up. I think all of us are feeling that, but we need to educate our clients for them to understand hotels are rebuilding right now. Their sales force is down, so it's gonna take a little bit more time. 

It’s not just hotels, it's DMCs — which are down to skeletal staffs, unfortunately. When we want a reasonable response, it's taking them two or three times longer, because they're going to their suppliers, which might be one-person or two-person companies, and might not be in existence now. They're having to source new companies. It’s just a spiral effect down the line, so we have to be patient as well. 

Peckinpaugh: Over the past 12 months, there's been a lot of flexibility [in contracts]. I think a lot of that flexibility is starting to go away. And there’s obviously a lot of negotiation around force majeure language. Every hotel — every property, chain, etc. — has a different approach to that. That used to be sort of a standard and you didn't have to worry about that negotiation. Now, it’s front and center.   

What can suppliers do to make your jobs easier?

Branstrom: It goes back to basic customer service. I think with hotels, it’s all about collaboration. We have to work together. We really are in it together, and we need each other to get by. I like to work with hotels that are genuine and responsive. 

Herzberg: We're seeing a lot more clients getting their legal team involved with verbiage and redlining and all that fun stuff. We’re seeing that more than ever — all these red lines that go back and forth. It really comes down to partnership and flexibility. You’ve got to build that trust with your hotel partners, DMC partners and everybody else. 

Peckingpaugh: Proactive communication from the supplier community is going to be incredibly helpful. We try to do our best, and we’re monitoring what's going on in every destination that we can, but that's a difficult task. Keeping us abreast of what's going on locally as far as restrictions, any kind of local governmental regulations, anything around testing or other protocols, is really going to help us, particularly as everything changes. If we have more communication coming our way, it is going to help us drive more business to destinations that are opening more quickly and welcoming groups more rapidly. It might mean different destinations than what has been popular before. 

How are health and safety concerns and costs being addressed?

Herzberg: Each client is different. For some of the larger conventions we're planning on in the future, we're definitely utilizing the partnership with [health firm] Eurofins, especially for our Fortune 1000 clients. They enforce the protocols and make sure we're dotting the i's and crossing the t's, based on the destination and what their restrictions are and what the hotel’s protocols are. 

To say that we're not going to have anybody have Covid in our events is almost ludicrous. It's gonna happen — and it has happened in one of my events. You just need to have that plan of attack, and know what you're going to do to keep it calm with the client. This means educating the client beforehand that this could happen, and that if it happens we’ve already got a plan in place.  

Hecht: I had an isolated situation I was dealing with yesterday. We have a client going to Vegas. It just so happens there's a performance by Lionel Richie on one of the nights where the participants were going to be free and just doing a cocktail party. The client wants the entire group to go, which is fine. It will be 100 percent capacity in September for concert venues in Vegas. But there’s a mandatory Covid test for every single person going into that show, and it's a $25 per-person test cost. I was able to explain that to the client, and I said let's account for it in the budget. They understood, and the name of Lionel Richie helped to outweigh the cost.

Peckinpaugh: We're not seeing any pushback; I think it's the cost of doing business. That's the reality. It should not be a deciding factor. I think it's our job as planners to keep educating them. 

Which industries are bringing back incentive travel?

Branstrom: Software and IT firms. And they're definitely firsts for me. I used to be a planner for Chrysler, so I still know people there. It's one step forward, one step back [for their incentive program] because Michigan's Covid rates are so bad. It's very, very hard because they get excited [to hold travel programs again], I do the RFPs and then, shoot, they can't leave their houses again, so the perception just goes down. It's a lot of back and forth.

Hecht: For us, its building-materials suppliers: fencing companies, windows and lumber materials.

Herzberg: The insurance/financial industry is very powerful. In fact, one of my clients said "If you know of any companies out there that are hesitant, have them call me and we can go through the plan we did to get 210 people to Mexico. We just have to get insurance/financial back in order." That’s a huge testament!

Peckinpaugh: I would agree with insurance/financial. They're the first ones to recommit. It still may not be until fall or into 2022. But they're all in, fully committing and contracting. That's a massive sector for us and it's important to see that they're returning.

What is your single biggest challenge now?

Peckinpaugh: People. It's a sort of battle for talent for us. How many of our people have permanently left the industry and how many can we get back? If you have to bring in people that are new to the industry, it creates a training and education issue. The whole world of human resources is front and center and my biggest concern right now is bringing back staff, but it's really tough. 

Hecht: For us, it's procuring new clients that we've never been in touch with and having the discussions about getting them to re-enter the market. We have to convey to them that now's the time [for an incentive travel program] because the longer they wait, their options are going to be much, much fewer — and getting them to understand that is not as simple as it sounds.

Branstrom: For me, it's the waiting, just sitting here waiting for something to happen to move forward. There's a lot of activity, there are a lot of conversations, but not a lot of contracts. I mean, I don't get paid until things happen. So it's sitting in this waiting place, which I hate. 

Herzberg: I think our industry in the next six months or the next year is going to see a little rustiness. There's a lot of new people at hotels, at DMCs, at restaurants and at event centers. And we've got to figure out how to get the well-oiled machine back up and running as powerfully as it was before. 

What is one positive sign you see for incentive programs?

Hecht: There’s a pent-up demand. People want to get out there, back to face-to-face — there's nothing like it, you can't replace it. And we're excited by that. Vaccinations are going to help with positivity and that positivity is going to bring this industry back — hopefully quicker than we would think.

Peckinpaugh: What we've learned is that understanding individual guests and what their expectations are for the future of travel — whether it's incentives or any other sector — is going to be critical. Understanding that, and really embracing design as the driver of everything we're doing, are crucial — because that's what is ultimately going to decide whether an incentive needs to be in person, digital or some sort of hybrid event.

Herzberg: We've had more RFPs in the last four weeks than we've had in the last 12 months. 

Branstrom: I feel like there's more of a sense of collaboration between the buyer and the seller. And I hope that in the end of this time, that will remain positive, because it was such a seller's market before. It was really tough to negotiate or have flexibility. There is a shake-up and maybe they'll be rusty, but there could be new talent that emerges and now they're going to come back and build better relationships.