Incentive Travel – A 2017 Big Budget Item

Meeting Professionals International reports that $280 billion is spent annually on meetings and events in the United States. The two biggest budget items are incentive travel programs and large-scale sales meetings.

Incentive travel programs? Really? Few people realize how popular incentive travel programs have become because they are used to motivate individual employees and usually take place in distant locales away from the home office. In the past decade, however, as budgets have gotten tighter and technology has facilitated better data collection, planners are being asked to show the return on their spending.

HOW DOES THIS PAYOFF?

CEO’s are beginning to ask the traditional questions:

  • “How does all this expense impact my business?”
  • “What am I getting for my money?”
  • And the classic, “What’s the ROI on all this fancy travel?”


ROI
Uh…Oh!

ROI is a traditional accounting concept that seeks to reduce all investment to simple mathematical calculations. It makes senior executives comfortable when they are asked to take responsibility for investing substantial amounts of company capital. However, it is not designed to evaluate the monetary impact of changes in human behavior. The essential purpose of incentive travel programs is to impact human behavior. How do you measure an improvement in morale or loyalty?

TRADITIONAL ROI

Traditionally, planners would arrive at an ROI for incentive travel by comparing the amount spent on an incentive travel program to the growth in sales during the incentive period. This was helpful, as far as it went, but it didn’t take into consideration the true purpose of incentive travel programs, impacting human behavior, or measure the impact on non-sales employees.

SOFT RETURNS

The tangible returns, like increased overall sales or the number of new accounts, does not take into account the wealth of soft returns that have a substantial positive impact on a company’s performance. Improvements in morale and loyalty translate into the slightly more tangible results of:

  • Employee and customer retention
  • Reduced customer complaints
  • Improved service quality
  • Customer and employee satisfaction
  • Lower absenteeism
  • Improved communication
  • Group affiliation
  • Individual motivation

Theses soft returns are hard to measure with a simple mathematical formula but they have the greatest impact on a company’s profitability.

INCENTIVE TRAVEL ROI

The key to calculating ROI for incentive travel programs is to establish specific objectives for a program well in advance and design measurement metrics applicable to each objective.

For example:
Let’s assume that absenteeism in the engineering department is slowing production and causing mistakes.

  • Your HR department and planner design an incentive travel reward that recognizes perfect attendance then measures any improvement in attendance in the period following the incentive travel program’s duration.
  • If attendance improves dramatically, we know it worked, and we can now create a metric that measures the difference in the rate of production during the improved attendance period following the incentive reward program.
  • Monetary metrics for improved efficiency are a simple matter for any company. Dividing the efficiency metric by the cost of the travel program creates a clear ROI calculation that will comfort any CEO.

By starting with clear objectives and designing measurements specific to those objectives, planners can create an all new and accurate way to measure changes in human behavior.

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