Editor's Blog

Focus on the value delivered by incentives rather than the price
Mon 4 Feb, 2019 at 12:00 am

The objective of incentive travel is simple. It aims to reward top achievers with an impressive and unforgettable experience so that they are motivated to perform better and achieve higher goals. An emerging downside is that incentive travel planners and suppliers are facing such a price sensitive environment that the programmes being offered to top achievers are too often the cheapest available. The battle for an incentive trip contract is becoming so stiff that price wars are common and trade experts caution that all parties might emerge losers. Rather than unique experiences and quality offerings that will leave lasting memories for participants, bids are now being won solely based upon the price of the offer. And that is the hard reality.

There are multiple reasons leading to this. The internet seems to serve up a transparency of pricing and that may be a contributor.  Increased competition for business in destinations where there are plenty of suppliers of hotels, DMCs and other ground handling vendors could be another factor. Desperate competition from new entrants in the game trying to get a toe-hold in a fiercely competitive market adds to the downward slide of composite pricing.

Victor Mogilev, group director of sales at Diethelm Travel Group, said: “Cutting rates also means cutting profit margins, so this can easily impact the quality of services as suppliers start offering less added value or transport operators opt for lower quality vehicles. In the worst case scenario, companies could fold, which of course will affect jobs. Should this happen, clients can pay for services not rendered.” The stiff competition based on price will impact stakeholders, as well as the clients in the long run.

Destinations can be at the wrong end of the gun, too. Aruldass Arulandu, managing director of Tourland Malaysia, said: “If clients don’t have a good experience, they will not return to the destination and they might also impress upon other decision-makers in the industry that the destination is unsuitable for incentives and lacks the capability and professionalism to organise an incentive event.” This is most likely to occur if the incentive tour programme was selected on the basis of price and not quality.

Sam Lay, senior director of CWT Meetings & Events Asia Pacific, warned that destinations might end up being labelled “cheap” in a price war, which goes against the messaging convention bureaux and tourism boards are trying to convey. Lay said: “I don’t think any destination will want to portray itself as being low-cost, rather than one where organisers see value in bringing their incentives to.”

Some markets are more prone to fuelling this incentive travel price war. Panithan Vongkerd, managing director of MaxiMICE Management Thailand, says that Asian clients are more price sensitive than those from long haul markets such as the US and Europe, partly due to relatively weaker Asian currencies. Since high achievers from the long-haul markets had to travel farther to get to Asia, incentive organisers are more determined to ensure an unforgettable experience unrestricted by price and are less prone to bargaining. Asian clients shop around for cheaper deals and that can spiral downwards leading to loss of quality of the final offer. Some Indian clients solicit bids from multiple DMCs in a destination, leading to confusion among hotels, transporters, team-building experts.

The only way to avoid a price war and the resulting disappointment of the event experience, is for the incentive planner to gain the client’s confidence and understanding.

Sandhya Kartha, managing director of Redchilli Holidays Mumbai, explained: “It is important to educate the client on why we propose something with a given price, and why a lower budget would mean having to give up on certain things. Client engagement is critical for them to see how we are ensuring the quality of their event, meeting their objectives and delivering a great attendee experience. They must trust that we are the right partners for them.”

It is critical for the client or the incentive house to be focused on the value not the price. What will it achieve in increased turnover or profit or staff retention? If that is correctly positioned, the price paid becomes of much less importance.

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