The battle for an incentive trip contract is becoming so stiff that price wars are common, but experts warn that everyone might just emerge losers.
Incentive travel is all about rewarding top commercial achievers with an experience so impressive and memorable that they are motivated to do even better in the following year and beyond.
But what happens when the world that incentive travel planners and suppliers exist in gets so competitive that the programme that gets chosen eventually for top achievers is the one that is the cheapest?
Unfortunately, this is the reality today, said incentive specialists who lamented that some bid are won solely on pricing, rather than unique experiences and quality offerings that will leave lasting memories for participants.
Reasons for the intensive price war are many.
Transparency of pricing listed on the Internet may be a contributor, so too is increased competition for business in destinations where there are plenty of suppliers (hotels, ground handlers or DMCs).
As well, new entrants trying to gain a foothold in the market are more than willing to offer their services at cost or even below.
Victor Mogilev, group director of sales with Diethelm Travel Group, warned that the stiff competition based on price will hurt many parties in the long run.
Mogilev said: ‚ÄúCutting 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.
‚ÄúIn the worst case scenario, companies could go bankrupt, which in turn will affect jobs. Should this happen, clients end up paying for services not rendered.‚ÄĚ
Destinations can also be on the losing end.
Arokia Das Anthony, director, Luxury Tours Malaysia, said: ‚ÄúIf clients didn‚Äôt get a good experience (because the programme was selected based on price and not quality), they would not return to the destination and they might also (convince) other decision makers that the destination lacks the capability and professionalism to organise an incentive event.‚ÄĚ
Sam Lay, senior director, CWT Meetings & Events Asia Pacific, warned that destinations might end up being labelled ‚Äúcheap‚ÄĚ in a price war, which goes against the messaging that convention bureaus and tourism boards are trying to convey.
‚ÄúI don‚Äôt think any destination will want to portray itself as being low-cost, rather than one where organisers see value in bringing their incentives to,‚ÄĚ said Lay.
Are there markets that are the bigger culprit in fuelling this incentive travel price war?
Panorama Destination Thailand country manager, Nicola Scaramuzzino, thinks there are.
Scaramuzzino explained that Asian clients were more price sensitive than those from longhaul markets such as the US and Europe, due to relatively weaker Asian currencies.
Furthermore, as top achievers from the longhaul markets had to travel farther to get to Asia, organisers are more determined to ensure a ‚Äúwow‚ÄĚ experience that is not restricted by price.
Arokia has also observed a tendency among Asian clients to shop around for good deals.
While Lay agrees that ‚Äúcost must be competitive‚ÄĚ, he stressed that CWT Meetings & Events Asia Pacific is against the practice of undercutting.
To avoid a price war and the resulting detriment of the event experience, Lay said the incentive specialist must gain the client‚Äôs understanding.
He explained: ‚ÄúIt is important to educate the client on why we proposed something with that price, and that a lower (budget) would mean having to give up on certain things.
‚ÄúClient 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.‚ÄĚ
When faced with a client decision based on the lowest price, Padraic Gilligan, chief marketing officer for the Society for Incentive Travel Excellence (SITE), suggested using humour to remedy the situation.
Gilligan, who is also a managing partner at SoolNua, a Dublin-based specialist agency offering strategy, marketing and training services to destinations, hotels and venues in the business events sector, said: ‚ÄúThis is an opportunity to elevate the conversation beyond price to value. I‚Äôd ask whether the client would take the cheapest price if they were going for an open heart surgery.
‚ÄúA successful incentive programme is clearly not a matter of life and death, but it is often mission-critical for the client or the incentive house contracting on the client‚Äôs behalf. As a once-off, live event, you get one chance to get it right.‚ÄĚ
Gilligan acknowledged that this was not a surefire remedy, but moving the conversation to quality ‚Äúdid work more times than not‚ÄĚ.