New Zealand Incentive Travel Industry. Market Research Report

Transcription

1 New Zealand Incentive Travel Industry Market Research Report Prepared for Funded by CONSULTANTS TO THE HOTEL, TOURISM & LEISURE INDUSTRIES A member of Horwath International

2 TABLE OF CONTENTS 1. INTRODUCTION Background Scope of Work Approach Exclusions Disclaimer KEY FINDINGS NEW ZEALAND INBOUND INCENTIVE TRAVEL Key Characteristics of Inbound Incentive Programmes Industry Groups Group Sizes Source Markets Length of Stay Market Size / Expenditure Regions Visited Activities Offered Key Competitive Advantages and Drawbacks Challenges and Opportunities - Individual Travel Experiences KEY FINDINGS NEW ZEALAND OUTBOUND INCENTIVE TRAVEL Key Characteristics of Outbound Incentive Programmes Industry Groups Group Sizes Destination Markets Length of Stay Market Size / Expenditure Activities Offered Key Competitive Advantages and Drawbacks...28 APPENDIX

3 1. INTRODUCTION Incentive travel has primarily developed to reward the achievement of high, or stretch, sales or performance targets. Some people achieve the target, and therefore enjoy the reward of an incentive group travel experience. The majority don t. Some Incentive travel programmes are developed to incentivise and reward an entire team within an organisation, based on the achievement of pre-determined organisational goals (eg: for achieving or exceeding sales or profitability targets). Some incentive programmes are developed to reward an organisation s most valued clients based on the achievement of pre-determined customer purchasing targets. A few incentive rewards do not relate directly to performance or sales targets. For example, some organisations pay for their staff or clients to attend sporting events (usually involving international travel) in order to develop or improve customer and/or employee relationships. For the purpose of this report, we have adopted the following definition of incentive travel: incentive travel results from a motivational programme, where only the highest performing employees or customers who achieve challenging pre-determined targets are rewarded with a group travel experience (including partners), paid for by the organisation. The chart on the following page illustrates our approach to definition of incentive travel targeted in this research. 3

4 Definition of Incentive Travel Gift / Experience / Event Yes Entertainment of customers / clients / employees based on targets selected on any Criteria to build relationships? NO Is there a reward involved? Yes Entertainment reward for key clients / customers / employees who meet some criteria not set / published in advance, to further develop relationships NO Yes Is there an incentive target? Yes Yes Lower Value Incentive NO Is there travel involved? Yes NO Is there group travel involved? Yes Does the company pay for everything? NO Medium Value Incentive Travel Yes Are there pre- and posttravel options included? NO High Value Incentive Travel Yes Yes Yes Does not meet definition of Incentive Travel Premium Value Incentive Travel Yes Meets definition of Incentive Travel 4

5 Conventions and Incentives New Zealand, with funding from The Incentive Research Foundation, has commissioned Horwath HTL Limited to undertake this research into the New Zealand inbound and outbound incentive industry. We would like to acknowledge Tourism Auckland for their support for this research project in providing research assistance in undertaking the market research. 1.1 Background There is effectively no existing body of research in the New Zealand context on which to draw upon for this project. There is better research on outbound incentive business from some of New Zealand s core source markets especially the United States. In 2004, Incentive Travel to/and within the United States was worth $USD6.24 billion or 5.1% of the Business Events market (Source: Convention Industry Council 2004 Economic Impact Study). As a background to this study, the National Business Events Study of Australia 2003 provides a good comparison. The Australian Incentive sector has strong similarities to that of New Zealand including geographic proximity, language, and parent/sister offices of some of the New Zealand incentive practitioners that have assisted in this study are located there. The Australian incentive sector appears to be significantly larger than that of New Zealand. In 2003, research shows that A$585m was spent on incentive business in Australia of which A$539m was from international incentive visitors. Incentives, Conferences, Conventions, Meetings, and Exhibitions were worth a combined A$17 billion to Australia in 2003 (Source: Australian National Business Events Study 2003). The Australian business events traveller has an average daily spend of A$554 almost six times the A$94 spend of the average international visitor. The National Business Events Study is the most comprehensive snapshot that has been conducted of the Australian Business Events industry. Nevertheless, it was noted that the attempt to measure the size of the incentive sector would have inevitably produced an underestimate, as the majority of practitioners in this sector maintain confidentiality of the detail of their clients and this made it difficult to track incentives through venues and accommodation. In undertaking this study, we have sought to replicate some of the findings of the Australian National Business Events study, in the New Zealand context. 5

6 1.2 Scope of Work The objective of this research is to provide a snapshot of inbound and outbound incentive activity organised principally by / through incentive practitioners in the New Zealand market. An inbound incentive programme is defined as any incentive programme held fully or partly in New Zealand for which the primary client is an international corporate, society or association. In some cases, a small number of New Zealand participants may register to attend an inbound incentive programme organised by an international employer or supplier. An outbound incentive programme is defined as any incentive programme held in an international destination for which the primary client is a New Zealand corporate, society or association. The scope excludes inbound and outbound incentive travel programmes organised in-house by corporate businesses 1. In this regard, the remote location of New Zealand, compared with other competitive destinations, is likely to result in minimal organisation of in-house incentive travel into New Zealand, with a large proportion of this market being organised by external Destination Management Agencies. The outbound incentive travel market in New Zealand is relatively very small, which reflects the small size of the New Zealand corporate market. For example: the total population of New Zealand is 4 million people; there are approximately 15 companies with a turnover exceeding USD1 billion, of which the average revenue is approximately USD 2.3 billion, and with more than 50% of these top 15 being overseas controlled; there are approximately another 20 companies with a turnover of between USD 0.5 billion and USD 1.0 billion. Our interviews with outbound incentive travel practitioners indicate that there is likely to be less than 10 companies, (probably less than 5) undertaking incentive travel programmes that meet the definition of incentive travel on an in house basis. This level of in-house incentive business is likely to contribute less than 5% of our identified market size, based on our primary research of the market. The analysis includes a quantitative assessment of: 1 Based on interviews undertaken with operators and Destination Management Agencies, we understand that it is likely that the majority of inbound incentive travel into New Zealand is organized by the incentive practitioners interviewed. However, there is likely to be some scope to research this market further to ascertain its future potential. 6

7 the approximate number of incentive travel groups / programmes, categorised by group size, group type, and range / extent of incentive travel experiences offered / obtained an estimate of the expenditure in relation to these travel groups an estimate of the breakdown of the above travel expenditure, analysed in terms of: international airfares domestic airfares and travel expenses accommodation food and beverages, including gala events activities and attractions retail other. The cultural impact analysis includes a qualitative assessment for New Zealand inbound and outbound incentive travellers of the level of interest in experiencing, learning about, and having face-to-face personal interactions with the peoples of other cultures, and other cultural experiences, as part of an incentive travel programme. 1.3 Approach Through collaboration with Conventions and Incentives New Zealand ( CINZ ) and other key convention & incentive industry players, we sought to identify all practitioners who were actively managing programmes for New Zealand inbound and outbound incentives. Inbound Research A practitioner was defined as an Incentive House, Destination Management Company ( DMC ) or Hotelier who managed all or part of the ground component of an inbound incentive programme to New Zealand in In the process of creating a list of New Zealand practitioners, we also identified two Australian practitioners (both DMCs) who also regularly managed ground programmes for New Zealand incentives. It was our objective to target and obtain complete responses from practitioners (respondents) who managed at least 80% of New Zealand s inbound incentive market. 7

8 A request to participate was sent to each of the 10 DMC s and Incentive Houses identified (by CINZ) to be active in bringing inbound incentive business to New Zealand. Additionally, a request to participate was sent to 10 New Zealand Hoteliers. We then contacted each of these respondents to arrange a series of face to face interviews, telephone interviews, or to a questionnaire survey containing all of the interview questions to those respondents who could not set aside the time for an interview. In some cases, we made arrangements to meet with more than one person in that organisation, particularly where specialised incentive accounts were managed by different persons. Respondents were asked to provide specific incentive programme data in commercial confidence for aggregate use. A separate version of the interview questionnaire was developed for hoteliers with some specific hotel questions substituted in place of others. Interviews were held with 9 New Zealand based Destination Management Companies, 2 Australian based Destination Management Companies, 1 Singapore based Incentive House, 1 Cultural Product Provider and 9 New Zealand Hoteliers. All interviewees were specifically asked to provide: a count of the number of incentive groups managed, the industry in which the participants were employed, number of participants in each of these groups and number of days that each of these groups spent in New Zealand an estimate of the expenditure in relation to these travel groups (both in New Zealand and overseas, including en-route to New Zealand) funded by the group travel organiser a count of the number of visits by these groups to each of 27 regions within New Zealand. a measure of the percentage of these groups whose programmes included each of 14 activities and a measure of other activities experienced that were not listed Interviewees were also asked to qualify what they saw as the major draw cards and shortcomings for New Zealand as an incentive destination and to describe the role of cultural tourism in their client s programmes. Interview subjects were also given the opportunity to speak in an unstructured manner about their experiences and involvement in the New Zealand inbound incentive sector. 8

9 In the course of the interview process, some respondents identified additional persons and organisations who met the criteria for interview and inclusion in this study. Every effort was then made to contact these persons and arrange to meet for an interview or have them complete the survey questionnaire remotely by telephone or . Qualitative responses were recorded during the interview session and were subsequently transcribed and stored as electronic documents. A spreadsheet was developed to analyse quantitative responses. Outbound Research A practitioner was defined as an Incentive House who managed all or part of the ground component of an outbound incentive programme from New Zealand in It was our objective to target and obtain complete responses from practitioners (respondents) who managed at least 80% of New Zealand s outbound incentive market. A request to participate was sent to each Incentive House identified (by CINew Zealand) to be active in managing and fulfilling outbound incentive business from New Zealand. We then contacted each of these respondents to arrange a series of face to face interviews, telephone interviews, or to a questionnaire survey containing all of the interview questions to those respondents who could not set aside the time for an interview. Respondents were asked to provide specific incentive programme data in commercial confidence for aggregate use. Interviews were held with 7 Incentive Houses (or 88% of Incentive Houses identified). All interviewees were specifically asked to provide: a count of the number of incentive groups managed, the industry in which the participants were employed, number of participants in each of these groups and number of days that each of these groups spent offshore an estimate of the expenditure in relation to these travel groups funded by the group travel organiser 9

10 a measure of the percentage of these groups whose programmes included a range of activities specified and a measure of other activities experienced that were not listed interviewees were also asked to qualify what they saw as the major criteria in the selection of a particular destination as an incentive destination and to describe the role of cultural tourism in their client s programmes. Interview subjects were also given the opportunity to speak in an unstructured manner about their experiences and involvement in the New Zealand outbound incentive sector. In the course of the interview process, some respondents identified additional persons and organisations who met the criteria for interview and inclusion in this study. Every effort was then made to contact these persons and arrange to meet for an interview or have them complete the survey questionnaire remotely by telephone or . Qualitative responses were recorded during the interview session and were subsequently transcribed and stored as electronic documents. A spreadsheet was developed to analyse quantitative responses. 1.4 Exclusions Excluded from this study are inbound and outbound incentive travel programmes that did not utilise the services of the Incentive Houses, DMCs and Hotel Chains interviewed. However, based on the information provided by the parties we interviewed (representing 80%-90% of the estimated market size), we have made an estimate of the likely scale of business handled by those other providers we were not able to obtain information from. Consumer customer loyalty schemes including Frequent Flyer, Air Miles and Fly Buys programmes have been deliberately excluded from the scope of this study. These programmes are incentives by definition - the reward is in recognition of customer spending however the value of each reward is usually small and the scope of international loyalty rewards taken in New Zealand is very difficult to quantify, as the travel arrangements are usually made outside of New Zealand. Domestic travel rewards taken in New Zealand are somewhat easier to quantify, but have been excluded categorically as these do not represent an inbound market or generate a foreign exchange receipt. 10

11 Also excluded from this study are boutique incentives (typically organised for less than 20 participants) and staying at one of New Zealand s small luxury lodge properties. We suspect that the total value of this market is relatively small. 1.5 Disclaimer This report has been prepared on the specific instruction of Conventions and Incentives New Zealand and The. Horwath HTL Ltd assumes no responsibility whatsoever in respect of, or arising out of, or in connection with the contents of this report to any other parties. This report is based on estimates, assumptions and other information available to us, the sources of which are stated in the appropriate sections of the report. We did not carry out an audit or verification of the information supplied to us during the engagement, except to the extent stated in this report. We advise that the projections and forward looking statements presented in this report are based on estimates and assumptions which are inherently subject to uncertainty and variation depending upon certain evolving events. Accordingly, we do not present the projections as results which actually will be achieved. Actual results achieved may vary from the projections and the variation may be material. 11

12 2. KEY FINDINGS NEW ZEALAND INBOUND INCENTIVE TRAVEL There were a total of 22 survey respondents representing 215 inbound incentive groups. 2.1 Key Characteristics of Inbound Incentive Programmes The following key characteristics of inbound incentive programmes are analysed in this section: industry type group sizes source markets Industry Type market size / expenditure regions visited activities offered. Figure 2.1 below shows the breakdown of inbound incentive groups by Industry Type in % of inbound incentive groups were from the Finance & Insurance and Retail industries. This reflects the remuneration structure of employees in such industries, which is frequently commission-based. Figure 2.1: Inbound Incentive Travel Groups by Industry Type Manufacturing/Industry 4% Arts and Leisure 3% Pharmaceutical/Medical 3% Sports Group 4% Other 5% Finance, Insurance 31% Technology/Science 9% Automobile 11% Retail 29% Note: Based on 11 respondents representing 89 incentive travel groups (Source: Horwath HTL Limited) 12

13 2.1.2 Group Sizes Figure 2.2 depicts the distribution of group sizes of inbound incentive travel to New Zealand in Approximately 50% of these (107 groups) comprised of 20 participants or less, and originated mainly from China. Anecdotal feedback suggests that about half of these incentive programmes could possibly better be described as holidays for groups of business colleagues organised around a Chinese principle of compounding reciprocity of favours, a relationship building principle. In 2005, there were only 4 large incentive groups of > 200 participants. This is possibly due to the relatively small number of larger size facilities available in the main New Zealand centres. Figure 2.2: Inbound Incentive Group Sizes No. of Groups > 200 Group Size - No. of Participants (Source: Horwath HTL Limited) 13

14 2.1.3 Source Markets The key source markets for inbound incentive programmes to New Zealand in 2005 were Australia, Japan and USA, which comprised an estimated 55% of the total number of participants. Although Australian incentive groups are likely to be driven by their close geographical proximity to New Zealand, anecdotal evidence suggests that the Japanese and American groups are attracted by New Zealand s scenery and landscapes, portrayed through advertising by Tourism New Zealand and Air New Zealand in these markets, including building on New Zealand s film reputation established in The Lord of the Rings. Figure 2.3: Participant Numbers by Origin Markets 3, % 2,500 90% 80% No. of participants 2,000 1,500 1, Australia Japan USA China Singapore UK (Source: Horwath HTL Limited) Spain Malaysia Hong Kong SAR Thailand India South Korea Origin Indonesia Cook Islands Taiwan Ireland Portugal Brazil Chile Canada 70% 60% 50% 40% 30% 20% 10% 0% Cumulative % Some incentive practitioners did not supply or did not have detailed data about the country of origin of the incentive participants. In these cases, a variety of research sources were employed to estimate this breakdown including browsing the corporate website of the client company and its employment statistics by country. 14

15 2.1.4 Length of Stay As depicted in Figure 2.4, geographical proximity to New Zealand appears to be inversely related to length of stay, with incentive travel groups originating from countries furthest from New Zealand staying the longest an average of 18.5 days for the Irish groups, and 15 days for the British groups. By comparison, incentive groups from the Asia Pacific region typically have a length of stay of < 10 days. Figure 2.4: Avg. Length of Stay by Participants' Origin 20 Average Length of Stay (days) Ireland UK Japan India South Korea Taiwan Singapore USA Malaysia Brazil Hong Kong SAR Thailand Chile Australia Canada Cook Islands Portugal Spain China Indonesia Origin (Source: Horwath HTL Limited) 15

16 2.1.5 Market Size / Expenditure The total value of the New Zealand inbound incentive travel market in 2005 is estimated to be between NZ$95 115m, with a mid-point or most likely value of NZ$105m, based on actual researched activity in 2005 with destination management companies and hoteliers. However, 2005 may have been a particularly buoyant year for the New Zealand incentive travel industry, and may not be representative of a typical year. A number of destination management companies and hoteliers indicated in the survey that they expected the value of their New Zealand bound incentive programmes to decline in The incentive travel market is lumpy in nature and the annual market size can be significantly skewed by one or two large groups that have high daily average expenditures. Taking into consideration the above, the estimated size of the market in a typical year is possibly more likely to be between NZ$70 100m, with NZ$85m p.a. being the most likely outcome. As can be seen in Figure 2.5, Japan, Australia, USA and UK comprised approx. 70% of total delegate expenditure (including international airfares) in Figure 2.5: Total NZ$ Spend of Inbound Incentive Travellers (incl. international airfares) by Country of Origin $m Japan Australia USA UK Singapore China Malaysia Thailand Hong Kong SAR India South Korea Spain Ireland Indonesia Taiwan Cook Islands Brazil Chile Portugal Canada Origin Note: Daily personal expenditure has not been captured in the survey (Source: Horwath HTL Limited) 16

17 An indicative breakdown of this expenditure can be seen in Figure 2.6 below. International airfares (21%), Food and Beverage (16%) and Accommodation (16%) are the largest identified expenditure categories. Note that caution must be applied when interpreting these findings, as a large Other category of 28% might skew the results. Figure 2.6: Participants' Expenditure Breakdown Activities and Attractions 9% Retail 5% Transfers 1% Domestic Airfares and Travel expenses 3% Rental Cars 0% Other 28% Accommodation 16% Food and beverages, including gala events 16% International Airfares 21% Note: Based on expenditure breakdown provided by 10 survey respondents (Source: Horwath HTL Limited) A number of incentive practitioners did not supply data on the value of total and detailed expenditure by incentive groups. An estimation of the value of detailed expenditure was made based on an average value derived from the detailed responses received from the participating practitioners: unless specified otherwise by the practitioner, all airfares were valued as economy class. Mean return airfare values were calculated by market: North America (NZ$1,600), Europe (NZ$2,400), Australia (NZ$600) and Asia (NZ$1,200) mean domestic airfares where applicable, were calculated at NZ$600 per person gala dinner events where applicable, were estimated at NZ$350 per person; normal daily food and beverage spend was estimated at NZ$100 per person activities and attraction spend was estimated at NZ$100 per person per day transfer spend was estimated at NZ$40 per person per day. 17

18 2.1.6 Regions Visited Auckland is visited by 71% of inbound incentive programmes, being the arrival / departure city for the majority of groups. Queenstown is the next most popular destination, with 33% of groups visiting Queenstown for its adventure product offering. Although Rotorua is known for its cultural product offering, only 12% of incentive programmes visit the city. Anecdotal evidence suggests that this is due to a lack of high quality accommodation (5-star and 6-star product) and ground service offerings necessary for an incentive group. Figure 2.7: Regions Visited by Inbound Incentive Groups 80% 70% 71% % of Incentive Programmes 60% 50% 40% 30% 20% 33% 15% 12% 10% 10% 0% 5% 4% 3% 3% 2% 2% 1% 1% 0% 0% 0% 0% Auckland Queenstown Canterbury Rotorua Wellington Marlborough Nelson Northland West Coast, South Island Waikato Hawke s Bay Otago Southland Bay of Plenty Taranaki Gisborne Wanganui - Manawatu Regions Visited Note: Based on 8 respondents representing 105 incentive groups (Source: Horwath HTL Limited) Multi-destination incentive groups (ie: part of the travel included another country other than New Zealand) only comprised 3.3% of inbound incentive travel groups represented in the survey findings. Of the multi-destination groups, Australia and Fiji were popular choices as partner destinations with New Zealand. 18

19 2.1.7 Activities Offered Gala dinners, Maöri cultural performances and winery visits were the most popular activities among incentive groups visiting New Zealand, with an uptake of 100%, 90% and 72% of groups respectively. A wide range of outdoor / adventure product offerings were also incorporated into inbound incentive travel itineraries, as reflected in Figure 2.8 below. Figure 2.8: Activities Offered to Inbound Incentive Groups % of Inbound Incentive Programmes 100% 80% 60% 40% 20% 0% 100% 90% Gala Dinner Maori Cultural Performance Winery Visit 72% Boat Cruise 62% 53% 52% 49% 49% Golf Dine around Scenic Plane Flight Spa and beauty treatment Adrenaline Sport (e.g. Bungy Jump) 44% 41% 40% 36% Walking Helicopter Flight Sailing Hunting Back Country Programme Activity Offered 28% 28% 25% Fishing Cooking class/demonstration 15% 14% 10% Four Wheel Driving Soft Adventure Skiing/snow sports Note: Based on 6 survey respondents representing 29 inbound incentive groups (Source: Horwath HTL Limited) 6% Whale Watching 1% 0% Incentives are typically structured, so participants don t engage in activities involving interactions with local people, with the exception of organised cultural activities. Some programmes include a Dine Around (52%), where participants are picked up by local families who took them to their homes to dine. The drawback with this is the lack of ability to control the quality of their experiences. Some incentive programmes associated with an event such as the Lions Tour, include pub crawls that enabled participants to meet and share a pint with the locals in a range of pubs from high to low end community taverns. It has been observed by Destination Management Companies (DMC s) that programmes with a community interaction component are increasingly popular with US clients. Other 19

20 A number of survey respondents identified opportunities to link incentives with major events. To make events incentive ready will require consideration of safety, quality and exclusive hosting of incentive delegates at the event. 2.2 Key Competitive Advantages and Drawbacks Survey respondents were asked to identify three key competitive advantages that attract their incentive clients to New Zealand ahead of other destinations, and three shortcomings that have been responsible for potential incentive clients seeking an alternative destination other than New Zealand. The top three competitive advantages identified by survey respondents are: 1. scenery and landscapes 2. uniqueness % Pure New Zealand destination marketing campaign / activities on offer in New Zealand. The top three drawbacks are: 1. cost of airfare 2. distance 3. lack of quality hotels / operator infrastructure. Respondent feedback recommended that New Zealand needs to focus on new air routes and capacity, and investment in our accommodation and product offerings (5-star and 6-star) to increase our appeal to inbound incentive groups. Further, there needs to be a greater number of large venues (similar to the SKYCITY Convention Centre) to attract large incentive groups of > 500 participants. Other observations noted by DMC s and Hoteliers include: sacrifices are often made in the New Zealand land itinerary as the airfare component of New Zealand inbound incentives is comparatively large compared to the airfare component of programmes to other destinations unnecessary discounting is taking place on the part of the DMC s, particularly in the Asian markets with the low rates negotiated, the product cannot meet client quality expectations inbound incentive business out of the USA tends to be responsive to fluctuations in the exchange rate, resulting in volume fluctuations between years. 20

21 2.3 Challenges and Opportunities - Individual Travel Experiences Based on qualitative comments made by survey respondents, some of the key challenges and opportunities for individual travel experiences are summarised below: Challenges Asian markets (eg: India and Thailand) often do not provide high returns as a result of travel package price discounting. The ability to provide high quality experiences to individuals is therefore minimalised Incorrect categorisation of some incentive groups (eg: in hotel reservation systems) as wholesale group tours can result in rate discounting and client experiences being below expectation Limited range of incentive activities in some primary cities that fully complement Tourism New Zealand s 100% Pure destination marketing messages does not meet with individual visitor perceptions of New Zealand, and therefore results in experiences being below expectation Due to New Zealand s relatively distant location, the airfare cost substantially increases overall incentive package costs compared with competitive incentive destinations. Providing sufficient profitable value added products and services in order to provide an exceptional profitable experience in some cases can be a challenge. Opportunities Providing a high-end cultural experience such as interaction with local Maöri and undertake traditional Maöri activities target the Green Incentive Market which may include a community interaction component, such as planting trees with the local community in schools Significant potential in the high-end Asian incentive travel market who are keen on building individual cultural experiences Opportunities to provide cultural activities, currently provided in regional destinations, in primary cities for groups that do not have a regional destination incorporated in their itinerary. 21

22 3. KEY FINDINGS NEW ZEALAND OUTBOUND INCENTIVE TRAVEL There were a total of 7 survey respondents (88% of Incentive Houses identified) representing 43 outbound incentive programmes for Survey respondents agreed that, for the purposes of this research, an incentive programme should be defined as the creation of a unique, enriching experience for a group of individuals that an individual cannot purchase independently. 3.1 Key Characteristics of Outbound Incentive Programmes The following key characteristics of outbound incentive programmes are analysed in this section: industry type group sizes destination markets Industry Type market size / expenditure activities offered Figure 3.1 below shows the breakdown of outbound incentive groups by Industry Type in % of New Zealand outbound incentive groups were from the Construction industry, with a further 16% from Manufacturing. The Construction and Manufacturing industries comprise a large proportion of the outbound incentive market as the majority of trade suppliers run incentive travel programmes for customers who exceed purchase targets. In the majority of New Zealand outbound incentive travel programmes, organisations are providing incentives to their customers who exceed targets, rather than employees. 22

23 Figure 3.1: Outbound Incentive Groups by Industry Type Media / Publishing, 2% Technology / Science, 11% Other, 2% Retail, 2% Automobile, 8% Manufacturing / Industry, 16% Construction, 37% Management / PR, 7% Legal, 2% Food & Beverage, 5% Finance, Insurance, 7% Note: Based on 6 respondents representing 43 incentive groups (Source: Horwath HTL Limited) Group Sizes Figure 3.2 depicts the distribution of group sizes of outbound incentive programmes from New Zealand in Two clusters are visible in Figure 3.2 below group sizes of participants, and group sizes of > 80 participants. This reflects the two distinctive segments of the New Zealand outbound incentive market: large outbound incentive groups (> 80 participants) which are typically serviced by incentive houses that have the supporting infrastructure and capability to handle large volumes small to medium sized groups (< 50 participants) which are serviced by boutique incentive houses who primarily target the premium and exclusive end of the market. 23

24 Figure 3.2: Outbound Incentive Group Sizes No. of Groups > 100 Group Size - No. of Participants (Source: Horwath HTL Limited) Destination Markets The key destination markets for New Zealand outbound incentive programmes in 2006 were the Pacific Islands and Australia. This is likely to be driven by their close proximity to New Zealand, resulting in less travel time involved and a lower budget for incentive clients. Survey respondents also indicated that short haul travel to Australia is often linked to sporting events, in particular, rugby. Asia is also becoming increasingly popular as an outbound incentive destination, as many Asian countries offer a unique cultural experience within an affordable budget. Thailand, in particular, is a popular choice for New Zealand outbound incentive groups. New direct air routes introduced by Air New Zealand (eg: Shanghai and Vancouver) will also increase the range of possible destination choices for incentive houses. 24

25 Figure 3.3: Participant Numbers by Destination Markets 3, % 2,500 80% No. of participants 2,000 1,500 1,000 60% 40% Cumulative % % 0 0% Pacific Islands Australia Asia Europe South America Hawaii Caribbean USA Dubai Destination (Source: Horwath HTL Limited) Incentive houses have also observed the following trends: a substitution away from domestic incentives to international outbound incentives due to the higher perceived value by participants clients have a tendency to alternate between domestic / short haul and long haul destinations between years, therefore creating a cyclical business pattern for incentive providers single destinations are the norm with New Zealand outbound incentive programmes, with very few programmes involving multi-destinations (usually only for a stopover or as part of a transfer) Length of Stay All survey respondents consistently reported an average length of stay for short haul travel to Australia and the Pacific Islands to be approximately 4 5 days, and the average length of stay for long haul travel (Asia, Europe, Americas) to be approximately 7 8 days. 25

26 3.1.5 Market Size / Expenditure The total value of the New Zealand outbound incentive travel market in 2006 is estimated to be approximately NZ$25 million based on actual researched activity with incentive houses, represented by interviews with 88% of New Zealand outbound incentive travel business. As can be seen in Figure 3.5 below, the Asia Pacific Region (Pacific Islands, Asia and Australia) comprised approximately 72% of total delegate expenditure (including international airfares) in Figure 3.5: Total NZ$ Spend of Outbound Incentive Travellers (incl. int airfares) by Destination Spend $m Pacific Islands Asia Australia Europe Caribbean South America Destination Hawaii USA Dubai Note: Daily personal expenditure has not been captured in the survey (Source: Horwath HTL Limited) 26

27 An indicative breakdown of this expenditure can be seen in Figure 3.6 below. International airfares (30%), Accommodation (21%), Food and Beverage (21%) and Activities and Attractions (22%) are the largest identified expenditure categories. Figure 3.6: Participants' Expenditure Breakdown Retail 3% Transfers 3% Activities and Attractions 22% International Airfares 30% Food & Beverage 21% Accommodation 21% Note: Based on expenditure breakdown provided by 6 survey respondents (Source: Horwath HTL Limited) Activities Offered Gala dinners, spa and beauty treatments and boat cruises were the most popular activities among New Zealand outbound incentive groups, with an uptake of 100%, 75% and 67% of groups respectively. A wide range of outdoor / adventure product offerings were also incorporated into outbound incentive programmes, as reflected in Figure 3.7 below. 27

28 Figure 3.7: Activities Offered to Outbound Incentive Groups % of Outbound Incentive Programmes 100% 100% 80% 60% 40% 20% 0% 75% 67% 46% Boat Cruise Cultural Shows / Events Gala Dinner Spa and beauty treatment 35% 33% 28%28% 25% 21% Sporting event Dine around Golf Shopping Island hopping Winery visit / tour Concert / Theatre Cooking Class / Demonstration 12%12%12% 8% 7% 7% 5% 3% 3% 3% 2% 2% 2% 2% 0% 0% Factory Tour Fishing Helicopter Flight Hot air ballooning Sailing Activity offered Scenic plane flight Motor Racing Car Rally Kayaking Adrenaline Sport Scuba Diving Wildlife tour Hiking Horse-riding Note: Based on 6 survey respondents representing 43 outbound incentive programmes (Source: Horwath HTL Limited) Incentives are typically structured, so participants don t engage in activities involving interactions with local people, with the exception of organised cultural activities. Participants typically have a preference for observing culture, rather than immersing in culture. Some programmes include a Dine Around (33%), but these are not a true cultural experience, as restaurants are pre-selected to control the consistency of the experience. Outbound incentive houses have also observed that the uptake of green programmes and the inclusion of charity components have been very minimal with New Zealand outbound incentive programmes. This is primarily driven by participants preference for luxury and pampering as part of their reward, rather than involvement in an educational exercise. 3.2 Key Competitive Advantages and Drawbacks Survey respondents were asked to identify three key competitive advantages that attract their incentive clients to particular destinations, and three shortcomings that have been responsible for potential incentive clients seeking alternative destinations 28

29 The top three competitive advantages identified by survey respondents are: 1. new, inspiring destinations which will enable the packaging of unique group experiences 2. warm climate it is usual for outbound incentive groups to travel overseas during the New Zealand winter 3. short travel times / distances to maximise the available time at the destination. Other important factors mentioned by survey respondents include the availability of supporting infrastructure (such as 5 star hotels), destinations with a range of activities and attractions, and sporting events. The top three drawbacks are: 1. security concerns 2. cold climates 3. lack of direct flights transfers are not viewed favourably by the majority of incentive clients and respondent feedback indicated that new air routes to destinations such as Shanghai and Vancouver will open up new possibilities for New Zealand outbound incentive travel. Other observations noted by the incentive houses we interviewed include: clients typically stay loyal to their incentive houses, so repeat business is the norm the relative value of the New Zealand dollar has a large influence on clients budgets and the selection of destination the largest competition faced by incentives houses is the volume of outbound incentive business that organisations manage in-house (no valuation of this has been undertaken as part of our research) the corporate segment in New Zealand is diminishing as organisations relocate their head offices to Australia and other international cities consequently, decisions relating to incentive travel are now frequently made off-shore. 29

30 APPENDIX We would like to thank the following organisations for their contribution to this research: Inbound Research Inbound Practitioner Business Type 1. Accor Hotels Hotel Group 2. ATS Pacific Inbound tour operator and inventive travel 3. Carlton Hotel (now Rendezvous Hotel) Hotel 4. General Travel Group of Companies Inbound tour operator and inventive travel 5. Heritage Hotels Hotel Group 6. Hilton Auckland Hotel 7. ID Tours Inbound tour operator and inventive travel 8. Maöri Experience New Zealand Maöri Tourism and Hospitality Businesses 9. Millennium, Copthorne and Kingsgate Hotels Hotel Group 10. New Zealand Destinations Conference and Incentive Management Conference and incentive travel, exhibitions and special interest events 11. Pan Pacific Travel Inbound tour operator and inventive travel 12. SKYCITY Entertainment Group Hotels and Convention Centre 13. Stamford Plaza, Auckland Hotel 14. The Extra Mile Company Incentive programmes and merchandise rewards 15. Williment New Zealand Experience Sports group, special interest travel and incentive travel Outbound Research Outbound Practitioner Business Type 1. ESP Ventures Limited Corporate and small meetings, and incentive travel 2. Event Dynamics Corporate meetings and incentives 3. Go Conference and Incentive Corporate and incentive travel, merchandise rewards 4. Incentive and Conventions International Private conference organiser and incentive house 5. The Premium Group International and domestic conferences and incentives 6. The Extra Mile Company Incentive programmes and merchandise rewards 7. CI Events Sports group, special interest travel and incentive travel 30