Lessons from ethical retail for incentive travel professionals

Pádraic Gilligan, Founder, SoolNua & Chief Marketing Officer, SITE

Incentive travel professionals learning from others

I’ve always been pleasantly surprised by how much we can learn from business professionals outside of our own bubble. I remember buying a car a number of years ago from a Toyota dealer and immediately incorporating some of her brilliantly subtle sales techniques into my own pitches.

Same with a older gentleman in retail from whom I bought a suit. I just loved how natural he was, no hard sell, just gentle questioning as to why I needed a black suit. Both were great examples of how a skilled sales person can elevate a basic transaction into an meaningful experience, take a step towards their sales targets and make repeat sales by creating a loyal customer in the process.

Ethical Retail in Portugal – ITSO

While researching a forthcoming leisure weekend to Porto (Portugal), I came across a local clothing brand called ISTO and quickly became fascinated by their business model which pivots around sustainability and radical transparency. I immediately wondered what the implications and applications for incentive travel might be.

On the website TRANSPARENCY is one of 5 category headers on the navbar. When you click there, you’re taken to landing page that features further sustainability / transparency content including details of TRANSPARENT WEEK, a 2023 IMPACT REPORT, ISTO’s 360 degree GREEN SOLUTIONS and, intriguingly, a detailed price breakdown of core ISTO supplies such as the work jacket or the classic t-shirt.

It’s a fascinating to see how costs are incurred across the entire manufacturing supply chain: on the classic t-shirt, ITSO achieve a net 11% margin while 53% of the retail cost of the t-shirt goes to the retailer. I don’t see any line item here against design – admittedly the designs are super-simple – but perhaps that’s allocated to “other”? Marketing comes in at 8% but some of the retailers’ cut should also, presumably, be allocated to MarCom too?

Transparency in the world of incentive travel

This all reminded me of a series of presentations that industry veteran, and able advocate for the hotel sector, Michael Dominguez, used to make at industry events about 10 years ago when he worked in Vegas. His deck would open with an overview of the global economy and then he’d drill down into the implications for hoteliers, providing plausible rationales as to why an urn of coffee cost an arm and a leg or why pork-based produce like bacon and hot dogs were off the charts. His presentation may not have helped with budget bottom lines but it allowed us sound knowledgeable when a client questioned a line item.

Transparency across the supply chain in incentive travel has, for decades, been largely in the realm of dirty little secrets with finder’s fees, commissions and over-rides buried all over the place on all sides. In some locations, hotels charge DMCs commission for a referral, in others it’s the other way around. Big agencies have all manner of “pay to play” strategies, some requiring after-the-fact rebates. These are all business practices and tactics and, as such, are acceptable approaches to revenue maximisation. The issue is they are not transparent when many corporate contracts demand absolute transparency.

And, of course, we know why they happen. Many corporations find it difficult to understand and accept the presence of two agencies in the supply chain – the incentive agency in the source market and the DMC in the destination – so the two agencies end up squeezing each other.

Many corporations also expect hotel commissions to be rebated fully to them but agencies usually factor this revenue into their initial pitch and thus end up under-costed. Transparency has to play both ways and corporations need to accept that a professional business cannot survive on 10% margin.

The sooner we move to the costing structures deployed by professional firms – hourly billing based on experience and expertise – the easier it will be to be totally transparent.

Factorism – an new opportunity for incentive travel programs?

We’re all familiar with Medical Tourism, Cultural Tourism and Agri-Tourism but what about Factourism? The founders of ISTO, Pedro Gaspar and Pedro Palha, wanted to demonstrate their commitment to sustainable manufacturing and so decided to open their factories and manufacturing locations to customers. Hence factourism! On their website, they describe it thus:

Think of a factory as a touristic attraction: all roads are going north to a place where you learn something new and you see where things get done. We’ve decided to take transparency to a whole new level, opening the doors to show our way of doing things. We’ve invited everyone to visit the source, learn about the process and understand how organic clothes are made. We’ll organize a free tour to the factories we work with to show you the process of making our staples. Does transparency get any better than this?

In an age where qualifiers want experiences, not tourist visits, this has massive appeal. Tourist visits, largely, involve surface level encounters with historical landmarks, art museums and other visitor attraction. There may be an after-hours, curator-led or VIP route through the attraction, but, ultimately, you’re still doing what other visitors do. It’s still a tick boxing exercise – been there, done that, got the t shirt.

With this experience you don’t just get the t-shirt. You see, experience and learn how the t-shirt is created and, in particular, gain an understanding of how t-shirts can be made sustainably and ethically. This is travel that instructs, teaches, confronts you with innovative ways of doing things – travel as transformation.

Pádraic Gilligan is founder of SoolNua and serves as Chief Marketing Officer for SITE.