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Pitfalls of a Travel Certificate

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Travel certificates present the appeal of a simple yet affordable incentive to offer your employees, clients, and customers. After all, the universal appeal of other gift cards makes it a seemingly simple idea. The assumption is that travel certificates are as flexible and easy-to-use as retail gift certificates. That couldn’t be further from the truth.

For one thing there’s the issue of initial investment. The more you pay for a travel certificate, the fewer restrictions there will be, and thus, the certificate will be more user friendly. Restrictions have become very prevalent today, especially in the airline industry with their frequent flyer programs. It’s getting more and more difficult to redeem the miles for a flight. Often times you need to use twice as many points as before for a flight because you are a "rule breaker."

In certificate lingo, this means the manufacture is afforded the right to NOT honor the certificate, or find a way to charge you for the service you are requesting.

The legalese in certificates protects the manufacturer from honoring the travel certificate if it’s not beneficial to them. Language like; "subject to allotment" or "subject to seasonal surcharges" are vague and don't use specific dates. That in essence gives the manufacturer the opportunity to say they are out of allotment on that date, or that the date selected needs a seasonal surcharge of say $300 in able to book the trip.

Another disappointing reality with travel certificates is that many manufacturers write the Terms & Conditions to encourage non-use of the certificate. This is what’s often referred to as 'breakage" in the incentive certificate industry. Here’s a common restrictions scenario:

-Monday or Tuesday arrival/departure only
-90 day advanced booking required
-Security deposit needed upfront before knowing booking dates
-Sit through a timeshare presentation, attend a seminar, etc.

With restrictions like these, the recipients become frustrated and give up trying to redeem the incentive travel certificate. The manufacturer pockets the money charged for the sale of the certificate and never incurs any redemption costs. This is often the case in travel certificates that sell for less than $100. They are manufactured under a “breakage” model of 90% or more. They almost never redeem any of them.

The benefit of these travel certificates is they cost the issuer way under the going rate for, say, a 7-night cruise for 2 for $99. Nobody could profitably sell a 7-night cruise for 2 for $99 unless the breakage is 90% or higher (10 certificates sold for $99 yields $990, with only 1 redemption the numbers start to make sense). If they charge the recipient a $299 per person processing/port tax fee now the numbers make sense. The manufacture yields $990 + $598 = $1,588. The certificates are almost always for the lowest level of room or berth so the recipient is encouraged to upgrade or availability is non-existent (see allotment language above). Additional fees are charged to upgrade.

You can see with a high breakage percentage and user fees that these $99 travel certificates turn profitable for the manufacturer, but end up being a major nuisance and disappointment to the recipient.

If you need an inexpensive incentive travel certificate, look at travel certificates without these breakage restrictions. The certificates should have limited black-out dates, not ask for monies from the recipient up front, and not have long reservation waiting periods.

Marriott and Ritz-Carlton certificates include all room related expenses and have no waiting period to reserve the room. Someone being handed a Marriott or Ritz-Carlton certificate could book a room later that day and not have to pay for any room related expenses. American Airlines has flight certificates good anywhere in the contiguous U.S. There are no black-out dates and they only require a 14 day advanced notice. It doesn't matter if the going rate for the flight is $749 or $149; the certificate is good for a roundtrip flight anywhere the recipient wants to go. These are examples of non-restrictive travel incentive certificates.

The benefits of these travel certificates are the recipients don't incur costs or unfavorable Terms & Conditions. They are user friendly and almost all who receive them will use them. A company awarding these will have a customer or employee who will redeem their certificate and have a positive result. This person will be much more likely to refer others to the company or talk about the company in a very positive light.

Incentives Marketplace has the most comprehensive suite of incentive travel certificate offerings in the industry. Contact us today to learn more about incentive travel certificates.



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