The last three years in the incentive industry have left most of us dragging out old “Grateful Dead” covers to hum solemnly along to “what a long strange trip it’s been.” According to the Incentive Research Foundation’s (IRF) most recent polling however, this trip may be coming to an end, with a much happier journey on the other side.
In the months of April and May, the IRF surveyed industry professionals to get a better understanding of where the market for incentive travel programs, merchandise/non-cash programs is headed, with a special concentration on ROI/budget considerations.
For all intents and purposes, most respondents feel that the tide of economic woe that seems to have befallen the incentives industry of late is beginning to turn. Compared to the summer or fall results of last year, this latest survey shows that buyers and providers in the incentive industry are cautiously optimistic about the current economic climate.
Most specifically, 69% of industry professionals felt that the economy was actually going to have a positive impact on their ability to plan and implement incentive travel programs. This indicator has seen a steady rise since the summer of 2009 when only 24% felt the economy was going to have positive impact. Likewise, the market for merchandise incentives is on an upward trend as well, but not as dramatically as incentive travel. In April, 41% of industry professionals felt the economy was going to have a positive impact on their ability to sell programs, up significantly from 20% in the summer of 2009.
The primary indicator of the cautious nature of this optimism, however, is the industry’s view on budgets. While 67% of industry professionals felt that their budgets for incentive travel programs will stay the same or increase, there was still a good one third of the market that felt budgets will decrease. Buyers and providers of merchandise incentives, however, were a bit more optimistic. Almost 40% felt that budgets would increase and almost an equal amount felt that budgets would not change. A little over a fifth felt that budgets would, once again, decline. This is promising news, considering last year’s results showed that more than half of the same individuals anticipated that budgets for merchandise incentives would decline. It is also reflective of what we at the IRF heard in our roundtables at our annual invitational in May. Many industry professionals had experienced a comeback of business, but this business almost always demanded “more for less” or “more with less.”
Additionally, it seems that some of the prior underlying issues plaguing an organization’s ability to implement programs—primarily the influence of corporate forecasts and competitors reactions to programs—have finally begun to stabilize. Both of these indicators peaked in the fall of 2008 and have since seen a steady decline.
The downside of this trend, however, is that sensitivity to program extravagance remains high. It has not yet stabilized and has, in fact, risen from 45% in the fall of 2008 to 64% in the spring of 2010. This fits very well with what we at the IRF heard at our Invitational Roundtables in May. Attendees at the roundtables felt a new era has arrived where luxury and extravagance in programs is no longer accepted. This is why many industry professionals (42% to be exact) felt that there would be a shift from international to domestic locations for incentive trips. Likewise, 47% also felt that the average length of travel programs would decline.
All of these trends have lead to a positive outlook for one other area of the industry: individual travel. Apart from reduced programs altogether, participants in the IRF roundtables felt that individual travel was the most common shift or reward substitute for current incentive programs. Likewise, in the April 2010 pulse survey, participants were asked if they anticipate their award strategy to include more individual travel and fewer group trips, either temporarily or permanently, 29% predicted some movement from group to individual travel. Likewise, a similar amount (24%) saw movement from merchandise awards to individual travel.
Overall, it seems that a discussion on trends in the industry, is at long last, starting to turn positive. Yet there is still caution on this new ride, as most in the industry are still learning to navigate the waters of leaner staff, different program configurations, and varying definitions of perceived extravagance.
<i>Melissa Van Dyke is president of The Incentive Research Foundation. [http://theirf.org/] She can be reached at [email protected].</i>
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