Departments - November/December 2017

Positive Outlook

Study Shows Optimism Toward the Economy

By Deborah L. Vence


The incentive travel and rewards segments are showing optimism toward the economy and its impact on the industry, according to the Incentive Research Foundation's (IRF) 2018 Outlook Study.

The study, which was carried out in the summer of 2017, is an analysis of how incentive, rewards and recognition programs are being designed and budgeted for 2018. Nearly 230 industry representatives, including suppliers, corporate end users and incentive house representatives participated, and gave their feedback on the outlook for U.S. incentive travel and reward programs in 2018. (The IRF sponsors regular trend surveys that cover topics of current interest to those in the incentive industry, incentive providers, suppliers to the industry, and corporate merchandise and travel buyers.)

"Industry stakeholders reported that they expect the financial performance of their firms to be strong in the coming year," stated IRF President Melissa Van Dyke in a September press release. "Optimism is up from last year. The IRF 2018 Outlook Study provides a detailed look at important industry metrics, such as the Net Optimism Score, as well as trends that are emerging year over year."

The IRF launched the Net Optimism Score in 2017 to assist in reporting the state of the industry. Now, in its second year, the simplified metric tracks the economic outlook for the incentive industry. Similar to the Net Promoter Score, the Net Optimism Score is the percentage of respondents providing a positive rating to an industry question, adjusted by subtracting the percent giving a negative rating. A higher Net Optimism Score indicates greater optimism in the industry.

Insights from the IRF 2018 Outlook Study include the following:

  • The incentive travel industry's Net Optimism Score for the economy is up from 26 percent in the fall of 2016 to 44 percent in the summer of 2017.
  • The merchandise/gift card reward program industry's Net Optimism Score was up as well—to 22 percent. (Incentive house/agency respondents chose electronics, sunglasses, clothing/apparel, open gift cards and luggage most often for their programs. Open gift cards, clothing, sunglasses, closed gift cards and plaques were the most frequently selected items by corporate end users.)
  • Incentive travel budgets are up with an average per-person spend of $3,915, an increase of 4 percent over last year. (The largest number of net increases reported by respondents of incentive travel included the following: inclusion of wellness/well-being components--38 percent; all-inclusive pricing options--35 percent; budget for F&B--25 percent; and budget for rooms--25 percent.)
  • For gift card and merchandise programs, those with budgets from $251 to $5,000 per person have risen to 57 percent. (For gift card and merchandise programs, the percentage of respondents reporting an average per-person spend budget between $1 and $250 has declined to 43 percent. And, nearly a third of respondents indicated that the number of participants earning a reward would be increasing.)
  • The top five incentive travel destinations for respondents were the continental United States, Hawaii, the Caribbean, Mexico and Europe. (Canada also is popular with nearly half of third party service providers operating at least one program there in the coming year.)
  • Almost a third of respondents indicated an increase in individual travel packages
  • (31 percent) and experiential rewards (37 percent).
  • Regulations continue to be difficult to navigate with almost 75 percent of respondents saying that it is difficult to stay informed about the federal, state and local regulations affecting programs.

In addition, all parties anticipate an increase in wellness/well-being elements for incentive trips. Suppliers and third parties agree that all-inclusive pricing is on the rise. Suppliers also indicated that they expect more on-site inclusions, while all groups are conservative in their expectations for per diem cash allowances.

In the area of program enhancements, social media, CSR (corporate social responsibility), social recognition and CRM (customer relationship management) integration have gained traction for about a third of buyers. A strong presence is seen across the industry for mobile apps, though it has not reached critical mass at the buyer level.

With regard to rewards budgets and the outlook for budget increases in the coming year, suppliers and third parties are expecting increases, while corporate buyers are expecting declines. Stakeholders agree that the number of participants earning rewards will increase.

Overall, the outlook for industry stakeholders is that they expect the financial performance of their own firms to be strong in the coming year, despite a somewhat less optimistic outlook for the economy. Regulations continue to be difficult to navigate with nearly two-thirds of respondents indicating that it is difficult to stay informed about the federal, state and local regulations that are affecting programs.