by Leo Jakobson | September 29, 2017
Incentive program planners and suppliers are optimistic that a booming economy will trickle down to allow their incentive travel, merchandise, and gift card programs to grow.

That is among the findings of the Incentive Research Foundation 2018 Outlook Survey released this week. Optimism among planners who manage incentive travel programs and those who oversee incentive merchandise and gift card programs grew substantially in the six months ending in September, with scores closing in on the high seen in 2013 and 2014.

Looking back over the past eight years, the organization found that the IRF Net Optimism Score tracked in this survey gives a fairly accurate preview of what is about to happen to the overall U.S. economy, as measured by the Gross Domestic Product (GDP), says Rodger Stotz, chief research officer of the IRF. 

"It may be the canary in a coal mine," Stotz told attendees of the IRF's first annual Leadership Insights Forum, held in Miami in late September. One likely explanation is that companies' "financial forecasts dictate what happens in their programs," he added. 

And indeed, survey participants are strongly bullish, with +61 percent saying the U.S. economic outlook is strong, and +80 percent saying that their own company will have a strong financial performance in 2018. 

The IRF only created its Net Optimism Score last year, but has used data dating back to 2009 to create an historic perspective. The score is determined by taking the percentage of respondents giving a positive (optimistic) rating and subtracting those who give a negative (pessimistic) rating. So, if the planners surveyed are evenly split, there would be a zero -- or neutral -- Net Optimism Score. 

Noting that the IRF Net Optimism Score data dates back to March 2009, during the worst of the recession, Stotz notes that the first incentive travel program score was -79 percent. That jumped to +47 percent a year later, and other than a quick dip into negative territory late 2011, has been positive ever since. 

The Net Optimism Score survey was based on the responses to 176 incentive travel planners and suppliers (including 26 corporate planners) and 99 incentive merchandise and gift card planners and suppliers (including 14 corporate planners). 

Incentive Travel Programs

Currently, the IRF's Net Optimism Score for incentive travel programs is very positive, with 44 percent more incentive program planners optimistic about the economy and its impact on the incentive business than are pessimistic. And while that is up 18 percentage points from September 2016, it is still slightly lower than the roughly 50 percent Net Optimism Scores recorded in September 2013 and 2014. 

It should be noted that when the incentive travel respondents to the IRF Net Optimism Survey are broken down by audience, the corporate end-users are far less optimistic than either incentive suppliers or third-party incentive planners. The overall score was +44 percent, but corporate clients' Net Optimism Score for September 2017 was just +12 percent, compared to suppliers (+54 percent) and third-party planners (+47 percent).

Looking at some specifics, the respondents said that they foresee overall incentive travel budgets rising, with a +25 percent score. That number was the same for both room budgets and food-and-beverage budgets. But a +60 percent score says that program costs are increasing faster than budgets

The overall score for on-site gift budgets was down, at -4 percent. Corporate procurement departments will get more involved, the survey predicted, giving this a +31 percent score.

The respondents felt that the number of participants earning a trip earning a trip was likely to go up, giving this a +12 percent score. Other program elements with a strongly positive outlook were the inclusion of wellness and well-being components (+38 percent) and the use of all-inclusives (+35 percent), a category that generally includes both resorts and cruise ships.

Incentive travel budgets are up 4 percent over last year, with an average per-person spend of $3,915. The five most popular incentive travel program destinations are: the continental United States, Hawaii, the Caribbean, Mexico, and Europe. (It should be noted that this study was completed well before the recent hurricanes devastated much of the Caribbean.)

Incentive Merchandise and Gift Card Programs

When looking at recognition and reward programs using gift cards and merchandise awards, the most basic result is the same - the Net Optimism score is up from lsat year, but still lower than it was in the 2013 through 2014 time period. But both the scores and the increase from September 2016 (-14 percent) to September 2017 (+22 percent) are lower than they were in the incentive travel field. 

That said, the planners and suppliers in this field were never as pessimistic as incentive travel planners were. The merchandise and gift card program Net Optimism Score was just -8 percent in September 2009, and has not dipped into the negative numbers since (although it was just +1 percent during the September 2011 downturn.)

"The Net Optimism Score for merchandise and gift card programs is similar to incentive travel, except that in downturns, incentive travel reacts faster and harder," Stotz said. 

The budget picture is strong, with a +32 percent score for overall reward and recognition program budgets. There is a +24 score for award budgets, and +32 percent predicting more participants will win awards. Again, procurement departments will become more involved, respondents predict, with a +32 percent score. 

Experiential rewards like spa and event tickets, individual travel packages, and gift cards are the fastest growing award types. The top five award categories are electronics, sunglasses, clothing/apparel, open-loop gift cards (that are usable anywhere), and luggage. 

Average per-person budgets are +57 percent in the $251 to $5,000 categories. And nearly three quarters of respondents say their programs include non-U.S. participants. 

The full study is available free here, and a white paper with highlights can be found here