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IRF Research: Incentive Industry Shows Optimism

More than one-fourth of respondents feel positive rather than negative about the economy's impact on future programs

Melissa Van Dyke IRF

In February, the Incentive Research Foundation (IRF) released its 10th annual survey of the trends seen by planners, suppliers, and corporate executives who oversee and run incentive programs. That data provides substantial insight into the current trends for incentive travel, merchandise and gift card programs, and the news is generally good. By and large, the data shoes that 2017 will be a year of growth for non-cash incentives.

 That comes from the IRF's recently released 2017 Outlook Study --previously called the IRF Trends Study -- which introduces our new industry metric, the Net Optimism Score, which is found by taking the number of respondents responding positively and subtracting the number responding negatively. So if 60 percent are optimistic on a survey question and 40 percent are pessimistic, the Net Optimism Score would be 20 percent.

 With a decade of information to look back on, the 2017 Outlook Study does two things. It offers a snapshot of what's happening to budgets right now (a "point-in-time" insight), and it provides data that can be compared to previous years' scores (an "over time" insight. 

 But over time the Net Optimism Score can also be measured against the broader economy's movements. That is to say, it can be a "leading indicator" of what the economy's impact on incentive programs will be the future -- which of course makes it a good predictor of next year's budgets. So the Net Optimism Score over time can be decreasing while the Net Optimism Score at this point in time can be positive -- which is the case with merchandise and gift card incentive programs, as you'll see below. .

 Here are some highlights of what we learned from the 248 respondents who participated in our Outlook Study last fall.

Incentive Travel Over Time

 While the IRF's Net Optimism Score for incentive travel programs shows that 26 percent more individuals feel positive rather than negative about the economy's impact on future programs, this is down from highs in the 50 percent range in the last few years, but well above the extreme lows observed in 2009 and 2011. Which suggests that planners think future budgets will not be as strong as they are this year.

Incentive Travel at This Point in Time

 For 2017, the Net Optimism Score is positive both overall and in a variety of specific incentive travel budget items. The current study shows positive scores for food and beverage budgets (29 percent net positive ) and room budgets (25 percent net positive). However, growth in the number of room-nights in incentive travel programs in 2017 was minimal (only  3 percent net positive), reflecting concerns over growing costs. 

 The respondents to the IRF Outlook Study can also be divided into groups; corporate incentive planners and program owners did not see their 2017 room budgets increase as much as third party incentive professionals and suppliers did. 

 In 2017, survey respondents were also strongly positive in the involvement of procurement or purchasing departments (36 percent net positive). This growth is most pronounced -- and anticipated -- among hoteliers and other survey participants on the supply side. 


Incentive Merchandise and Gift Card Optimism Over Time
 A look across the last seven years shows that the Net Optimism Score for merchandise and gift card programs has ebbed and flowed considerably as the economy has changed.  The Net Optimism Score for merchandise and gift card programs hit a low in 2009 at -8 percent and also dipped sharply in 2011 to 1%, perhaps in anticipation of the GDP declines that followed in the months after.  Although the Net Optimism Score for merchandise and gift card programs has remained positive since 2012,  it hit a high in 2013 at 43 percent.  Since 2013 the Net Optimism Score has been on a slight decline, but still remained solidly positive in the last survey at 14 percent.  
 This current Net Optimism Score is driven first by suppliers who are most optimistic about the economy's impact on non-cash reward programs.  Corporate stakeholders are currently more neutral, with data showing they are most concerned about the regulatory environment's impact on the incentives industry. 
Incentive Merchandise and Gift Card Awards at This Point in Time
 As the overall Net Optimism Score is positive for gift cards and merchandise, we would expect to see this reflected in 2017 program design plans.  Accordingly, the Net Optimism Score for merchandise and gift budgets is strong, with 35 percent more program owners increasing than decreasing their budgets. This positivity is reflected across the board, with net optimism scores showing more corporate incentive stakeholders, suppliers, and planners expecting an increase than a decrease in the number of award earners (41 percent), as well as growing budgets for program technology (37 percent), communications (28 percent), awards (25 percent), and administration (18 percent). Corporate planners and program owners' attention is concentrated on gift card growth (21 percent), while suppliers and third party service providers show increased emphasis on experiential rewards in the coming year (63 percent and 37 percent respectively).
 Looking across the net numbers for all key statistics for all prime areas of the incentive travel, merchandise, and gift card markets shows a strong story of growth in 2017. The net effect of all this data is a good story for programs moving forward.


Melissa Van Dyke is president of the Incentive Research Foundation (IRF), where she has helped triple the organization's research and education footprint. As president, Van Dyke has responsibility for all day-to-day operational, financial, and marketing aspects of the organization.