Last year, our survey of incentive planners was overshadowed by uncertainty after the 9/11 terrorist attacks. More than 18 percent of respondents said they didn't know if they would have an incentive travel program in 2002, and 34 percent were unsure about 2003. The uncertainty seems to have faded: In our most recent survey (conducted in September), 71 percent plan to have incentive travel programs in 2004, up from 59 percent who planned programs for 2003. It's true that 26 percent are still not sure about their 2004 plans, but given the prospect of war with Iraq and the ongoing weakness of the economy, that's almost a vote of confidence.

Perhaps that's because, despite all the questions, in the end, incentive spending for 2002 was about what planners had predicted: an average of $2,394 per person, compared to the anticipated $2,250.

Incentive budgets are looking healthier, too — where last year a full 25 percent of planners anticipated budget cuts, this time around it's only 9 percent, and a third are expecting increases. That's almost back to the optimism of five years ago, when 36 percent expected increases. Uncertainty is still part of the current picture, though: 20 percent don't know whether budgets will go up or down, which is not far off from last year's 22 percent. Back in 1997, the number of those who didn't know which way budgets would go was too small to count.

Although budgets are improving, planners are watching costs as never before. “Our clients are very, very reluctant to let money go,” says Richard A. Kaback, vice president, travel services and incentives, at Don Jagoda Associates Inc. in Melville, N.Y. “A lot of clients feel it's improper to be hosting these kinds of programs when they've let staff go in this downturn. The incentive culture is such that this is a time when you need to be motivating your existing staff, but not everybody buys into that.”

Travel is still the most popular form of incentive, used most often by 58 percent of respondents, and regarded as the most effective reward by 49 percent; 46 percent use tiered programs involving cash, merchandise, and travel, up from 40 percent last year. In particular, despite common wisdom that it is the least effective incentive, 19 percent reported using cash most often. “Recently, a client told me, ‘Hey, these are tough times, cash will work,’” says Kaback. “We can all quote chapter and verse about why cash is a bad incentive, but there are decision-makers who believe that since times are tough, this is what people could really use right now.”

And because times have been tough for suppliers, planners are actually getting bargains when they shop for them. “There's far more room for negotiation these days with suppliers, where in periods of high travel demand there's less opportunity,” says Kaback. “It's supply and demand. So planners have every opportunity to negotiate in ways they never have before.”

The percentage of companies using incentive firms such as Kaback's to handle logistics for meetings stayed stable at 15 percent; another 15 percent are using independent meeting planners; 18 percent use travel agents; and 55 percent rely on in-house planners. And although suppliers report dealing more often with events scheduled on short notice, our survey still showed readers beginning to plan programs a full year in advance, up from 10 months last year.

Fear of Change

In this climate, what has been hurt most are innovative programs. The proportion of companies with programs for nonsales employees is far down from the 2000 peak of 51 percent.

“I think nonsales programs are harder to quantify,” says Mary Rigby, vice president of travel operations for EGR International Inc., an incentive and meeting management firm based in New York City. “Sales are an easy thing to measure, but if you're trying to motivate office people, it's more subjective.”

Individual incentives were flat, at 35 percent, and well down from earlier peaks. “We do have a couple of people we send on individual trips,” says Peter Morgan, vice president of sales for Peerless Boiler Inc., Boyertown, Pa. “Those are usually successful, because you make a deal with someone and come hell or high water they're going to make it.

“But I just think that overall it's better for your business if you can get more people together,” he continues. “We just find that when you use incentive travel for people in groups, there's an incredible amount of loyalty you can build.”

Classics, Revisited

So sales-oriented group trips are going strong, perhaps because of the weak economy. A good program can bring in sales even in tough times. “It's like advertising,” says Collier. “Do you advertise when business is good, or when business is bad? The answer is both. An incentive program is the same way. Frankly, most of our industry is slightly down in this area, but we're up. And I think a lot of it has to do with the right incentive package.”

Peerless' trip is four days long, which is about average. “A lot of our distributors are entrepreneurial, and they can't afford to have too many people out very long,” says Morgan. Nonetheless, he's planning a seven-day cruise this year. “I'm interested to see how people will react.”

International Demand

Noncruise international travel didn't seem to be hurting, at least not in September when we asked: 64 percent of respondents were offering incentives that went outside the United States, and 73 percent of those expected to continue to go overseas in 2003. Whether that's borne out depends on the international situation.

For Rigby, pent-up demand from 2002 has made 2003 a peak year for overseas travel. “We're seeing more international destinations for 2003,” she says. “I think that's because there was such a dropoff in 2002. But they're falling off again for 2004. Our two major clients have given directives not to go offshore for 2004.” So uncertainty is still a factor.

“2003 is lean, meager, and very tenuous,” says Kaback. “I have absolutely no confidence that what we have for 2003 will operate if we go to war. It could all cancel.”

For that reason, domestic trips should remain strong. The most popular domestic destinations remain those where fun can be had in the sun: Florida (43 percent), California (33 percent), and Hawaii (28 percent).

But the big news may be cruises. Companies offering cruise incentives jumped nine percentage points, from 34 percent last year to 43 percent in this year's survey. The average cruise length is five days, and 30 percent of the planners who now offer cruises expect to offer them in the future.

Many planners feel cruises offer an exotic location without the perceived risks of international travel. “People do see cruises as safer,” says Morgan. “That's why we're doing a cruise, our first, to the Caribbean in April. They thought about going to Europe, but realized they wouldn't get the same draw, and decided to do the cruise.”

But there's also the ease of one-stop shopping. “I don't think safety is the deciding criterion on cruises so much as value,” says Kaback. “And the cruise lines are so adept at satisfying the whole spectrum of needs, from dining to entertainment. I've never done a cruise program that has not been successful.”

About the Survey

This survey was conducted by Primedia Business Marketing Research, which contacted 4,008 domestic CMI subscribers by e-mail on September 12, 2002. A follow-up e-mail was sent September 18. By October 2, 285 usable responses had been received, for an effective response rate of 9.6 percent. In addition, 12 incomplete surveys were returned, and 1,027 of our outbound e-mail invitations were returned as undeliverable. The results presented here are based on the 285 completed surveys.