On the surface, the news from our 2008 Incentive Trends Survey looks pretty positive. Per-qualifier spend is up a healthy 7 percent this year over last, to $3,659, and budgets are up for 40 percent of respondents.

But there's another side to the story. Budgets are the same or less for 53 percent of readers. And the write-in responses accompanying our survey point to the fact that even a healthy increase in budgets cannot compensate for the skyrocketing cost of hotel, air, and destination management companies, along with the shrinking value of the U.S. dollar for overseas programs.

“A 7 percent budget increase is barely going to cover your increased costs,” says Bob Dawson, 2008 research chairman for the Incentive Research Foundation and director of The Business Group, an incentive ROI consulting company in Rocklin, Calif. The reality, he says, is that planners are walking a fine line between getting the best value for their dollar and motivating participants who are being asked to do more today than even two or three years ago.

This budget crunch is not likely to get better any time soon. Domestic hotel rates have risen nearly 6 percent over last year, according to PKF Consulting, with hot markets such as New York and Miami posting double-digit gains. The U.S. dollar, already at a historic low against the euro at the end of 2006, sank another 12 percent this year. At press time, one euro cost travelers $1.53. Neither situation is expected to improve in 2008.

Planners will feel the pinch even more because of the growing influence of procurement, says Julie Carroll, vice president, industry relations, BCD Meetings & Incentives, St. Louis. “Now that larger companies have procurement departments in place, they are expecting planners to keep budgets flat, even though they know that air and hotel have increased.”

The survey shows that readers are allocating their budgets the same as last year, with the largest portion going to hotel (36 percent), followed by air at about 25 percent. Jerry McGee, president of travel and event management at Ambassadors International, Newport Beach, Calif., reports that in some instances, he has seen plane tickets creeping up toward 30 percent of per-qualifier spend.

“Airfare is becoming a more significant part of the budget,” he says, noting that particularly for business-class travel, schedules and prices are becoming more of a burden. “We always looked at dates and rates for hotels when putting together an incentive program; now we look at dates and rates for airlines as well.”

How Far Is Too Far?

Faced with rising costs all around, readers say that they are most likely to cut back on on-site gifts, choose less expensive destinations, or shorten the trip. That probably explains why the survey shows more off-the-beaten-path destinations cropping up among readers' choices.

The problem is, winners are starting to notice. “Most incentive winners are sophisticated travelers, so if you take them to a five-star destination one year and then a four-star destination the next, they will notice,” McGee says. Cutting back on the frills on-site will have the same result, notes IRF's Dawson, who overheard participants at a recent incentive program cocktail reception bemoan the lack of golf on this year's itinerary. “It's really hard for the planner to say, ‘Look, the company didn't want to fund it,’” he notes.

Bob Vitagliano, executive director, iSITE Foundation, couldn't agree more. “How do you tell people that we're having tough times and have to cut back on the incentive program when we're rewarding CEOs with ridiculous compensation packages?” he says. “We're getting to the point where we're pushing employees too far and expecting them to make too much of a sacrifice without enough rewards.”

This has put planners in a tough spot, he says. “I recall things being this tight only once before: during the recession of the early '70s.”

C-Level Decisions

The fact that C-level executives are making the destination decisions in nearly half the companies that responded to our survey is telling.

“CFOs are taking more of a microscope to programs, asking, ‘Do they really have to stay at the Ritz-Carlton?’” Dawson says, adding that he thinks it's partly the industry's fault. Even after decades of pounding away at proving ROI, he says, the value of incentive programs as a sales generator still has not sunk in.

However, the value might soon be difficult to ignore. Brian Martenis, sales incentives manager for Bayard Sales Corp., Philadelphia, says that his higher-ups chose not to do a European program last year — and it definitely has affected sales. He knows of several customers who have taken their business elsewhere because of his company's decision.

“Just last week, a customer called and told me where she was taking her business. She was very vocal about why she did business with us and what she expected us to do in return.”

How Does Your Incentive Compare?

This year's incentive benchmarks continued to trend toward shorter programs with less lead time for planning, and five-day, four-night programs, which has been the average program length for several years. More and more companies are also including meetings in their programs, as trips shift from the “pure incentives” of years ago to a mix of business sessions and pleasure. The average number of qualifiers also remained fairly steady at 100, with average group size of 160 including guests and staff.

Creative Site Decisions

While almost half of our survey respondents take their incentives outside the United States every year, and nearly 80 percent leave the U.S. at least once every couple of years, Europe just isn't a likely destination for incentive groups because of the devalued dollar.

“The situation with the dollar is a disaster for our industry,” says Vitagliano. “Instead, groups that used to use Europe are considering Montréal, where at least the dollar is equal, or New Orleans, which has an international flavor.”

The one bright spot in Europe for respondents is Spain. Always known for delivering value, it was the only European destination to make this year's list of international destinations. “There are some good values in Spain,” confirms Bayard's Martenis, noting that his participants tend to trust that if he is taking them off the beaten path, say to Marbella in the south of Spain, it will still be a five-star program.

Instead of Europe, Mexico and destinations in the Caribbean ranked among the top choices for our readers. Martenis says he has been able to negotiate some great deals at five-star properties in Mexico, especially when he's willing to jump in at the start of construction at a new resort.

BCD Meetings & Incentives' Carroll has seen more clients considering second-tier cities as well. For example, instead of using Miami, they're choosing Tampa; in Mexico, instead of Cancun, they're choosing Puerto Vallarta, which is a better value.

“This allows them to keep the on-site activities and amenities at the same level people are used to,” she says, adding that some clients are even adding tiers to their programs, sending some winners to a second-tier destination and others to a first-tier one.

Both Carroll and Dawson have noticed more openness to off-season destinations, such as Bermuda in April or Hawaii in the rainy season, hoping that the trophy value of the destination, along with golf, spas, and five-star properties, can overcome any weather-related concerns.

As Dawson puts it, “People are saying, ‘We're going to take a chance and hope it doesn't rain every day.’”


Corporate Meetings & Incentives' Annual Incentive Trends Survey, completed in November 2007, is based on the responses of 118 subscribers who have decision-making responsibilities for their companies' incentive programs. The respondents hold a combination of C-level, sales and marketing management, and meeting/incentive management titles. Almost half of the respondents (48 percent) work in companies with 1,000 or more employees.