PULSE SURVEY The Incentive Industry Trends 2012 September 2012

Background and Survey Purpose Beginning in August 2008 it was decided that an appropriate topic for the 2008 Pulse Survey would be an incentive industry trends outlook for 2009 and with the continued economic conditions, also an appropriate topic for the trends outlook for 2012/2013. Given that the Incentive Research Foundation (IRF) is charged with advancing the science of incentives, it surveyed industry professionals to obtain their opinions about the more salient trends affecting the industry during 2012/2013. To this end, the IRF asked these professionals questions on trends with regard to incentive travel programs, merchandise non-cash programs, and budget changes forecast for In addition to the current topic on industry trends, the IRF tracks core issues of continuing interest to the industry: The extent to which company financial forecasts influence incentive programs; The effect of competitor reactions on company incentive programs; and Sensitivity to others perceptions of company incentive programs. 2

Research Methods Invitations to participate in this online survey were sent to 2461 incentive providers, suppliers to the industry and corporate incentive travel buyers. The 246 survey participants can be categorized 1 as follows… Buyer (Corporate planner, Incentive Company, Program Manager) (57.3%) Supplier (i.e./ Hotel, Airline, DMC, Brand/Merchandise) (33.7%) I am not involved in incentive programs (8.9%) Data collection was conducted August 21 st through September 4 th, This question was changed to segment the respondents into categories for logical question sequencing in Fall 2012.

Highlights: Core Issues 4 Findings indicate that the trends have stabilized this period compared to the previous four survey periods which indicated a strong positive upward trend for each of the core issues beginning in July 2009 – October The overall trends continue to remain lower than reported in The positive trend continues with respect to the perceptions of the companys financial forecast influences the design and implementation of our incentive program(s) compared and the previous three survey periods. *Previously question was asked as; Sensitive to perceptions of program extravagance to the extent that it would impact the type of company program awards and inclusions

Current Topic Industry Trends for 2011/ Incentive Travel Programs Merchandise Non-Cash Programs ROI – Budget Considerations

Perceived Impact of the Economy on Ability to Plan and Implement Incentive Travel Programs 6 Respondents in the current survey (September 2012) indicate they are less optimistic and consider the economy as having a less of a positive impact on their ability to plan and implement incentive travel programs when compared with the previous result in March (All positive 36% September 2012 vs. 60% March 2012) Strongly negative 0.7% March 2012 vs. 5.3% September All negative impacts 22% March 2012 vs. 36% September In the coming year what impact will the economy have on your ability to plan and implement travel incentive programs? (N=151) Note: The response categories were modified in the May 2011 and the historical data was adjusted to reflect these changes.

Perceived Impact of the Current Air Transportation Environment of Incentive Travel Programs 7 Most respondents (63%) have a negative perception of the current Air Transportation Environment and its impact on incentive travel plans. Significantly negative- 12% March 2012 vs. 13% September All negative perception- 71% March 2012 vs. 63% September What impact does the current air transportation environment have on your incentive travel program planning? (n=151)

Techniques Used In Coming Year To Enhance The Air Transportation Portion Of Incentive Travel Programs, What Component? 52% anticipate that All costs for air transportation-related expenses, are to be included components of Incentive Travel Programs in the coming year. 51% indicate that Only Tickets will be provided. 15% indicate that Non-air options will be included. 9% indicate that seating upgrades will be included. 7% indicate that Airline club passes will be included In the coming year, do you anticipate any of the following changes will be made with regard to choices of incentive travel programs? Check all that apply. (n=151, multiple choice) 8

Trending of Techniques Used To Enhance The Air Transportation Portion Of Incentive Travel Programs The inclusion of both components has decreased slightly compared to the results reported in March

Anticipated Changes In Coming Year With Regards To Incentive Travel Program Destinations Most of the respondents (45%) anticipate no change with respect to the program destinations for Incentive Travel Programs in the coming year. 16% indicate that they anticipate a change from International to Domestic with regards to the travel program destinations 15% Will pick locations closer to home with regards to the travel program destinations. 10 In the coming year, do you anticipate any of the following changes will be made with regard to incentive travel program destinations? Check all that apply. (n=151, multiple locations)

Trending Anticipated Changes With Regards To Incentive Travel Program Destinations There has been a significant decrease in program destinations from International to Domestic since

Anticipated Changes In Coming Year With Regards To Incentive Travel Accommodations 21% percent of respondents anticipate reducing the On-Site inclusions per participant for the accommodations portion of Incentive Travel Programs in the coming year. 27% indicate No Change 21% indicate the Total number of days/nights will be reduced. 18% indicate the Number of rooms will be reduced 12% indicate a Change to all inclusive pricing options. 12 In the coming year, what changes, if any, will be made with regard to accommodations for incentive travel programs? Check all that apply.(n=151, multiple response)

Trending Anticipated Changes With Regards To Incentive Travel Accommodations The anticipated reduction of both components with regards to hotel accommodations has decreased compared to the past two survey periods. 13

Anticipated Changes In Coming Year With Regards To Sponsored Non-Meal Related Components Nearly half (48%) of respondents anticipate No Change with regards to Sponsored Non-Meal Related Components for Incentive Travel Programs in the coming year. 32% indicate that Sponsored Non- Meal related components will be Reduced to some degree, and 21% indicated that Sponsored Non-Meal related components will be Slightly Increased. 14 With regard to the sponsored (paid by your company) non- meal related components such as airline tickets, transfers, gifts, etc for incentive travel programs, what changes will be made in the coming year? (n=151)

Anticipated Changes With The Involvement Of Procurement And Purchasing In Travel Incentive Programs Most of the respondents (44%) anticipate No Change with regards to involvement of procurement and purchasing for Incentive Travel Programs in the coming year, 51% agree that procurement involvement will increase by some degree in the coming year. 38% indicate that procurement and purchasing involvement will Slightly Increase in the coming year. 13% indicate that procurement and purchasing involvement will Significantly Increase in the coming year. 15 In the coming year, do you anticipate the involvement of procurement and purchasing with regard to your incentive programs to…(n=151)

Anticipated Changes In Incentive Travel Program Budgets for This Year Forty-eight percent (48%) of the respondents anticipate budgets for Incentive Travel Programs to Remain Unchanged this coming year. 21% indicate that budgets for Incentive Travel Programs will decrease by some degree in the coming year. 31% indicate that budgets for Incentive Travel Programs will slightly increase this coming year. 16 In the coming year, do you anticipate budgets for incentive travel programs in general to… (n=151)

Trend Strategy For The Consideration Of Award Strategy Moving (Either Temporarily Or Permanently) From "Group Trips" To "Individual Travel Packages" The majority (73%) of the respondents do not anticipate changing (either temporarily or permanently) from "group trips" to "individual travel packages" in the coming year. A combined 9% indicate that the consideration of award strategy moving (either temporarily or permanently) from "group trips" to "individual travel packages in coming year to decrease. 18% indicate that the consideration of award strategy moving (either temporarily or permanently) from "group trips" to "individual travel packages to increase in the coming year. 17 With regard to planning and implementing incentive travel award programs, do you anticipate the consideration of award strategy moving (either temporarily or permanently) from "group trips" to "individual travel packages" to…n=151)

Geographic Region Chosen as Destinations" for Incentive Travel Program(s). 53% of the respondents indicated that North America was their chosen region for Incentive Travel Destination programs. Top regional destinations include: The Caribbean (46%) Europe (41%) Central America (16%) 18 In the coming year, please indicate which geographic region you will choose as your "destinations" for your incentive travel program(s). (n=151)

Perceived Impact of the Economy on Ability to Plan and Implement Merchandise Non-Cash Incentive Programs 19 In September 2012, respondents continue to anticipate the impact of the economy to have a positive effect on their ability to plan and implement merchandise non-cash incentive programs potentially indicating a positive trend in the coming year. Negative impact 22% in September 2012 vs. 17% in March No impact 28% in September 2012 vs. 31% in March Positive impact 50% in September 2012 vs. 53% in March Do you anticipate budgets for merchandise non-cash incentive programs in the coming year to…(n=124) Note: 2008 vs percentages not comparable because not involved response category added in 2009 survey. Note: The response categories were modified in the May 2011 and the historical data was adjusted to reflect these changes.

Anticipated Changes This Year With Regards To Merchandise Non-cash Incentive Programs Award Selections 36% of the respondents anticipate Increased merchandise award values in the coming year with regards to Non-Cash Incentive Program Award Selections 16% indicate No change to the merchandise non-cash incentive program this year. 32% indicated Included individual travel as an option 31% indicated Increased use of debit/prepaid gift cards. 29% indicated Added Merchandise. 27% indicated Included experience- related (SPA, event tickets, etc.) 20 With regard to merchandise non-cash incentive programs, what changes,, will be made this year with award selections? Select all that apply. (n=75)

Merchandise Types Used Within Reward and Recognition Programs Electronics (79%), Golf Items (68%), Luggage (66%) and House wares (62%) are the most common merchandise used in Reward and Recognition Programs. More than half of the respondents indicate they use: Open Cards (59%) Jewelry/Watches (58%) Office Accessories (58%) 21 What types of merchandise are you using within your reward and recognition program? Select all that apply (n=71)

Use of Points Based System for Merchandise Non-Cash Incentive Programs A majority (82%) of the respondents indicate they use a points based system for their Merchandise Non- Cash Incentive program(s). 18% indicated they do not use a points based system. Compared with October 11, more respondents indicate the use of a Points Based System for Non-Cash incentive programs. 22 Do you use a "points-based" system for your merchandise non-cash incentive program? (n=124)

Anticipated Changes In Non-Cash Incentive Program Budgets for This Year Forty-four percent (44%) of the respondents anticipate budgets for Non-Cash Incentive Programs to Slightly Increase this coming year. 10% indicate that budgets for Non- Cash Incentive Programs will decrease by some degree in the coming year. 49% indicate that budgets for Non- Cash Incentive Programs will increase by some degree in the coming year. 23 Do you anticipate budgets for non-cash incentive programs in the coming year to...(n=124)

Anticipated Changes Incentive Program Elements In general, respondents indicated that they anticipate most incentive program elements to remain the same in the coming year. The Number of total qualifiers is the element that has the highest reported increase in the coming year at 41%. The following elements received Increased ratings of greater than 20% for the coming year: Awards budget (36%) Third Party/Incentive Company involvement (23%) Communications budget (22%) 24 This year, do you anticipate the following incentive program elements will increase, decrease or remain the same? (n=124)

General Issues Of Interest to the Industry 25 Budget Changes for Incentive Program Elements

Impact on Incentive Program As A Result Of The Current Economic Conditions 51% of the respondents anticipate no changes to the budget for Incentive Programs in the coming year as a result of the recent economic conditions. 18% indicate that that budgets for Incentive Programs have been reduced as a result of the recent economic conditions. 18% indicate that budgets for Incentive Programs have increased as a result of the recent economic conditions. 12% indicate no budget change, but reduced the component and added or increased a merchandise incentive program component. 1% indicate the program has been eliminated entirely as a result of the recent economic conditions. 26 As a result of the recent economic conditions, have you made a change to your upcoming incentive program, and if so have you… (n=141)

Impact of Budget Changes on Employee Morale Aside from the respondents that indicated an increase in the budget for the coming year, in general, respondents indicated that changes to their Incentive travel program will have either a decreased impact or remain the same on Employee morale. 27 You indicated that you have [inserted response on change to their program], what impact has this has on…

Impact of Budget Changes on Sales Results The impact of budget changes on Sales Results indicate significant differences. For those that increased the 88% indicate an increase in Sales results. Conversely, those that reduced the budget or reduced the travel incentive portion, between 24% indicate that Sales Results have decreased. 28 You indicated that you have [inserted response on change to their program], what impact has this has on…

Impact of Budget Changes on Profitability Results The impact of budget changes on Profitability Results indicate significant differences. For those that increased the 88% indicate an increase in Profitability results. 29 You indicated that you have [inserted response on change to their program], what impact has this has on…

Use of Enhancement Tools/Techniques for Incentive Programs Many of the respondents (62%) indicate they use Social Media tool/techniques to enhance their incentive program. 48% indicate the use of CSR components. 36% indicate that they use Gaming techniques. 27% indicate that they use Integration with Sales Management Tools. 26% indicate that they use a Virtual elements component. 30 Are you using any of the following to enhance your programs? (Check all that apply) …(n=134)

Trending of Enhancement Tools/Techniques for Incentive Programs While all components show decreases in the enhancement of incentive programs, Gaming Techniques had the only increase (6%) compared to March 2012 as an enhancement tool for incentive programs. Social Media, CSR components, Integration with Sales Management Tools and Virtual Elements each have significant decreases as enhancement tools when compared with October Are you using any of the following to enhance your programs? (Check all that apply) …(n=176)

General Perceptions of the Coming Year Most respondents (54%) perceive The Economy to be either Slightly or Extremely positive in the coming year. 32 As you look ahead to the coming year, what is your view of the following. (n=138) While the outlook on the Economy is generally positive, 29% of the respondents also indicate a negative perception of the economy in the coming year. In general, over 40% of the respondents perceive Slightly Positive/Extremely Positive views with respect to each of the areas measured.

Impact of 2012 Presidential Election on Incentive Program Planning for 2013 and Beyond 60% indicate they not changing the current plans for 2012 or 2013 because of the upcoming Presidential Election. 27% indicated that changes may be made next year (2013) based upon the process/outcome of the 2012 Presidential Election. 7% indicated that changes are planned to be made next year as a result of the upcoming Presidential Election representing the only significant change compared with March Only 6% indicated that changes have already been made to this years program because of the upcoming Presidential Election. 33 Which of the following statements best describes the impact the upcoming Presidential Election will have on your planning for 2013 and beyond?…(n=224)