With more companies struggling with smaller budgets to reward productive employees, some are restricting travel to certain locales or limiting items eligible for expense reimbursements. Such an approach may be penny-wise and pound-foolish, however.
It seems the slow-moving recovery is having an especially negative impact on travel-incentive plans.
According to the Incentive Research Foundation's latest survey of incentive-industry trends, companies are struggling with inadequate funding pools to cover expenses for employees' reward trips going forward.
More than three of five (62 percent) of the survey's 130 respondents say they are struggling more now than earlier this year, according to the Incentive Industry Trends 2011 report, which polled incentive providers, suppliers to the industry and corporate incentive-travel buyers.
"Respondents indicated they are less optimistic than they were in the spring about their ability to plan and implement incentive-travel programs," says IRF President Melissa Van Dyke. They "consider the economy as having a ... negative impact on their ability to execute the programs they would like."
Most of the respondents (62 percent) say the economy is the culprit behind reduced program planning -- numbers that haven't been this high since July of 2009. Additionally, nearly three of four (73 percent) expect their budgets to decline or stay the same in 2012, with the remainder expecting an increase.
Destinations also reflect today's economic realities, with 83 percent of planners providing incentive travel to sites in the United States, 55 percent going no further than the Caribbean, 52 percent including Europe and 29 percent targeting Central America. Slightly more than three in 20 (18 percent) are considering destinations in Asia, South America, Africa or the Middle East.
This is the first time the survey polled respondents about specific destinations, however, the organization has seen an increased interest in domestic locations. In a Spring 2010 survey, 42 percent of meeting and incentive planners said they were moving programs from international to domestic locations, compared to 7 percent who were doing the opposite -- moving from domestic to international.
In the fall of 2011, 16 percent of planners said they plan to move programs from an international to domestic location; 10 percent said vice versa.
Many programs are also cutting back on some reimbursable items.
For instance, more than half of the travel incentives will only include air tickets and not incidental expenses. About four of 10 (41 percent) plan to reduce the length of the trips and about the same number (40 percent) plan to cut -- or drastically reduce -- "non-meal" components, i.e., alcoholic beverages, desserts and other beverages, such as milk.
This "nickeling and diming," though, could backfire, says Marc Drizin, a recognition expert and co-principal of Tributumcorp.com, an Indianapolis-based workforce engagement and productivity consultancy.
"I get it that companies are not contributing as much [to incentive trips] or are changing destinations ... or are giving money instead of trips because they know their employees need to pay bills," he says.
"But skimping here and there? Paying for the airfare, but then charging them for the walnut they eat out of the hotel mini-bar? Employees feel resentful [with that tactic], despite the fact that the incentive was given at all," he says. "To me, that's just being penny-wise and pound-foolish."
Drizin also recommends companies spend their limited incentive budgets on complete trips, as opposed to simply writing employees a check.
"What you want to do in a recognition-and-reward environment," he says, "is to create a memory. Money is a satisfier, not a driver of engagement.
"Whatever incentive you do," he adds, "if it isn't feeding instant engagement and incentive, you ultimately won't get out of it what you want to get out of it."
Though St. Louis-based Maritz Travel says it isn't experiencing the same degree of scaling back as the IRF study indicates, Jim Ruszala, Maritz' director of marketing, says the travel-incentive industry is "definitely not business as usual."
Rather than slashing or severely scaling back programs, however, companies need to "invest their money smarter," he says, so incentives are more "clearly tied to business objectives."
"We knew years ago, before the recession," says Ruszala, "that we had to connect the incentive with the customer" and carefully determine who should receive gifts and why, based on business goals.
Maritz also pushed for a pre-recession effort to involve employees in the decision-making process, so money spent on incentives would result in the most engagement, commitment, loyalty and alignment possible.
"We've been stressing for years now that employers need to have that conversation with employees," Ruszala says. "It could be an idea box, focus groups, surveys, even a research study, to determine what people will be willing to trade off for their reward.
"A lot of organizations understand that people are in a pinch right now," he says. Yet, the need to reward productivity persists, "so when they decide to reward one person with a trip, they're allowing 'buy-in' options to include family members as well. Others are choosing to pay for one child, but not two."
What's unique and different in today's economy are the stepped-up negotiations between management and reward recipients.
Companies know employees are stretched thin and "don't have a lot of vacation time," Ruszala says, "so when they go on an incentive-travel experience, they don't want to exclude the family. We're definitely seeing more family-friendly opportunities."