PULSE SURVEY The Incentive Industry Trends 2012 September

PULSE SURVEY The Incentive Industry Trends 2012 September 2012

Background and Survey Purpose 2 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 2012. 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.

Research Methods 3 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, 2012. 1 This question was changed to segment the respondents into categories for logical question sequencing in Fall 2012.

Highlights: Core Issues 4 100% 93% 90% 86% 84% 81% 77% 75%75% 74% 73% 69% 68% 64%63% 64%64%64% 61% 62% 80% 70% 60% 43% 40%39% 45% Sep-12 Mar-12 Oct-11 May-11 Oct-10 May-10 Nov-09 Jul-09 Mar-09 31% Oct-08 30% 47% Sep-08 40% 55% 49% 48% 44% 42%41% 52% 50% The company financial forecast influences the design and implementation of incentive programs Competitors’ reactions to programs impact the products and services included in company incentive programs Perception of the Public significantly influences the design of our incentive program(s). * Perception of internal (non-incentive) stakeholders significantly influences the design of our incentive program(s). *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 2011/2012 5 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 Strongly Positive Somewhat Positive Have No Impact Somewhat Negative Strongly Negative 5 17 43 7 1 31 8 16 55 18 51 20 61 43 50 40 9 6 51 38 28 19 6 2 5 3 8 3 10 9 4 6 Oct-10 May-11 Oct-11 10 May-10 5 Nov-09 18 Jul-09 4 3 4 4 5 22 7 38 Mar-09 In the coming year what impact will the economy have on your ability to plan and implement travel incentive programs? (N=151) 22 21 15 11 • Strongly negative 0. 7% March 2012 vs. 5. 3% September 2012. • All negative impacts 22% March 2012 vs. 36% September 2012. 4 9 0 5 0 Sep-12 18 5 Mar-12 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 2012. (All positive 36% September 2012 vs. 60% March 2012) No Answer 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 No Answer Significantly Positive Slightly Positive Have No Impact Slightly Negative Significanty Negative 100 12 80 60 What impact does the current air transportation environment have on your incentive travel program planning? (n=151) 50 40 27 20 22 0 5 3 0 8 2 0 MMM-yy • Significantly negative- 12% March 2012 vs. 13% September 2012. • All negative perception- 71% March 2012 vs. 63% September 2012. 59 MMM-yy Most respondents (63%) have a negative perception of the current Air Transportation Environment and it’s impact on incentive travel plans. 13

Techniques Used In Coming Year To Enhance The Air Transportation Portion Of Incentive Travel Programs, What Component? 8 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) All costs for air transportation -related expenses will be included 52% Only tickets will be provided 51% Non-air options (train, bus, driving allowances) will be use) 15% Seating upgrades will be included 9% Airline club passes will be included 7% 0% 100%

Trending of Techniques Used To Enhance The Air Transportation Portion Of Incentive Travel Programs 9 60% 52% 51% 45% 42% 40% 32% 30% 28% 30% 22% 20% 10% y M -y M M M M -y y M M M -y y 0% M The inclusion of both components has decreased slightly compared to the results reported in March 2012. 56% 55% 53% Only tickets will be provided All costs for air transportation-related expenses will be included

Anticipated Changes In Coming Year With Regards To Incentive Travel Program Destinations 10 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. 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) No change 45% From international to domestic 16% Will pick locations closer to "home" 15% From land to cruise 4% From domestic to international 3% From cruise to land 3% 0% 20% 40% 60%

Trending Anticipated Changes With Regards To Incentive Travel Program Destinations 11 45% 42% 40% 35% 30% 28% 26% 25% 23% 20% 19% 15% 10% 2% 7% 16% 14% 7% 5% 6% 10% 5% 3% 4% 16% 15% 11% 9% 4% 3% 1% 3% y M M -y M M M M -y y y M -y M M M M M -y y y 0% M There has been a significant decrease in program destinations from “International to Domestic” since 2010. From cruise to land From land to cruise From domestic to international From international to domestic Will pick locations closer to "home"

Anticipated Changes In Coming Year With Regards To Incentive Travel Accommodations 12 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% No change On-site inclusions per participant decreased 21% Total number of days/nights reduced 21% 18% Number of rooms reduced • 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”. Change to "all inclusive" pricing options 10% Number of room upgrades reduced 9% Total number of rooms increased On-site inclusions per participant increased 7% Total number of days/nights increased 5% Number of room upgrades increased Don't Know 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) 12% 5% 1% 0% 10% 20% 30%

Trending Anticipated Changes With Regards To Incentive Travel Accommodations 13 60% 52% 47% 50% 42% 41% 40% 32% 30% 28% 30% 21% 18% 19% 20% 15% 10% Total number of days/nights reduced y M -y M M M M -y y M M M -y y 0% M The “anticipated reduction” of both components with regards to hotel accommodations has decreased compared to the past two survey periods. Number of rooms reduced

Anticipated Changes In Coming Year With Regards To Sponsored Non-Meal Related Components 14 Nearly half (48%) of respondents anticipate No Change with regards to Sponsored Non-Meal Related Components for Incentive Travel Programs in the coming year. Significantly reduced 2% 30% Slightly reduced • 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. 21% Slightly increased Significantly increased With regard to the sponsored (paid by your company) nonmeal related components such as airline tickets, transfers, gifts, etc for incentive travel programs, what changes will be made in the coming year? (n=151) 48% No change 0% 0% 20% 40% 60%

Anticipated Changes With The Involvement Of Procurement And Purchasing In Travel Incentive Programs 15 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. Significantly decrease 3% Slightly decrease 2% 44% Remain unchanged • 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. Significantly increase In the coming year, do you anticipate the involvement of procurement and purchasing with regard to your incentive programs to…(n=151) 38% Slightly increase 0% 13% 20% 40% 60%

Anticipated Changes In Incentive Travel Program Budgets for This Year 16 Forty-eight percent (48%) of the respondents anticipate budgets for Incentive Travel Programs to “Remain Unchanged” this coming year. Significantly decrease 3% 18% Slightly decrease • 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. 31% Slightly increase Significantly increase In the coming year, do you anticipate budgets for incentive travel programs in general to… (n=151) 48% Remain unchanged 1% 0% 20% 40% 60%

Trend Strategy For The Consideration Of Award Strategy Moving (Either Temporarily Or Permanently) From "Group Trips" To "Individual Travel Packages" 17 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. Significantly decrease Slightly decrease 8% 73% Remain unchanged 17% Slightly increase Significantly increase 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) 1% 1% 0% 20% 40% 60% 80%

Geographic Region Chosen as “Destinations" for Incentive Travel Program(s). 18 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%) 53% North America 46% Caribbean 41% Europe Central America 16% Asia 16% 13% South America 10% Africa Not Applicable In the coming year, please indicate which geographic region you will choose as your "destinations" for your incentive travel program(s). (n=151) Middle East 0% 7% 4% 20% 40% 60%

Perceived Impact of the Economy on Ability to Plan and Implement Merchandise Non-Cash Incentive Programs 19 No Answer Significantly Positive Slightly Positive Have No Impact Slightly Negative Signficantly Negative 19 28 42 38 11 0 12 0 y y -y -y M M M -y y 24 M -y M M M y y M -y M M 34 2 13 -y y y M 24 4 M 2 15 20 M M 31 27 44 39 2 M M M 20 1 -y y -y -y M M 2 28 24 33 y 33 M 18 19 1 1 16 6 20 20 11 4 M 22 21 17 Do you anticipate budgets for merchandise non-cash incentive programs in the coming year to…(n=124) 23 3 11 27 23 • Negative impact 22% in September 2012 vs. 17% in March 2012. • No impact 28% in September 2012 vs. 31% in March 2012. • Positive impact 50% in September 2012 vs. 53% in March 2012. 2 M 19 31 0 7 M 5 M 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. Note: 2008 vs. 2009 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 20 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 experiencerelated (SPA, event tickets, etc. )” 32% Included individual travel a. . . 31% Increased use of. . . 29% Added merchandise 27% Included experience-relate. . . 24% Added debit/prepaid gift. . . Decreased use of. . . No change Decreased merchandise. . . With regard to merchandise non-cash incentive programs, what changes, , will be made this year with award selections? Select all that apply. (n=75) 36% Increased merchandise. . . 17% 16% 13% 0% 10%20%30%40%

Merchandise Types Used Within Reward and Recognition Programs 21 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%) Golf Items 68% Luggage 66% 62% Housewares Open Card 59% Jewelry/Watches 58% Office Accessories 58% Clothing/Apparel 49% Food 49% Restricted Card 42% Closed Card 38% Plaques/Trophies 38% Flowers What types of merchandise are you using within your reward and recognition program? Select all that apply (n=71) 79% Electronics 0% 34% 50% 100%

Use of Points Based System for Merchandise Non-Cash Incentive Programs 22 A majority (82%) of the respondents indicate they use a points based system for their Merchandise Non. Cash Incentive program(s). Pulse Survey Fall ‘ 12 Don't Know 0% No 18% • 18% indicated they do not use a points based system. Yes 82% 100% • Compared with October ‘ 11, more respondents indicate the use of a “Points Based System” for Non-Cash incentive programs. 80% 60% Do you use a "points-based" system for your merchandise non-cash incentive program? (n=124) 48% 40% 20% 0% 82% 74% 26% 18% 12% 0% October-12 Yes March-12 No 0% Sept. -12 Don't Know

Anticipated Changes In Non-Cash Incentive Program Budgets for This Year 23 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. Significantly decrease 0% Slightly decrease 41% Remain unchanged 44% Slightly increase Significantly increase Do you anticipate budgets for non-cash incentive programs in the coming year to. . . (n=124) 10% 0% 5% 20% 40% 60%

Anticipated Changes Incentive Program Elements 24 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%) This year, do you anticipate the following incentive program elements will increase, decrease or remain the same? (n=124) 41% Number of total qualifiers 40% 36% Awards budget 12%7% 49% 12%3% Third Parth/Incentive Company involvement 23% Communications budget 22% Third Party/Incentive Company management 12% Incentive program non-meal components 12% 54% 19% 15% Incentive program on-site gifts 12% 52% 22% 14% Administration budget 7% Per diem cash allowances 5% 0% Increase 54% 12%11% 64% 12%2% 60% 18% 11% 73% 18% 2% 52% 20% Remain the Same 40% 14% 29% 60% Decrease 80% 100% No Answer

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 26 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 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. 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) 51% No changes Reduced the budget 18% Increased the budget 18% No budget change, but reduced the travel. . . 12% Eliminated the program entirely 1% No budget change, but replaced the travel incentiv. . . 1% 0% 20% 40% 60%

Impact of Budget Changes on Employee Morale 27 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. No budget change, but replaced the travel incentive (n=1) 0% No budget change, but reduced the travel component (n=17) 24% 29% 47% 84% Increased the budget (n=25) 0% 48% Reduced the Budget (n=25) 48% You indicated that you have [inserted response on change to their program], what impact has this has on… 0% Increase Decrease 20% 40% Remain Same 60% 80% 100% Don't Know

Impact of Budget Changes on Sales Results 28 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. No budget change, but replaced the travel incentive (n=1) 0% No budget change, but reduced the travel component (n=17) 6% 24% 88% Increased the budget (n=25) Reduced the Budget (n=25) 71% 24% 0% 0% 76% You indicated that you have [inserted response on change to their program], what impact has this has on… 0% Increase Decrease 20% 40% Remain Same 60% 80% 100% Don't Know

Impact of Budget Changes on Profitability Results 29 The impact of budget changes on Profitability Results indicate significant differences. For those that increased the 88% indicate an increase in Profitability results. No budget change, but replaced the travel incentive (n=1) 0% No budget change, but reduced the travel component (n=17) 29% 100% 24% 88% Increased the budget (n=25) Reduced the Budget (n=25) 47% 12%28% 0% 60% You indicated that you have [inserted response on change to their program], what impact has this has on… 0% Increase Decrease 20% 40% Remain Same 60% 80% 100% Don't Know

Use of Enhancement Tools/Techniques for Incentive Programs 30 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. Are you using any of the following to enhance your programs? (Check all that apply) …(n=134) 62% Social Media CSR components (Corporate Social Responsibility) Gaming Techniques 48% 36% Integration with Sales Management Tools (salesforce. com, etc. ) 27% Virtual elements 26% 0% 20%40%60%80%

Trending of Enhancement Tools/Techniques for Incentive Programs 31 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. 56% 74% 62% Social Media 44% 57% 48% CSR components (Corporate Social Responsibility) 19% 33% 36% Gaming Techniques • Social Media, CSR components, Integration with Sales Management Tools and Virtual Elements each have significant decreases as enhancement tools when compared with October 2011. Are you using any of the following to enhance your programs? (Check all that apply) …(n=176) Integration with Sales Management Tools (salesforce. com, etc. ) Virtual elements 14% 37% 23% 31% 26% 0% 20% 40% 60% 80% October-11 March-12 September-12

General Perceptions of the Coming Year 32 Most respondents (54%) perceive “The Economy” to be either Slightly or Extremely positive in the coming year. • 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. The Economy (n=221) 5% Merchandise Awards (n=191) 11% 7% 39% Incentive Group Travel (n=208) 5% 40% 14% 0% As you look ahead to the coming year, what is your view of the following. (n=138) 40% Individual Travel (n=200) Pre-Paid Gift Cards (n=181) 18% 49% 20% Extremely Positive Slightly Positive NO Change 40% 23% 6% 32% 16% 1% 38% 3% 13% 33% 17% 5% 39% 15% 4% 60% 80% 100%

Impact of 2012 Presidential Election on Incentive Program Planning for 2013 and Beyond 33 60% indicate they not changing the current plans for 2012 or 2013 because of the upcoming Presidential • 27% indicated that changes may be Election. 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 2012. • Only 6% indicated that changes have already been made to this years program because of the upcoming Presidential Election. Which of the following statements best describes the impact the upcoming Presidential Election will have on your planning for 2013 and beyond? …(n=224) Not changing our current plans, or next year’s, in any way because of the upcoming Presidential Election 66% 60% Changes may be made next year depending upon the process/outcome of the upcoming Presidential Election 25% 27% Changes are planned to be made next year as a result of the upcoming Presidential Election The upcoming Presidential Election has already caused changes to be made this year 2% 7% 6% 6% 0% 10%20%30%40%50%60%70% March-12 September-12