Updating Your Incentive Travel Budget
The trend is undeniable: Demand for travel is incredibly strong. Despite rumblings of recessions and industry-specific layoffs, travel bookings have been running above pre-COVID levels and incentive travel programs are booking well into 2025 and beyond.
While many companies try to keep the cost of their incentive travel program flat year over year, steady inflation will gradually eat into the program details over time. With high inflation and high demand, however, increased budgets are needed to deliver the same program.
- New York Times reports that airline fares, transportation services, and food away from home top the list of price increases. Here’s what happened from February to March alone:
- Wall Street Journal notes that after a decade of declining fares, increased post-pandemic demand and pilot shortages are driving higher costs. Amazingly, “airfare inflation peaked last fall at 43%, according to the U.S. consumer-price index, easing to 18% in March.”
- And in its May 6 Stocks That Defined the Week column, the Wall Street Journal also reported recently that Marriott’s “first quarter revenue jumped 81% to $4.2 billion as it saw the largest leap in global travel demand since the onset of the pandemic.”
- TSA passenger volume records show that the number of travelers is back to 2019 levels, but from pilots to restaurants, the 77% of respondents to an Incentive Research Foundation (IRF) study on the travel industry workforce are reporting labor shortages. Low pay is reported to be the main barrier, driving higher costs to travelers, as employers increase overhead to attract talent.
It’s a recipe for higher costs.
At NXL, we’re seeing increased demand for meetings and incentives across all sectors, and encountering higher room rates and soaring airfares, even when booking in off-season or shoulder-season dates.
If you are thinking of booking your next incentive program, here’s what we recommend:
- Plan for a 10-20% increase to budget for 2024 and 2025. We have already seen some hotels double in cost since 2019.
- If you can’t increase your budget, consider how to adapt your program:
- Develop a tiered program, rewarding fewer people with the big trip, but expanding rewards to include individual travel or points for the next tier.
- Give participants more free time. “Ample time to relax” is the most important factor in program desirability for participants according to recent IRF research, so this may actually enhance the program experience for guests.
- Be flexible about your day/date pattern.
- Look at a second tier city for your national sales meeting.
- Review your business rules for air travel and fare classes.
- Be open to all-inclusives and cruises that can often offer the greatest value.
There are some early signs that demand may be leveling off, but not dropping off. It’s better to be prepared, though, for high costs in the foreseeable future.
We’d love to help you find your next destination!