When financial services giants announced plans to send executives on incentive trips to chi-chi hotel/resort destinations last fall and earlier this year – drawing the ire of Congress and the public – the travel and upscale hospitality industries were suddenly caught in the “AIG effect” crossfire.
“They (financial companies) didn’t understand the impact of the Treasury’s regulations which put limits on executive pay as well as eliminated ‘unnecessary business conventions and meetings for any company receiving TARP funding,’” said Marlene Colucci, executive vice president for the American Hotel and Lodging Association in Washington, D.C.
Companies like AIG, Wells Fargo and Citigroup might be bad actors, but it was the Wynn Resort in Las Vegas, for example, that took the real hit when Wells Fargo cancelled an executive “incentive weekend,” forcing immediate staff layoffs and downward sales projections.
“Industrywide, everybody has been hurt – with a 20 to 30 percent drop in large meetings,” Colucci said, adding that even companies outside the Wall Street fray are worried about their public image and stockholder backlash.
Lost business at The Greenbrier in West Virginia – where threatened labor strikes just added fuel to the bailout fire – was addressed by Bloomberg.com last week.
But The Greenbrier’s losses have been The Broadmoor Hotel’s gain.
The resort landed an unexpected trophy account when the Council of Insurance Agents & Brokers moved two of its three annual confabs from The Greenbrier to Colorado Springs.
The resort also has attracted a National Association of Realtors meeting that will fill the entire hotel later this month.
But Broadmoor director of marketing and sales John Washko and CEO Steve Bartolin are not willing to wait for business to fall from the sky.
In response to an “unprecedented” effort to reassure clients that the hotel will be good stewards of corporate resources, the resort rolled out a “money back guarantee” for groups of 50 or more.
The move was undertaken, Washko said, “to point out that we’re a responsible choice.”
“I’ve been in hospitality for 19 years – and even 9/11 was nothing like this,” he said. “That was just a one-hit, and instead of demonizing travel or hotels, President Bush urged Americans to go on with their lives.”
He said the real problem is that it’s just as expensive, if not more, for a company to cancel an event.
“At AIG, for example, they have independent agents selling for them,” Washko said. “If the agents hit certain sales targets, there are trips and other rewards. The company still has to pay their compensation – even if there’s no meeting. And, they have to pay the hotel for what it’s invested in staff time, food ordered and other expenses.”
That said, Washko admits that firms like AIG figure “it’s not worth taking this on,” and just pay the bill.
So far, The Broadmoor’s reservations – and revenue – are down about 20 percent for the year, but a list of more certain bookings is expected to keep the property busy going into high season this May.
One of those annual events is the Space Symposium, scheduled to return to The Broadmoor for the 25th year March 30 through April 3. The resort has been booked since late last year, including 60,000 square feet of exhibit area.
About 7,500 people are expected to attend, said Janet Stevens, director of communication and public outreach for the foundation, and will account for about 2,000 hotel room nights during the week.
“The only group that has seen some cutbacks is NASA – they’re under the same pressure as all government agencies and have had to prioritize their travel budgets,” she said.
As the host hotel, The Broadmoor benefits significantly from what Stevens estimates is about a $25 million economic impact on the community.
Down the road at the Cheyenne Mountain Resort, General Manager Laura Neumann also sees the event as a boon to her business, which also has experienced at least a 20 percent increase in cancellations this year.
“We are filled for the entire symposium – and this meeting comes at a good time,” she said. “The entire hospitality industry has been affected by what’s happened on Wall Street. Even good companies are worried about perception.”
Stevens’ and Washko’s comments were echoed by Roger Dow, president and chief executive officer of the U.S. Travel Association, which represents the country’s $740 billion travel industry.
In an interview with the Philadelphia Inquirer, Dow said, “But for meetings and corporate incentives, people are holding off or canceling meetings out of concern.”
The U.S. Commerce Department predicts a loss of an additional 247,000 travel-related jobs this year because of the weakened economy, in addition to the 200,000 jobs lost during 2008.
Those losses could be much higher when the effect of the new restrictions is felt, Dow said.
In response, Colucci said, the AHLA has not only mobilized its forces to educate government officials, but also is reaching out to the public through www.meetingsmeanbusiness.com.
A group of 12 “prominent CEOs in the lodging and travel industry” also met with President Barack Obama earlier this month and the president announced that Americans should not stop traveling, but instead support the hospitality industry and the small businesses that support it.
“They explained how demonizing corporate business meetings had unintended consequences – and hurt all of us,” Colucci said, adding that the economic impact of leisure and business travel ripples throughout the economy.
The effort to stay in front of decision makers will continue through 2009.
Two-hundred members of the hotel and travel industry are in Washington, D.C., this week to meet with legislators – and the AHLA continues to educate Treasury Department officials about the negative impact their actions could have on the industry.
“We have to make the president and Congress aware of the significant impact we have on communities throughout the country,” Colucci said. “This is the lifeblood of many small businesses.”