AIG Effect Still Hampering Meetings Industry

According to this article, the dreaded "AIG Effect" is still with us...

excerpt:

AIG’s spending spree at a St. Regis resort last September, just days after receiving federal bailout money, continues to send aftershocks throughout the resort and luxury segments of the industry. The opening session of the virtual Resort Conference—a webinar titled “The Voice of Customers”—gave resort owners and operators a chance to hear from meeting planners (corporate, incentive, etc.) earlier this week.

Moderator and HSMAI President and CEO Bob Gilbert called the current landscape “dismal” and talked about the media firestorm and the “collateral damage” still being felt after AIG’s junket. Some of the damage: $1 billion in U.S. company cancelled bookings in the first quarter because of outrage over AIG; 56 percent of corporate planners reported canceling at least one meeting or incentive trip; 40 percent less group business at Starwood during the first quarter; a $50 million estimated statewide loss for Hawaii. A bit of irony: The Resort Conference went online because of lack of attendance due to travel costs and cutbacks.

Read the rest here.

The Hemorrhaging Continues...More Conferences Canceled

In keeping with our reports on the "AIG Effect", we see two more prominent national annual conferences have thrown in the towel, citing the economy. This one is a twofer, though, as it also ties into another focus of this blog, the fitful death of newspapers/print publications...

Excerpted:

Two annual meetings in the publishing industry have been canceled for 2009, both casualties of the economic recession.

The American Society of Newspaper Editors announced that it is canceling its 2009 annual meeting just two months before the convention was to take place, April 26-29 in Chicago. Plans were well under way, but officials decided to cancel it because of low attendance projections and the stress of the economy on members. With the newspaper industry struggling, ASNE leaders concluded that the challenges editors face at their newspapers demand their full attention, said Charlotte Hall, president at ASNE, in a press release. Also, said Hall, attendance would have been significantly lower than normal. The convention typically attracts between 400 and 500 attendees.

This is the first time since 1945 that ASNE has canceled its annual convention.

“This is a uniquely stressful period in our business as we face both structural change and deep recession,” stated Hall. Even though the learning opportunities at the convention would have been valuable, the greatest priority is leading our own newsrooms as we shape the future of the business,” Hall stated.

The board of directors will meet electronically to handle association business that would have otherwise occurred at the meeting. One piece of business is a vote to change the bylaws and drop “paper” from its name to expand its membership to include editors of online-only news Web sites. “We intend to press on with our transformation of ASNE to ensure its relevance in the digital age,” Hall said.
[...]

For many of the same reasons, the Magazine Publishers of America canceled its annual convention, the American Magazine Conference. The conference was scheduled for October 18-20 in Boca Raton, Fla.

“The cancellation of this year’s AMC is in response to the difficult economic climate facing all businesses, including the magazine industry,” said Nina Link, president and CEO at MPA in a press release. “We recognize that this year our members are looking at a variety of ways to achieve savings, which would include curtailing certain discretionary travel and hotel expenses.” They hope to resume the AMC next year in Chicago.

The Sauce
This is far, far from over. I hate to use a hackneyed phrase like "perfect storm," but this situation truly is.

Take a look: the events and travel industry is suffering from bad press because of bad actors like AIG. Simultaneously, in an almost perverse twist of fate the print media is being ground under the heel of Internet news.

Is the death knell of print pubs a Thermidorian reaction to the hegemony of corporate media? Or is it mostly the depressed economy coupled with the rise of the Internet as a credible means of delivering news?

Or is it something else? I don't know. But I do think we ain't seen nothing yet.

“Nobody Wants to Be Perceived as the Next A.I.G.”

UPDATE (Feb. 28, 2009): Click here for the latest perpetuation of the "AIG Effect."

As our last post revealed, the well-publicized actions of a minority of companies has sent shockwaves throughout the travel and meeting industry, potentially affecting millions of jobs. Rather than risk a public relations backlash, many companies are cutting back or eliminating their travel and meetings.

An article in the New York Times sums it up:

According to a survey released last month that was conducted by the industry trade group Meeting Professionals International and American Express, 7 percent of business meetings already scheduled for 2009 have been canceled. And attendance is expected to be down by about 5 percent at those meetings that are still being held, the survey found.

While anecdotal reports indicate that few industries have been spared, a large number of the canceled events appear to be in industries hit hardest by the recession: banking, mortgage lending, credit cards, housing construction and renovation.

Reasons behind the cancellations vary. In some cases, image — not wanting to appear to be spending lavishly in a recession — is the impetus.

“We’ve received notices of cancellation along with a check for the full amount,” said Steven Rudner, a hotel industry lawyer. “Nobody wants to be perceived as the next A.I.G.”

[…] One conference planner, who did not wish to be identified because of continuing hotel negotiations, canceled a two-day seminar a month before it was scheduled to take place when only 16 delegates had registered. The event had drawn an average of 125 people in years past. The organization refunded registration fees for the handful who had signed up, and offered a credit toward a future event to offset the expense of canceling their flights.

[…] Canceling an event is not cheap. Costs can run into six figures, starting with the hotel’s cancellation fees and including any planned entertainment and functions planned outside the hotel.

Holding a conference with a drastically reduced head count is not much better, though. Typical contracts include clauses that require the host to compensate the hotel for the difference between the number of guest rooms held for the group and those actually filled.

As a rule, hotels would rather have fewer guests than receive a cancellation check, because conferences usually generate revenue from purchases like minibar snacks or fitness center passes.

Obviously, the lavish spending of AIG executives and other PR missteps such as the Big Three Automaker private plane debacle has the public angry and companies gun-shy about meeting and incentive travel.

Kansas City special event professionals Bill Svoboda and John Short believe that trend will exacerbate the problem. They own EventPros, Inc., a leading special event and communications firm in Kansas City and have more than fifty years of special event experience between them.

“Unfortunately right now everyone has the perception that all conferences are lavish junkets,” said Short. “That perception factor leads to the bottom dropping out of the industry.”

“The business community as a whole has been at one big party the past decade,” Svoboda said. “Well, the party’s over and we have one huge hangover.”

Svoboda believes that events and conferences became more lavish partially because employers wanted to reward performance and felt a need to “top themselves” each succeeding year.

“You want to reward performance, it builds every year,” he said. “But you often have poor communications in a company—departments have different perceptions of what is appropriate, and that can get out of hand quickly.”

“And then because of the public’s perception, all the meetings go away,” Short added. “Unfortunately the spotlight goes on the people who misbehave or are insensitive to the current economic situation and in the mind of the public that perception becomes the reality.”

Short believes the Keep America Meeting strategy of educating the public about the real need for business travel and meetings—as well as the jobs lost when travel and meetings are cut—is the best way to calm the public fervor fueled by sensational news reports.

Svoboda agrees that there is a perception problem, and that companies should employ a third party to review their public activities.

“When you’re not doing business as usual as we are now its important to have a third party take a snapshot (of what you’re doing) to keep you out of hot water,” Svoboda said. “This would have made a huge difference in AIG and the Big Three.”

“It’s too bad this (AIG Effect) occurred, because many of these events and conferences are part of incentives for the ‘little guys’ who make their goals,” Svoboda said. “Not only do they suffer for the actions of a very few, but industry employees also are at risk of losing their jobs.”

“It’s overcompensation,” he said. “The pendulum is swinging too far in the opposite direction.”

“You see news reports that show events being held in Las Vegas, for example, as if that were bad. Las Vegas is a top meeting and convention location,” Svoboda said. “You can do a conference in Vegas inexpensively. Flights are cheaper, there’s lots of reasonably-priced meeting space. But because it’s Vegas, people freak out.”

Dollars and Cents

Besides the “AIG Effect,” there’s also the matter of dollars and cents.

In an announcement on MeetingsNet.com, it was announced that the “high-profile launch of Reed Travel Exhibitions’ first U.S. conference—the Americas Incentive Business Travel & Meetings Exhibition—will be delayed at least a year.”

According to RTE Meetings and Incentive Events Group Exhibition Director Paul Kennedy, the “global economy is the reason for the cancellation of the Baltimore event, which expected to attract more than 400 VIP buyers and 250 exhibitors.”

“We have decided to delay the launch until 2011 or 2012 because of the macroeconomic climate," Kennedy told the Australian meetings magazine Conference & Incentive Travel. "We look forward to staging this event in Baltimore, but later. I am very sure about the health of the meetings industry, and I am very sure about the health of our portfolio, but this would be a bad time for such a major investment."

Frequent business traveler and trade show exhibitor Brian H., a manufacturing marketing executive in the Midwest, said he has seen changes in business travel and conferences recently.

“I spend at least twenty-five percent of my time on the road,” he said. “I see trends where sales conferences and training have been canceled in favor of webinars, conference calls or incorporation of training into downtime during trade shows.”

Looking Ahead and Staying in the Game

Pros like Svoboda and Short believe that now is the time for companies to step up to the plate with reasonable, well-considered meetings and events. In fact, they believe that companies that do not continue to expand revenue streams and invest in employee growth and training will suffer.

“Long-term, this situation will weed out weak businesses,” Svoboda said. “And someone will need to fill that void. A long-term growth strategy is key. The American economy thrives on growth, and companies that cut back completely are ultimately self-defeating.”

Both are optimistic that companies that focus on their current clients—finding ways to help them through the tough economic situation—will prevail.

“You have to help your clients stay in the game,” Short said. “If you do that, you will be rewarded when times get better. That’s why we will continue to work with our standing clients, even with reduced budgets.”

Echoing that perspective, marketing executive Brian H. says now is the time for companies to be planning for the recovery.

“Smart companies are going to be thinking far enough ahead to position themselves to grow when things improve. The ones who are retracting will suffer—they won’t be ready to run when the economy recovers.”

"Keep America Meeting" Campaign Seeks to Cool Public Anger Over “AIG Effect”

Remember when the CEOs of Ford, GM and Chrysler flew their private jets to D.C. to ask for bailout money? Regular readers of Bernays Sauce may recall our appalled reaction. As we said in that post:

It would also seem that their public relations advisors are either too "in the bubble" or too powerless to point this [the PR fallout of using private planes when asking for public money] out to their bosses. This kind of tone deaf handling of a crisis situation could very well be a nail in their coffin when trying to shore up public support for a bailout. These guys apparently learned nothing from AIG, where executives of the bailed-out-by-taxpayers insurance behemoth met at swanky resorts.

We all know now the terrible reaction and humiliation the CEO's rightly suffered for their boneheaded travel choices. It's unfortunate that their thoughtlessness may have done fatal damage to their companies, and by extension their employees and the overall economy.

A similar situation is brewing in the travel industry, where the boneheaded actions of a few may well cause serious harm to countless others. Take the aforementioned AIG, for example.

It would seem that the “AIG Effect” has caused serious collateral damage for the event planning, conference, travel and hospitality industries. An article in the Miami Herald illustrates:

In past years, partners of global executive search firm Stanton Chase conducted business meetings in South Africa during a long trip with their families that included a safari. They also enjoyed Sydney during a gathering at the Australian city's Ritz-Carlton.

But next month, the firm's partners will huddle at a Marriott in the suburbs of Nashville, chosen partly for its access to low-cost Southwest Airlines, says Mickey Matthews, a Stanton Chase executive. The firm is also overlapping meetings to avoid the expense of flying people out twice.

Today, "practical" has replaced "memorable" as the buzzword in high-end business circles. Companies are canceling splashy events and lavish business dinners or revamping the way they plan them. The new mood means drastic changes for employees who've come to expect five-star treatment, as well as hoteliers and travel planners who base their businesses on such meetings and incentive travel trips.

They've even coined a new phrase for the trend: "the AIG effect."

It comes from the embarrassing disclosure last fall that struggling insurance giant American International Group had spent about $400,000 on a retreat at a luxurious St. Regis resort and spa after taking an $85 billion federal bailout. After that, hoteliers saw mass cancellations or postponements of previously booked upscale trips and meetings.

Businesses usually cut back on luxury travel spending in tough times, but new image concerns raise additional worries, says Bjorn Hanson of New York University.

"There's not many companies out there that want to see their name on the reader board in a four-, five-star hotel nowadays," he says.

Geoff Freeman, U.S. Travel Association vice president, put it more bluntly in an interview with the online trade pub Travel Weekly: “We’ve become a target.”

He explained that President Obama’s public shaming of bad corporate actors has had a dampening effect on business travel by giving an angry public something tangible to heap their scorn upon. This leads to pressure on lawmakers who in turn lash out at the perceived "epidemic," thus continuing a cycle damaging to the industry.

We all need to help take the pressure off policymakers by doing a better job of cooling the public outcry [over perceived or truly extravagant travel spending], by explaining better the value of meetings and events. We need to help people understand who the real victims are if travel is cut. It is not the top executives.

We have to be better because elected officials respond to the calls they get. Also, companies that are taking government loans say they want help in reducing the risk [of bad publicity] when holding meetings and events demanded by their businesses.

Part of that public education effort is Keep America Meeting, a PR campaign started by the U.S Travel Association in conjunction with TBA Global, a privately-held agency that "creates nontraditional marketing and communications programs, events and meetings for high-profile businesses and associations worldwide."

Their press release lays out their case:

Two days after the U.S. Travel Association and industry leaders from key organizations issued guidelines for recipients of TARP funding, members of the meetings, events and incentive travel industries have banded together in a grassroots effort to draw attention to the important role meetings play in building successful businesses, as well as the vital role meetings, events and incentive travel play in the American economy.

According to the U.S. Travel Association, meetings and events are responsible for 15 percent of all travel-related spending, create nearly $40 billion in tax revenue at the federal, state and local level and generate more than one million jobs. Without the jobs generated by meetings, events and incentive travel, the current unemployment rate of 7.6 percent would rise to 8.2 percent and cost the average American household an additional $136 in taxes annually.
The campaign asks supporters to go to its website and sign an online petition. The petition signatures will be delivered by Keep America Meeting to the U.S. Travel Association and industry leaders from key organizations to fuel industry-wide efforts with the White House and the U.S. Congress.

The Sauce
The travel industry has moved swiftly to respond to this damaging public relations situation. However, it will take some mighty cool breezes to chill the white-hot fervor of Americans frustrated by the seeming impunity of “wealthy fat cats.” We agree with the Keep America Meeting strategy of educating the public about the jobs that will be lost—jobs held by “ordinary,” non-wealthy Americans.

Bernays Sauce has conducted interviews with business travelers and special event experts about the economy’s effect on travel. We’ll get into their take on this situation as well as cover some information on the value of meetings in our next post.

In the meantime, what do you think of the “AIG Effect” backlash and the efforts at damage control?