Incentive Travel & Event Planning: The AIG Effect – What Caused it & How Do we Reverse it?
by Anne Thornley-Brown, President, Executive Oasis International
It’s been almost a full year since my article “Should companies cancel incentive travel during a recession?” was printed in Incentive Magazine. In view of more hotel closures or bankruptcies that have recently been announced in Las Vegas, it’s to re-visit this issue.
These issues are vital and have a direct impact on the economy. Please tweet about this article, link to it, reprint it, Stumble Upon it, and share it with every executive you know. Please also share the other articles and resources that I have listed. Please add your comments and join the conversation in the Q & A section on LinkedIn.
As we all know, a dramatic chain of events has had a devastating impact on the business travel, hospitality and team building industries.
- After Bailout, AIG Execs Head to California Resort – Includes video footage.Rescued by Taxpayers, $440,000 for Retreat Including “Pedicures, Manicures”
- AIG Execs Splurged On English Hunting Trip
- Wells Fargo cancels Las Vegas trip
Bank that collected $25 billion in bailout money faced criticism
- Wells Fargo ad slams press accounts on junkets as “nonsense”
- Bailed out Bank of America Sponsors Super Bowl Funfest
What in the world were they thinking?
At least Morgan Stanley took the high road.
We all know, what happened next.
Some of my colleagues blame statements like this by Obama for the problems that followed:
I see it differently. I agree with my colleagues that there is an important role for sales incentive trips, luxury corporate events, and recreational events for teams. However, I think that Obama definitely “hit the mark” when he said that the companies that accepted the TARP bailouts had no business planning lavish trips and corporate events. I believe that Obama, other lawmakers, and the media were justified in their comments and that they should not be blamed for the troubles that have plagued our industry. In fact, I have been sounding the alarm for years about:
- companies behave as if they are country clubs and recreational centres rather than businesses
- companies that opt for strictly recreational events as placebos and pacifiers rather than bonafide business team building to get to the root of the problem and generate solutions when they are having trouble
- companies trying to pass off entertainment and recreation as “team building”
It’s a matter of remembering why we are in business, balance and priorities. I have been cautioning that an eventual backlash would come and we would see severe cutbacks in this sector. This is one time I wish I was wrong. The scenario that has unfolded is even worse than what I predicted.
The White House made its support for business travel clear:
So it is hard to understand the way in which some companies with a solid bottom line have responded to the criticism of AIG and other TARP fund reciplients. In a knee-jerk overreaction, even companies that are doing well and that had earned the right to reward their people have hit the panic button & cancelled incentive travel and retreats.
- ‘AIG effect’ tones down lavish business events
- Corporate travel is in retreat, thanks to AIG
- Corporate travel: ‘AIG effect’ causes companies to cancel $1 billion in conferences
- Driving Corporate Events Underground Won’t Solve the “AIG Effect”
One of the most mind-boggling decisions in recent months was AXA’s decision to cancel its overseas incentive travel programme for the next 2 years in the same week that it received recogniition for its outstanding performance. Despite solid performance:
Axa Life head of events Patti Heaven, says: “From the perception of the greater general public, financial institutions are viewed very much in the same way as banks, which are not enjoying good media coverage. To host overseas incentives together with big production conferences in this global economic climate would create the wrong image. This would be insensitive and could potentially be interpreted as a lack of respect for individuals that have been made redundant.”
Sorry, I don’t get it. It certainly sounds like AXA events were WAY over the top and needed to be scaled back:
Heaven’s first foray into the events world was taking a group of 60 plus partners overnight to a hotel down the road. It was so successful that in the following years the event was held in Amsterdam, then Switzerland, Monte Carlo, Mauritius, the US and Bangkok.
“They just kept getting bigger, and more frequent,” says Heaven. ” And now there’s all kinds of different events every year, from conferences to product launches to overseas sales incentives.”
Events run by Heaven have always had an edge of excitement. She once found herself in trouble with Florida police after a mix-up with
passports as ID at a Miami nightclub. “I grovelled so much I made Uriah Heep look like Osama Bin Laden,” she says. “They loved it. Everything was fine then.”
Other stand-out events – but this time for the right reasons – include a recent incentive to Venice where the group had a private tour and recital at St Mark’s Basilica. “The tour was divine, although it was 35degC and we were all in black tie – tourists were taking photos of us,” she recalls.
“But the recital was electric. The room was dark except for candles. The music was extremely atmospheric. It was an amazing experience – it reduced some grown men to tears.”
Patti, what in the world were you thinking? A backlash to this type of excess was inevitable. However, to go from one extreme to the other – overkill to cutting incentive travel completely is a clear case of throwing the baby out with the bathwater. It makes absolutely no sense.
If anybody reading this is in touch with AXA executives or Patti Heaven, please share this blog with them. They are welcome to give their side of the story. I hope that someone from AXA will answer the following question that I throw out to executives from all companies that have decided to scale back despite the fact that they are doing well:
How do you expect the economy to ever recover if you don’t spend money and if you make decisions that are contributing to the deminse of many organizations?
Please don’t think I am just picking on AIG and AXA. In one of my other blogs, I have previously written about some of the bizarre ways in which companies were spending money on recreational activities and passing them off as “team building. The problem with corporate excess is that there will ALWAYS be a backlash and innocent people eventually have to pay for the poor judgement of executives by losing their jobs.
- Financial Collapse: The St. Regis Monarch Beach schedule for a Foreclosure Auction!
- The AIG Effect Hits Incentive Providers
- Luxury Resorts are Still Struggling from AIG Effect
- More hotels are facing foreclosure, bankruptcy
- Green Valley Ranch manager files for bankruptcy
- Ritz Carlton In Lake Las Vegas Closing: Nearly 400 Employees To Lose Their Jobs
- OC Phenomenon Blamed for Las Vegas Ritz-Carlton Closure
Since we released this article, there has been another one:
Luxury hotels like the Ritz-Carlton have suffered from the backlash from the so-called “AIG effect.”
Just days after the federal government committed $85 billion of taxpayers’ money to a bailout of insurance giant American International Group (AIG) in September 2008, senior execs from the troubled company headed to the swanky St. Regis Resort in Monarch Beach for a week of wining and dining of 100 top salespeople.
The uproar was deafening.
“The whole demonization of luxury meetings and companies’ pulling back on having their high-end meetings in luxury hotels–. this has had a tremendous impact on Las Vegas,” Ritz-Carlton spokeswoman Vivian Deuschl reportedly said.
Last year, revenue for U.S. luxury hotels fell nearly 17 percent, outpacing the 14 percent drop in the overall industry, according to an analysis by PricewaterhouseCoopers LLC. Revenue per available room, a fiscal measure of health in the industry, plummeted about 24 percent, compared with a 16.4 percent drop for the industry overall.
Deuschl did not comment specifically on the Ritz-Carlton Las Vegas occupancy levels, other than to say it is lower than the company would like, but she did have an opinion about the ripples from the AIG effect.
Fallout in Canada
The AIG effect does have an impact on companies in Canada and around the world:
Still think AIG effect has no impact on Canada?
Here is the latest:
- Inn at Manitou Closes Doors After 36 Years (Ontario)
- If your company is in trouble, don’t schedule a luxury junket or corporate event. Instead, hire a consultant and have an on-site team building or brain storming session to generate solutions to your business challenges
- Rewarding Your Team Event During Tough Times
- Model Guidelines for TARP Fund Recipients
- “Champagne on a Beer Budget” – 21 Cost Cutting Tips for Event Food & Beverage
- If your company is doing well, don’t cancel your incentive travel programmes or retreats.
- Keep America Meeting
- Meetings Mean Business
- Business Events Industry Coalition of Canada (BEICC)
- Power of Travel
Reversing the AIG Effect
A Landmark study has revealed the ROI of business travel so there is no justification for companies that are doing well to continue to put the lid on spending in this area.
PERFORMANCE LEVEL: Are overseas incentives bouncing back?
It was the poor judgement of some corporations that triggered the AIG effect. It is the selfishness, short-sightedness and cowardice of other corporations that is prolonging it. Sound decision-making and decisive action can reverse the AIG effect.
The time to act is now! So here is the bottom line:
Here are some ideas and guidelines:
Ideas & Resources
Let’s stop this madness before we do permanent and irreversible damage to the global economy. Your team has worked really hard, beat the odds and generated outstanding results. They deserved to be rewarded. Let’s learn from excesses of the past, reward teams and expess appreciation to clients in a way that shows good judgement. At a time when there are so many in need at home and abroad, devote part of your sales incentive trip or retreat to a project that gives back to the community. Help boost the economy and save jobs by booking a sales incentive trip or retreat today.
I join the following organizations in urging executives from companies that are doing well to reactivate their incentive travel programmes before even more hotels go bankrupt, more employees lose their jobs and companies in the hospitality and business travel industry are forced to close their doors for ever.
Great minds think alike. It looks like this blog entry is timely. Just saw this in the current issue of Forbes:
Executive Oasis International is a Toronto based consulting firm that helps organizations succeed even in the midst of turbulence. Core services include consulting and on-site facilitated business team building and off-site team building reatreats. They also offer incentive travel and corporate event planning to help organizations reward their people when business objectives have been achieved.
You are welcome to reprint this article as long as you keep the by-line intact and ensure that all links are live.