An unprecedented media spotlight on the world of incentives inspires an industry response for level-headed debate and discussion. By Alanna McQuaid, March/April 2009
U.S. President Barack Obama has been outspoken in his quest to end corporate greed in America.
The U.S. banking upheaval that finally came to a head the week of October 10 ended with the worst Wall Street week on record. Spawned by the U.S. subprime-mortgage debacle that pushed up credit costs worldwide, with European and Asian banks writing down billions of dollars in holdings, the world looked for level-headed leadership from the major U.S. investment giants sitting at the epicentre of the crisis. Instead, the corporate chiefs and heroes of the free market faced fierce accusations of mismanagement, negligence and greed, while their companies teetered on the edge of collapse.
The bleak outlook for the immediate future unfolded as CEOs and top executives sat uncomfortably in the media spotlight, trying to explain what happened, while justifying their multi-million-dollar salaries and extravagant bonuses. For a brief moment, incentive travel took centre stage, when it was reported that AIG executives enjoyed an $86,000 four-day partridge hunt at a stately English manor at the same time the U.S. federal government handed the sinking firm billions. The White House called it ‘despicable’ when reports surfaced that other AIG executives hosted a posh, $440,000 California retreat just days after receiving additional federal bailout money. Every meeting and incentive travel planner listening, watching or reading these reports knew it meant big changes ahead.
Only months later, with a new president in the White House carrying out his pre-election promise to end corporate greed and excess — “you can’t get corporate jets, you can’t take a trip to Las Vegas or go down to the Super Bowl on the tax payers’ dime,” Obama warned — scrutiny was again focused on an already struggling meetings and events industry.
Las Vegas Mayor Oscar Goodman immediately demanded an apology from President Obama, noting that while he understood the economic burden of dealing with the worst economy since the Depression, and the need for accountability, he cautioned the president and others against “unjustified stereotypes” and said the remarks “are harmful to the meetings and convention industry as a whole and Las Vegas specifically.”
Goodman reported that Las Vegas hosts six-million business travellers annually, boosting the city’s economy by $8.5-billion U.S. “The assumption that all meetings, events and incentive travel are wasteful is wrong. Now, more than ever, we need businesses to travel and hold meetings and events,” says Goodman. While hosting more than a half-million attendees at conventions and meetings during the month of January, 2009, Las Vegas saw a 20.6-per-cent decline in overall convention attendance versus January, 2008. It was widely reported that after receiving $10-billion U.S. in bailout money, Goldman Sachs cancelled a recent Las Vegas conference, even though cancellation penalties totalled $600,000 U.S.
Roger Dow, president and CEO, U.S. Travel Association, and active spokesperson on behalf of an industry coalition of meetings and travel associations, is pleading with the meetings industry to mediate the damages caused by recent bad press and the new government regulations announced by the U.S. Treasury Department on Feb. 4, 2009. Dow points to a series of recent events that “created an environment in which legitimate meetings, events and incentives are being portrayed as symbols of excess. He says, “This is a dangerous trend. If this public perception, and the corporate response to it, take hold, the travel economy could experience a lasting economic hit on par with the decline of international travel post-9/11.”
Meeting Professionals International (MPI) has teamed up with the U.S. Travel Association, as well as other travel-related associations, including Site, to ensure the industry voice is heard in the U.S. Treasury Department. The newly formed group will assist in the development of a U.S. economic impact study, with MPI Foundation Canada’s 2008 Canadian Impact Study as a guideline.
That report found that the meetings sector contributed $71-billion and fueled 235,500 full-time jobs in Canada. The coalition released a statement, in response to the U.S. federal government’s efforts to curtail meetings, events and incentive travel programmes, for companies who received government lending. The partial statement reads, “We are extremely concerned about the unintended consequences of unnecessarily restricting corporate meetings, events and incentive-travel programmes. Business-related travel generates 2.4-million American jobs, $244-billion in spending and $39-billion in tax revenue at the federal, state and local level. State and local governments rely on this revenue to fund basic government programmes such as education, healthcare and unemployment insurance.”
According to Dow, three factors threaten the stability of the industry: the Obama administration’s new guidelines stating that, “The board of directors of any Troubled Asset Relief Program (TARP) recipient shall have in place a company-wide policy regarding excessive or luxury expenditures, as identified by the Secretary, which may include excessive expenditures on entertainment or events; office and facility renovations; aviation or other transportation services; or other activities or events that are not reasonable expenditures for staff development, reasonable performance incentives, or other similar measures conducted in the normal course of the business operations of the TARP recipient.”
Second, “Wells Fargo & Co. abruptly cancelled an incentive programme for hundreds of employees who, through great performance, had earned a trip to Las Vegas. Although the trip was to benefit mid-level employees and was used as a substitute for cash compensation, it was portrayed in the media as a “junket” for wealthy executives. Lawmakers accused Wells Fargo of misusing $25-billion in taxpayer bailout money.”
And third, Dow says, “Hotels across the country are witnessing hundreds of cancellations from companies that have not received federal government support, for fear of negative media coverage.”
CANADIAN FALLOUT
Susan Prophet, 2009 president, Site Canada Chapter says, “In speaking with our members over the last couple of months, we know that the world is not a rosy place right now for the incentive and meetings industry, we are once again facing challenges. On the front lines, we are seeing some major cancellations, smaller programmes, but there are also some meetings/incentives staying locally to reduce travel costs, which in turn, means they are staying in Canada. [This year] looks to be a reduction in bookings, but the companies are sourcing for 2010 and beyond, which is good news. Planners are being told to combine meetings, to minimize expenditures, as well. Companies are also being scrutinized more; therefore, the resort destinations will most likely feel the downturn more extensively. We can also see that it is a buyer’s market right now, and that the client is expecting more value for their dollars. Overall, of course, these are tough times, and if there is truly a time where we need to band together, it’s now. As the industry association for incentives and meetings, you can be assured that our leaders at the Site Global office are doing everything they can to aid the coalition that was formed to address the crisis. We also need to be there for each other, through our chapter meetings, our publications and creating opportunities to bring awareness to the community.”
Collectively, the coalition recognizes that companies who did not receive any government lending may consider implementing these same policies, although their metrics may vary, based on industry size, company size and market sectors. Canadian business may be affected by any new U.S. regulations, particularly with the number of U.S.-owned global companies who received government lending. MPI Canada’s website states, “Much of the focus of this crisis is currently on developments in the U.S., but if history is any indicator, the challenge will spread. And indeed, we are already seeing the start of fall-offs in Canada and Europe. But remember, now isn’t the time for panic. It’s the time for action. Think about the way the industry recovered after 9/11. We reached out. We connected to new ideas that made us better professionals. We connected to marketplaces that built our businesses. And we connected to relationships that protected and grew our industry.”
On the state of the Canadian industry, Alissa Hurley, director, events for Maritz Canada Inc., says, “The combination of economic conditions and media exposure has certainly had an effect on the industry beyond the borders of the U.S. While Canada is not experiencing challenges to the same degree, many Canadian operations of U.S.-based companies are exercising caution. We are proud that Maritz has been at the forefront in combating the negative perceptions. The guidelines that the industry coalition has proposed were developed in conjunction with Maritz and are based on best practices we have utilized with our clients. Overall, while some corporations have a more cautious view toward incentive travel at the moment, many understand the true business value, and we continue to work closely with our clients to track, understand and communicate that value.”
— Alanna McQuaid is a 25-year veteran of the travel industry and a freelance writer.
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