Fast Company

Work/Life: If You're a Hotel, the "AIG Effect" Is Real

Reflecting concern at the thought of a road warrior indulging in luxury, corporate travel departments have cancelled an estimated $1 billion worth of industry conferences in the first two months of 2009. Called the "AIG effect" for the financial company that took federal bailout funds and then spent several hundred thousand dollars for executives to stay at a resort, corporate America is getting tarred by the same brush that painted bailout recipients as big spenders of taxpayer monies.

Big corporations were already cutting back on business travel in a big way before the "AIG effect" took hold February. Nearly 200,000 travel-related jobs evaporated in 2008, according to the Labor Department. Another quarter of a million are expected to be lost this year.

One of the hardest-hit sectors is hotels. In fact, hotels felt the AIG effect immediately, as fastidious self-denial took the place of conspicuous travel consumption. Not only don't companies want to try to justify pricey travel choices to gun-shy boards, they also don't want the negative publicity that can flow even from travel that isn't even that expensive. Right now perception is the thing, and no one wants to be perceived as enjoying a little luxury or indulging in mere fun.

Of course, one person's luxury is another person's quality choice. Luxury can be very much in the eye of the beholder. Corporations know that better than anyone, which is why the conscientious corporate choice has become to spend as little as possible on corporate travel, and not even go out on the road at all unless absolutely necessary.

For example, the Los Angeles Convention Center and Visitors Bureau reported that, in February alone, local hotels saw events cancelled that would have filled nearly 100,000 rooms. Not only are hotels struggling with a precipitous drop-off in bookings, but every other travel service company is watching the bottom drop out of the business travel biz.

What makes the situation frustrating is that running scared is not a wise business strategy. To avoid the short-term perception of free-spending, firms are frittering away their futures. I say that because businesses just cannot do away with business travel and meetings and expect to prosper. Meetings and one-to-one get-togethers present opportunities that come to companies in no other way.

Sure, business travel is an expense that requires policy and oversight. Yes, businesses are smart to get creative in saving travel dollars. But no, businesses can't simply flat-out stop business travel and corporate meetings just because they worry what someone might think. It's no way to run a business, and deeply counterproductive besides.

After all, if you are cutting back on travel because you are worried about the health of your business, the health of your business is going to suffer. New business is often developed on the road. New bonds with new business teams are often made on the road. Moreover, there is nothing that can supplant the relationships built in face-to-face engagement. The human touch is too elementary to ever be replaced.






Road Warrior • Miami • www.us.amadeus.com

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