Economy watch: 'AIG Effect' that scared companies away from fancy resorts starts to fade
Wake up and good morning. Remember that big "AIG" stink from nearly two years ago (September 2009 to be exact)? American International Group decided to blow $443,343.71 on a celebratory week of fancy rooms, food, manicures, pedicures, facials, massages and golf at California's only Mobil five-star resort. The kicker, of course, is that occurred one week after AIG was saved from collapse with an $85-billion federal bailout loan. That colossal blunder earned the insurer first prize as the firm most out of touch with financial reality. Refresh your outrage here.
And that dubious branding endures today. A New York Times story this week cites the "AIG effect" on corporations shying away from fancy hotel events ever since the disclosures about AIG's lavish retreat. Replenished with a government bailout, AIG executives and customers partied at the St. Regis Resort at Monarch Beach, on a bluff overlooking the Pacific south of Los Angeles, for nearly a week. spending $139,375.30 for rooms that typically range from $400 to $1,200 a night, $147,301.71 for banquets, $6,939.09 for golf and $23,380 at the hotel's "Spa Gaucin" (photo, right).
Popular resentment soared amid the taxpayer bailout, so much that many luxury hotels soon renamed themselves with more modest brands hoping to appeal more to companies at least trying to appear more cost conscious and less outlandish in their event planning. USA Today discussed the AIG Effect in 2009. Forbes magazine in early 2010 blamed AIG not only for "tanking" the luxury corporate travel market and -- oh yeah -- "driving the world financial system to the brink of collapse."
So here's an unusual sign that the corporate ego and coffers are apparently strengthening again. That NYTimes piece says upscale hotels are shedding "some of that stigma" even as signs of a downturn remain. "Business travelers and corporate event planners say they are trying to define the limits of acceptable luxury, and may even have to retool it a little again given the recent market turmoil," the story says.
Notably, Florida resorts may benefit from the loosening of the corporate wallets. Software company Arcos of Columbus, Ohio, says it toned down its annual user conferences in 2009 and 2010 with events in Georgia and Alabama. This year, the story says, the event is back in Florida.
Mary MacGregor, vice president for account development at BCD Meetings & Incentives, tells the New York Times that "There was probably less of a thoughtful business case made in the past with regard to the use of luxury properties. The residual impact from the AIG effect has been to ask some questions about what is selecting this property going to do for the overall business result."
On the other hand, she says that because luxury hotel prices have not rebounded to their prerecession rates, companies may be able to justify holding meetings in opulent surroundings.
-- Robert Trigaux, Business Columnist, St. Petersburg Times