Resorts and the AIG Effect

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It's not the best time to own or operate a resort. Not only are you buffetted by the economic headwinds that have caused an extreme falloff in consumer spending, but you may also be a victim of the so-called AIG Effect, a media phenomenon that has many big corporations shunning board meetings, incentive trips and conventions at resorts, particularly those at the luxury end of the lodging spectrum. This curious morality play opened just after insurance giant AIG received a $150-bill-plus bailout from the federal government and then booked the five-star St. Regis Resort in southern California for a junket to recognize top-producing agents. They followed that event, which cost a reported $443,000, with a training session for financial planners at the Pointe Hilton Squaw Peak in Phoenix.

While I understand and feel the public's anger over a company spending what seems like discretionary monies at a time when it has its hand out for a government bailout. The problem, of course, is proportion. Sure, the St. Regis in Monarch Beach oozes luxury and expense and wasn't a good move from a PR point of view. But, as the company tried to explain, the meeting was scheduled months ahead of the bailout scenario and the purpose was to honor independent insurance agents, the company's lifeblood and primary revenue source. Likewise, the meeting in Phoenix seemed to have a legitimate purpose (training) and, despite media histrionics, was held at a nice, but hardly five-star hotel.

Now unfortunately, the entire resort business will suffer as other companies—particularly those with public ownership or who may be in line for any federal assistance—will undoubtedly avoid the appearance of spending lots of money at high-end resorts. The losers, of course, will be the innocent owners, operators and employees of these properties who were just providing a service for a fee.

By the way, AIG has since cancelled 160 other conferences and events it had planned. Total revenue loss for the lodging properties where the meetings would have been held: $8 million.

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