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"AIG Effect" In South Florida

"AIG effect" more of a drag on South Florida hotel bookings than the economy

Sep 24, 2009

Born a year ago and more than 2,000 miles away, the ``AIG effect'' continues to cause pain for South Florida's tourism industry.

A year ago this week, about 100 insurance executives and their spouses gathered at a St. Regis resort near California's Laguna Beach for a posh weekend of massages, cocktail parties and pampering. American International Group picked up the $440,000 bill for the getaway -- designed as a reward for top sales producers. It began the same day Washington authorized an $85 billion bailout of the teetering insurer.

Outrage fired through the political arena -- Barack Obama, at the time a presidential front-runner, called for the firing of any AIG executives responsible. The backlash prompted a wave of conference cancellations across the country as companies feared being blasted for lavish travel in a severe recession.

Some industry watchers predict meetings business will improve next year, and the U.S. Travel Association, a trade group, has launched a campaign to point out the economic importance of conventions.

But for now, ``resort communities have been demonized,'' Loews Hotels CEO Jonathan Tisch complained during a recent interview at the company's 790-room hotel in Miami Beach.

For South Florida's hotel industry, the ``AIG effect'' distinguishes this recession from past ones, with meeting bookings dropping farther and resisting a rebound, industry watchers said.

``Nobody could have forecast the weakness in group'' bookings, said Scott Berman, a hotel analyst in Miami and head of PricewaterhouseCoopers' hospitality division. ``I use the word `unprecedented.' ''

While there are no firm numbers locally or nationally, industry surveys show half of U.S. companies cut back on travel spending this year. Future group bookings by the Greater Miami tourism bureau, which represents South Florida's largest hotel market, are down 30 percent this year.

In a sign that the AIG effect is trumping actual budget squeezes, an August survey by Meeting Professionals International found that public perceptions about meetings overtook the economy as the top trend affecting members' businesses.

Popular vacation destinations got hit hardest as the AIG effect took hold. When the AFL-CIO held its annual convention at the Fontainebleau Miami Beach in March, Fox News filed live reports detailing the posh setting. ``That's where they had the Victoria's Secret show a couple months ago,'' anchor Bill Hemmer noted. ``Cha-ching!''

As scrutiny grew, hotels reported clients avoiding properties with certain words in their names -- particularly ``resort'' and ``spa.'' The Intercontinental West Miami, a business hotel off a highway in Doral, almost lost a conference this summer for being owned by a company called Real Hotels and Resorts.

``When the Resorts name came up [the conference] almost threw us out of the bid,'' said sales director Alex Garcia. ``I said, `We're not a resort!' ''

Critics blame President Obama for some of the damage, particularly after his February warning to bailed-out corporations.

the executives had to pay taxes on the value of the comped vacations.

Hoteliers say they haven't seen bookings recover yet, but they're expressing hope when meeting planners ask about dates over the next three years. At Lago Mar in Fort Lauderdale, a nonproift board that canceled its annual meeting at the beachside resort last year has rebooked for 2010.

``I think it's fading,'' owner Walter Banks said of the AIG effect. ``We're seeing less of a perception problem.''

"AIG effect" more of a drag on South Florida hotel bookings than the economy
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