Businesses, already struggling to survive the perils of an economic downturn, are starting to push back against a growing public perception that business travel is wasteful and unethical.
Government efforts to curtail corporate travel by companies that receive federal bailout funds have demonized the meeting business and harmed the nation’s hotel and travel trade, industry leaders say.
“Unfortunately, [the government] thought business travel was fair game,” J.W. “Bill” Marriott Jr., chairman and chief executive officer of Marriott International Inc., said last week at a gathering of travel industry executives. “As part of their attacks on Wall Street and corporate greed, they unintentionally hurt the travel industry. Even businesses that weren’t taking [Troubled Asset Relief Program] money canceled their meetings and paid the penalty fees because they were afraid of being the next target.”
“The government shouldn’t interfere with how businesses conduct their affairs, especially considering that their officials are traveling in the same way,” Doug Weeks, president of the Association for Corporate Travel Executives (ACTE), said at his group’s annual gathering in Washington. “How business is conducted should be left to the professionals, according to their own policies.”
A recent survey by ACTE suggests that public opinion is having a big impact on business travel. Sixty percent of American businesses would avoid taking business trips to an exotic locale to avoid public backlash, even if the proposed location were cheaper, according to a March 30 poll.
Negative publicity about business meetings was a contributing factor in a 5.6 percent decline in business travel over the past year, according to statistics compiled by the U.S. Travel Association. Of course, the economic downturn isn’t helping.
“The stimulus is aimed at creating jobs, yet many jobs are being eliminated because meetings are being canceled by the hundreds,” said Kevin Mitchell, chairman of the Business Travel Coalition, an advocacy group based in Radnor, Pa. “This toxic environment created around the meetings has caused the hotel industries to lay people off. That is the perverse irony of the situation.”
Merrill Lynch has cut back on the number of business trips it sends its star brokers on since it was bought by Bank of America in September. The brokerage raised the ire of government when it sent executives on expensive trips to a Ritz-Carlton resort in Florida after seeking federal bailout money. Financial services giant American International Group also antagonized Congress in September when it spent $443,00 to send dozens of top-performing insurance agents and executives on lavish weeklong retreats at a pricey California resort. Days earlier, AIG had received $85 billion in taxpayer money.
“You can’t take a trip to Las Vegas or down to the Super Bowl on the taxpayers’ dime,” President Obama told a town hall meeting in Elkhart, Ind., in February.
Now businesses are worried about what could happen if they are forced to further curtail travel.
Meetings and events account for nearly 15 percent of U.S. travel, generating $101 billion in spending each year, according to the U.S. Travel Association. Hotels, airlines, car rental companies and caterers are among the industries that are being affected by cancellations of business events and meetings. Almost 17 million people - nearly 1 in 8 U.S. workers - have jobs in the travel industry, according to U.S. Commerce Department figures.
The travel and tourism industry lost 200,000 jobs in 2008. The industry will lose an additional 247,000 jobs this year, according to the U.S. Department of Labor.
“In the past six months, hundreds of thousands of people in the travel industry have lost their jobs,” Mr. Marriott said. “These were not the Wall Street fat cats taking government bailout money while redecorating their offices. They were housekeepers, bellmen and the people who book your corporate travel.”
“Politicians are talking about an infinitesimally small number of businesses that are using government funding recklessly,” said Mr. Mitchell, of the Business Travel Coalition. “The more they talk about it, the more executives at companies pull back because they are afraid they will be scrutinized and receive backlash about excess spending.”
Businesses insist that face-to-face meetings are important. Although video chats and teleconferencing are beneficial, most business executives prefer face-to-face meetings.
“You can have all the technology you want to have, but there is no substitute for shaking someone’s hand, watching their body language or having a conversation,” said John H. Graham IV, president of the American Society of Association Executives. “There’s not the opportunity to get people rallied or informed about the product being sold, and I believe meeting face to face would clearly impact business performance.”
There are other reasons why businesses pay to send employees on expensive trips. Businesses use incentive trips to reward an employee’s outstanding performance. If those trips are cut, not only do employees lose out on a reward, but their families lose, too.
“Just because Las Vegas is a leisure location doesn’t mean that business can’t be done,” said Jeff Clarke, president of Travelport, a Parsippany, N.J., provider of travel technologies and services. “Las Vegas has one of the largest convention centers in the world and is one of the most affordable locations to conduct business.”