'AIG effect' tones down lavish business events

— -- In past years, partners of global executive search firm Stanton Chase conducted business meetings in South Africa during a long trip with their families that included a safari. They also enjoyed Sydney during a gathering at the Australian city's Ritz-Carlton.

But next month, the firm's partners will huddle at a Marriott in the suburbs of Nashville, chosen partly for its access to low-cost Southwest Airlines, says Mickey Matthews, a Stanton Chase executive. The firm is also overlapping meetings to avoid the expense of flying people out twice.

Today, "practical" has replaced "memorable" as the buzzword in high-end business circles. Companies are canceling splashy events and lavish business dinners or revamping the way they plan them. The new mood means drastic changes for employees who've come to expect five-star treatment, as well as hoteliers and travel planners who base their businesses on such meetings and incentive travel trips.

They've even coined a new phrase for the trend: "the AIG effect."

It comes from the embarrassing disclosure last fall that struggling insurance giant American International Group had spent about $400,000 on a retreat at a luxurious St. Regis resort and spa after taking an $85 billion federal bailout. After that, hoteliers saw mass cancellations or postponements of previously booked upscale trips and meetings.

Businesses usually cut back on luxury travel spending in tough times, but new image concerns raise additional worries, says Bjorn Hanson of New York University.

"There's not many companies out there that want to see their name on the reader board in a four-, five-star hotel nowadays," he says.

Smaller checks at dinner

The mood is evident even at business dinners. At Morton's in Midtown Manhattan, where a steak typically costs $50, the average check for business meetings and dinners is getting smaller, says Barbara Rodriguez, the restaurant's sales manager. People are scheduling early dinners or lunches instead of four-course meals, she says.

"They're taking into consideration that they don't have those larger expense accounts anymore," she says.

The incentive travel industry is also being squeezed because the trips — usually held in exotic locales to motivate sales forces — now seem splashy. Brenda Anderson, CEO of the Society of Incentive & Travel Executives, says companies are wary about programs that could invite scrutiny because, "The spotlight is still on looking for examples of how this greed got out of control."

How companies are handling "the AIG effect":

•Choosing lesser-known hotels. Independent luxury hotels such as Boston's Liberty Hotel are gaining business from their big-name rivals. "If you're submitting an expense account, and you get a big Ritz-Carlton or a Four Seasons plastered across the folio, it's going to raise some eyebrows," says Jim Treadway, the hotel's managing director.

One group last month called The James hotel in downtown Chicago to book an $80,000 meeting in February after canceling at an upscale hotel in Las Vegas, says Patrick Hatton, the hotel's general manager. "They didn't want the image of having their meeting in Las Vegas," he says.

•Avoiding waterfront. Miami's high-end waterfront resorts are having a tougher time than inland ones booking groups, says William Talbert III, CEO of the Greater Miami Convention & Visitors Bureau. "Whether it's the Four Seasons, Conrad or Mandarin Oriental, there's a drop-off on booked business," he says.

•Downplaying golf. The upscale Jekyll Island Club resort in coastal Georgia is receiving extra corporate business from groups that want to avoid top-priced golf resorts. The hotel, which charges $200 to $250 a night, has three public golf courses nearby.

"Nobody's going to get in trouble bringing their company here," says Kevin Runner, the hotel's general manager.

•Picking cheaper wines. The James hotel's restaurant, David Burke's Primehouse, now stocks fewer $250 bottles of wine and is replacing some pricey picks with cheaper ones. For example, pinot noir fans will now find a $110 Coho Pinot Noir Stanly Ranch Carneros instead of a $175 Hirsch Vineyards Pinot Noir Sonoma Coast. "People aren't spending on the big wines," Hatton says.

•Staying closer to home. Joyce Landry of Miami-based Landry & Kling Cruise Event Services says she expects companies will choose closer cruise options, such as the Caribbean instead of the Mediterranean: "They're not stopping, but they're being more frugal and careful."

David Ellis, a consultant for a major information technology company, says his company canceled an annual six-day conference this year at the Rio casino and hotel in Las Vegas for the first time in his eight years. Though it wasn't extravagant, many people — including his wife — enjoyed going, he says.

"Most of us looked forward to it for reconnecting to friends, networking (and) getting to know management," Ellis says. In the end, he wasn't shocked, given the economy.

Expectations also evolved at Stanton Chase.

"People have come down a little bit in their expectations," Matthews says. "People recognize that that stuff was outstanding, but it was maybe a little once-in-a-lifetime."