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Travel group urges companies to keep spending

With criticism of pricey corporate events spurring hotel and resort cancellations, travel industry leaders on Monday encouraged companies to keep spending on travel.
/ Source: The Associated Press

With criticism of pricey corporate events spurring hotel and resort cancellations, travel industry leaders on Monday encouraged companies to keep spending on travel and offered guidelines they hope will prevent a backlash.

Media coverage and Congressional criticism of corporate travel has created a "paralyzing environment," Roger Dow, president and chief executive of the U.S. Travel Association, said in a telephone press conference Monday.

Loews Corp. CEO James Tisch went a step further during a separate call with investors Monday about his hotel holding company's recent earnings.

"Congress has done a great job of killing the resort hotel business with the way they've criticized the number of financial firms from having conferences," Tisch said. "In fact, I just heard this morning of another investor conference that was canceled by another major investment firm because of the fear of being criticized by members of Congress."

Last week, the U.S. Treasury Department issued new regulations requiring businesses that received emergency government funding to create policies for approving conferences and events. The new rules came on the heels of stepped-up criticism about corporate spending on luxury retreats, which, in turn, prompted a rash of cancellations.

Dow said the lowest-paid workers — bellmen, maids and waiters employed hourly — are the first to lose their jobs when travel spending drops.

"When the Department of Labor reports a loss of nearly 200,000 travel related jobs in 2008 and U.S. Commerce Department data predicts a loss of an additional 247,000 travel-related jobs in 2009, it is critical that every effort be made to protect beneficial meetings and events," he said.

Among other suggestions, Dow's group and seven other trade associations proposing corporate travel guidelines recommend companies identify a specific business purpose for events that cost more than $75,000. And they suggest that no more than 10 percent of attendees at incentive-program events be senior executives from the host company.

Scrutiny of corporate business travel began in the fall, when American International Group Inc., or AIG, was sharply criticized for spending $440,000 on a retreat for top-producing insurance agents days after the U.S. government gave it a $85 billion bailout loan.

Detroit executives also came under fire for flying in company-owned jets to Washington to request billions of dollars for their struggling auto companies.

An Associated Press story last week stirred more controversy by revealing that Wells Fargo & Co. planned a casino junket for employees and had booked 12 nights this month at the Wynn Las Vegas and the Encore Las Vegas. Wells Fargo canceled the trip after criticism from Capitol Hill that it was misusing the $25 billion it has received in federal funds.

Morgan Stanley, which has received $10 billion in bailout funds, canceled a trip last week for top employees to Monte Carlo.

The U.S. Treasury Department's new executive compensation regulations create additional pressure to trim travel by requiring chief executives to sign off on spending on "excessive or luxury items."

The "demonizing" of corporate resort travel is likely to continue, Friedman Billings Ramsey analyst C. Patrick Scholes said in a note to investors on Monday.

"In our view, this trend will likely only intensify over the next few weeks as public companies (not just the ones which asked for a government handout) become increasingly image-conscious," Scholes said, noting that the concerns build on cutbacks already under way for financial reasons.