Growing taxpayer anger over government bailouts of the private sector is causing publicly traded companies across all industries to begin canceling, downgrading or delaying meetings, whether or not they are bailout candidates.
Public displeasure over lavish salaries and perks for executives of companies receiving bailouts has been exacerbated by news reporting that frequently has lumped reasonable business trips and group travel with extravagant outings.
"The CEOs are worried about being on the 6 o’clock news," said Brian Hollien, general manager of Morris Meetings and Incentives in Salt Lake City.
But even beyond the range of TV cameras, executives are concerned about misperceptions on the part of shareholders and staff about spending money on an event or incentive trip.
Roger Dow, president and CEO of the U.S. Travel Association, described the situation as "a country in panic mode. People are not thinking rationally."
In an effort to stem what he termed an "epidemic" of cancellations, Dow said U.S. Travel and seven trade organizations had quickly produced guidelines that the groups believe will enable companies to show that their spending on meetings and incentives is reasonable and prudent.
The guidelines are the industry’s response to a Treasury Department requirement that companies receiving federal bailout money develop corporate spending guidelines for private jets, conferences and events, among other things.
Guidelines for all companies
But Dow said the guidelines were not intended solely for bailout candidates.
"We’re encouraging all companies to adopt these," he said, as a way of encouraging "responsible and valid" travel that in turn protects jobs and drives growth for those holding the meetings.
Meetings and events produce nearly $40 billion in tax revenue for federal, state and local governments each year and generate more than a million jobs. For that reason, he said, curtailing valid travel was "dangerous."
He recommended that both travel professionals and their corporate customers adopt the following policies:
• Total annual expenses for meetings, events and incentives should not exceed 15% of a company’s total spend on sales and marketing.
• The amount spent on an incentive event should not exceed 2% of the total compensation provided to eligible participants or 10% of total award earners’ compensation.
• At least 90% of incentive attendees must be employees other than senior executives.
• Each meeting or event must serve at least one valid business purpose, but meetings costing more than $75,000 must be supported with a written business case.
• As to internal meetings attended only by senior executives, the participating executives must pay the cost of any non-business-related activities.
• An independent audit will confirm a company’s adherence to the policy.
Dow said U.S. Travel and its partners were undertaking an effort to broadcast and promote the guidelines at Treasury, in Congress, through trade groups and the U.S. Chamber of Commerce "in every way possible."
Among those involved in the creation of the proposals was Maritz, the nation’s largest incentive house. Beth Rusert, Maritz’s vice president of corporate communications, said the company contributed data "based on our real-life experiences."
She said Maritz had seen cancellations across all types of industries due to corporate concerns about image.
Maritz last week emailed copies of the guidelines to all its travel clients, "encouraging these companies to take the lead in adopting these," Rusert said.
Hollien said that Morris Meetings and Incentives, a division of Morris Murdock Travel, would "certainly make clients aware" of the guidelines before they canceled events.
He said Morris had dealt with two group cancellations that cost the companies almost as much in penalties as they would have spent keeping the meetings on track.
Morris, Hollien said, has had some success persuading clients not to cancel by showing the costs of canceling. Some customers are postponing 2009 trips until 2010.
Paul Salvatore, president of Hogg Robinson Group's events business for North America, said HRG was seeing cancellations but believed they were a result of budget issues. He said HRG had seen "little activity" so far this quarter, which should "have been a good quarter for us. I think people are saving their budgets."
He said the industry guidelines could be a valuable tool to help his clients think about their travel spending. But he said he would expect companies to adjust the suggested caps, especially the ratio of incentive spending to award winners’ compensation, based on the kinds of businesses they operate.
When announcing year-end results last week, Douglas Anderson, Carlson Wagonlit Travel’s president and CEO, said that while there had been an overreaction in the market, he was not aware of specific cancellations by CWT clients because of image issues.
However, he said Carlson was seeing customers downgrade their plans, moving meetings from "exotic" destinations to sites near home offices, for example.
"The level of downtrading has been fantastic, in the 30-40%-plus range" in recent months, Anderson said.
Marc Casto, president of Casto Travel in Santa Clara, Calif., said clients were canceling executive retreats due to image concerns. He said two clients had received government loans and had simply stopped traveling.
He said high-end business travel such as use of private jets was also off.
Casto said he was glad that the proposed guidelines had come from the industry, not from government.
"In all cases, there can be excesses, but the proper response is not to cancel all travel," Casto said. "Encouraging reasonable travel is not just a good policy, it is good business."
While concerns about the possibility of government getting involved in travel management have far from abated, it came as some consolation to the industry last week that the Senate’s version of the economic stimulus package acknowledged the value of "reasonable expenditures" for conferences and incentives.
The Senate proposal called for bailout beneficiaries to adopt company policies regarding "excessive or luxury expenditures," including events that go beyond reasonable travel expenses for conducting business.
Marriott CFO Arne Sorenson said Marriott was working to combat the public backlash against corporate travel.
"We’ve got to get away from the symbolism of a corporate fat cat smoking a cigar on a golf course and get to the symbolism of people meeting and building their corporations," he said during an earnings conference call.