Blame It On AIG

Posted by: Monica Gagnier on May 13

I thought I had come up with the perfect headline for this blog entry on the downturn in conventions in the Palm Springs area.

It was: “Call It the AIG Effect.” However, in doing a Google search I found a Los Angeles Times article on the same subject that used the same words.

So I settled for “Blame It On AIG.”

The word in Palm Springs is that ever since AIG got a PR black eye for holding a $443,000 corporate retreat, replete with manicures and massages, shortly after getting a government bailout, companies have been afraid to hold off-site meetings at upscale hotels and resorts.

I’m sure that’s not the only reason why occupancy rates at some high-end hotels in the Palm Springs area have been running as low as 10% recently. After all, there’s a recession on, and many companies are scrapping corporate travel in order to earn a profit even as sales are falling.

Another culprit? Technological advances in videoconferencing are also prompting some companies to jettison the corporate retreat in favor of a screenfest.

Just how bad are things in the land of 100 golf courses? Yesterday, the Palm Springs Desert Resort Communities Convention and Visitors Authority (CVA) held a rally at the Agua Caliente Casino Resort Spa in Rancho Mirage that drew 670 workers from the hospitality industry.

The meeting was designed to send a message to Washington. The message? By holding hearings like the one last October, where AIG was raked over the coals for its lavish corporate travel expenditures, lawmakers are threatening the livelihoods of those employed by hotels, casinos, golf courses, restaurants, and spas.

Yesterday's Rancho Mirage rally was part of a larger effort led by the U.S. Travel Assn., which held events in more than 40 cities, including Chicago, New Orleans, and Orlando.

"Travel and tourism plays a key role in the Palm Springs area's economy," said CVA President and CEO Jeff Beckelman in a statement. "Our community relies on travel for tax revenue and jobs and the benefits these bring to our economy. We hope [the] event raised awareness and showcased why travel matters to every hospitality employee throughout our desert."

The average convention traveler spends $262 a day in the Coachella Valley, according to research released at the rally.

During the rally, Beckelman said the CVA found that 121 group meetings have been canceled in the Coachella Valley, where Palm Springs and adjoining Desert Cities like Rancho Mirage are located, since the fourth quarter of 2008, according to The Desert Sun, the local paper.

This is a huge problem, because travel and tourism is the top industry and the largest employer in the Coachella Valley, with 22,949 jobs out 140,000 jobs, according to Wheeler's Market Intelligence. Indeed, the most recent unemployment figure for Riverside County, where the Desert Cities are located, is 13.3%.

If that figure doesn't seem alarming to you, check out a recent blog post by BusinessWeek Chief Economist Mike Mandel, expressing concern about the male unemployment rate of 7.1% in the 45-54-year-old age group over the past two months.

That's about half of what the unemployment rate is in Riverside County.

While tourism generates 16.4% of the jobs in the Coachella Valley, the sector contributes just 7.8% of all jobs in Riverside County, also home to the city of Riverside, which has lots of government, education, and health-care employment.

Nationwide, the condition of the travel and hospitality industry is also quite bleak. Based on U.S. Labor Dept. data, the U.S. Travel Assn. reported a loss of nearly 200,000 travel-related jobs in 2008 and predicts a loss of an additional 247,000 travel-generated jobs in 2009.