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AIG Effect’s Latest Victim: St. Regis Monarch Beach
June 12, 2009
The California luxury resort where bailed-out insurer AIG held the incentive trip that sparked a massive attack by elected officials and editorial pages on the incentive and meetings market late last year is reportedly heading for foreclosure.
The St. Regis Monarch Beach, where AIG hosted a $440,000 incentive trip in October, a week after receiving a federal bailout, may be sold at auction in July after its owners reportedly defaulted on a $300 million loan. The property is expected to remain open for business during and after the process, as is usual in these cases.
In March, Michael Mustafa, director of sales and marketing for the St. Regis Monarch Beach told Incentive occupancy was down 15 percent, and he expected it to hover around 50 percent this year. Twenty percent of the hotel’s business had come from financial services groups, and another large chunk from pharmaceuticals.
The AIG event was widely accused of being an example of corporate fatcats living it up while their company went begging to the government for a taxpayer-funded handout, sparking outrage that rip[pled across the meetings industry, causing every financial institution that has taken TARP bailout funds—and many public firms that have not— to cancel all meetings and incentive trips.
In fact, there were only four AIG executives on the trip, acting as hosts for the independent agents who had earned the trip by being the top sellers in that (profitable) division of the company. And the vast majority of the trip had already been paid for long before the bailout. In March, President Barack Obama met with the leaders of hospitality companies, business travel associations and incentive houses and said business travel was necessary and good. And in April, Rep. Barney Frank (D-MA.), chairman of the House Financial Services Committee, said on the floor of Congress that this type of incentive travel program was an acceptable practice and would not be banned under still-pending legislation limiting excessive spending and executive pay by TARP recipients. But by then, the damage had been done. Hundreds if not thousands of meetings and incentives had been cancelled and many more jobs had been lost in the hospitality, meeting planning and other related industries.
Asked about the foreclosure, Brenda Anderson, CEO of Site, compared the situation to Mexican resorts that have had corporate (and leisure) business devastated by the H1N1 Swine Flu.
“People have lost their jobs,” Anderson says. “This is what happened because we, as an industry, were not quick to respond with the facts.”
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