By Robert A. Gilbert, CHME, CHA, President and Chief Executive Officer, Hospitality Sales & Marketing Association International

Three letters have spelled trouble for the hospitality industry the past several months: AIG.

The public outcry over a spa trip by American International Group was understandable. The timing of the trip – just a week after the company received $85 billion in federal bailout funds – ignited a fury on Capitol Hill.

While the issue made for dramatic TV and heaping portions of righteous indignation, observers ignored the valid business principles of work-related travel and focused mainly on the misguided idea that all business meetings spawn excessive spending of taxpayer money. That’s plain wrong.

Scuttling the entire travel sector is like pulling out a good spark plug from a misfiring engine; the overreaction makes things run worse.

As it stands, indiscriminate cutbacks – including canceled meetings affecting healthy sectors or industries unrelated to bailout funds – generate the unintended consequence of spoiling local economies just at a time when every dollar counts.

Continue on this path and economic recovery may seize altogether. The services sector lost 20 percent of the 598,000 jobs slashed in January, including 28,000 eliminated by the hospitality industry. The impact is felt nationally and even more acutely at the local level.

Business travel isn’t a demon. It’s an economic halo.

The economic crisis stresses employees as they watch friends and family lose jobs. 'Am I next,' breadwinners wonder. Loyalty has reached a low point. All organizations should be focused on winning the hearts and minds of their top producers.

Incentive travel is a smart motivator used by many companies as a reward to top performers (the revenue drivers for these companies) – and not necessarily executives at the top of the pay scale. In times of recession, businesses need to reinforce loyalty among high-performing employees at all levels worried about their futures. Failure to connect, whether through travel or other rewards, makes businesses vulnerable to underperforming sales staff and to talent raids by competitors.

Even regular business meetings – those outside the realm of overt luxury – enhance key relationships and inspire success. Meetings and events produce the highest returns on investment of any marketing channel or initiative, according to a study of Fortune 1000 chief marketing officers. As the economy has imperiled businesses across the country, strategic, face-to-face meetings at off-site locations may mean the difference between survival or not.

Still, business- travel jitters are palpable. There’s a discernable “AIG effect” as companies abandon travel incentives and cancel business meetings at resorts, fearful they’ll be judged guilty by association.
Wells Fargo – the recipient of $25 billion in bailout funds – announced Feb. 3 it would cancel all employee recognition events, including one scheduled for Las Vegas. The cancellations happened because of “misconceptions” created by news coverage about business travel, Wells Fargo President and CEO John Stumpf wrote in a full-page ad in the New York Times.

“Who loses besides our team members?” Stumpf wrote. “The workers who depend on our business. The hospitality industry. Hotel housekeepers. Restaurant servers. The airlines.”

While cancelations may produce a feel-good effect for critics, it suffocates right at the spot in need of oxygen: the wallet.

Resorts and hotels are economic engines. At a time when economic stimulus is gravely needed, meetings and convention business provide high octane. Nationally, business-related travel generates 2.4 million American jobs and $244 billion in spending, according to one industry estimate.

Squashing business-related travel also changes a potential economic multiplier into a heavy-duty subtraction problem for cash-starved governments. Business-related travel generates an estimated $40 billion in tax revenue for federal, state and local governments. Some public services depend on tax revenue generated by conventions and meetings at resorts and hotels.

 State and local governments – already hurt by declining revenue spurred by the collapse of the residential housing market – may be forced to cut jobs and services if the economy eats further into the tax base.

Want to help your company, community and country? Keep traveling to meet with your customers and keep meeting to move your business forward.

Crushing the life out of business travel may produce short-term gain, but it spells doom for jobs and the economy.

This Op-Ed is part of the Meetings Mean Business Communications Tool Kit which is available to members of the Hospitality Sales & Marketing Association International. The kit was developed by the HSMAI’s Resort Marketing Special Interest Group as a  response to the "AIG Effect," which has taken a toll on the hospitality industry particularly in the resort sector. It is credited to Robert A. Gilbert, CHME, CHA, President and Chief Executive Officer of HSMAI. Gilbert also serves on the Board of Directors of the American Hotel & Lodging Association and the Convention Industry Council and is also on the Board of Trustees for the World Tourism Foundation as well as the Travel and Tourism Coalition of the Travel Industry Association of America. He is a member of the HITEC Advisory Board for Hospitality Finance and Technology Professionals.