What’s the difference between a business event and a party?
That may sound like a setup for a joke, but for Corporate America, it is a serious question without a clear answer. Many companies are pulling back on management retreats, junkets for top clients and getaways to reward top producers.
And this new austerity is likely to mean new pain for yet another part of the economy: the hotels, resorts, restaurants and event planners that cater to these events, which one trade association has estimated generate $244 million in annual spending and account for 2.4 million jobs.
It also means many employees on lower rungs of the corporate ladder are seeing at least a temporary end to what had become a normal perk of business life.
“O.K., time out. Something doesn’t feel right,” writes John Stumpf, the chief executive of Wells Fargo , in a full-page ad in Sunday’s New York Times and Washington Post. In a long letter, he blames misleading news articles that create the impression that “every employee recognition event is a junket, a boondoggle, a waste, or that it’s for highly paid executives. Nonsense!”
Its annual “recognition events,” Mr. Stumpf added, were paid for by profits, not the government. “Events such as this are the heart of our culture because our product is service, delivered by caring, energized, talented, loyal team members who earn competitive, fair wages and benefits,” his letter states.
Wells Fargo, which received $25 billion in federal bailout money, has canceled all its “recognition events” this year, including plans to fly dozens of its top mortgage officers to Las Vegas for a junket at the Wynn Las Vegas and the Encore Las Vegas.
Other companies — particularly financial firms that have received federal bailout money — are retreating from anything that might appear overly lavish.
“No company wants to look like they are spending money foolishly at a time when people are losing their jobs,” said Jack Riepe, a spokesman for the Association of Corporate Travel Executives, the industry trade group.
Just this weekend, the North Carolina bank BB&T , which had received a $3.1 billion bailout, canceled a four-day retreat in March for its Sterling Performance Club, its top salesmen and their families at the luxury Ritz Carlton in Amelia Island, Fla.
The trip included free air fare and hotel, foot scrubs and spa services, a sailing regatta and golf and tennis and sightseeing trips. BB&T did not return phone calls about the cancellation, which was confirmed by the hotel and local vendors.
“Everyone is concerned about their image,” said James Etkin, president of ME Productions, an event planning company in Miami, who said there are far fewer extravaganzas now. “They don’t want to be in the headlines.”
Meeting Professionals International, a trade group, predicted a 12 percent drop in conference attendance this year and a 9 percent decrease in off-site meetings and other corporate events. The association is the widely cited source on the estimated number of jobs supported by such events, and the spending on them.
And in a survey released last week, the Association of Corporate Travel Executives said 71 percent of its members planned to spend less on travel this year and would use teleconferences more to replace meetings.
The Las Vegas Convention and Visitors Authority issued a statement last week saying that “it is unfair to punish an entire industry that generates billions of dollars in economic stimulus and jobs for the American public.”
Vivian A. Deuschl, a spokeswoman for Ritz Carlton, a luxury hotel chain, said these cutbacks “have had a terrible effect on hotels, and luxury hotels have been very vulnerable.” Even companies not accepting bailout money have canceled events, “because it is a perception thing and that is very difficult to overcome,” she added. The Ritz Carlton in Half Moon Bay, Calif., has received cancellations from 32 groups in the last four months, a loss of $2.3 million in revenue, she said.
What is the new test for what’s acceptable? “Anyone investing in a meeting or an event has to have a solid business purpose,” said Bruce M. MacMillan, chief of Meeting Professionals.
By that standard, an event organized two years ago by Mr. Etkin for an investment bank would probably be considered out of bounds today.
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The bank took 150 clients and 30 of its sales staff to a remote Florida island for a “Miami Vice” afternoon, Mr. Etkin said. They created a competition using a yacht, Jet Skis, speedboats, paintball guns and plastic bags filled with sugar to simulate cocaine. “It was all very James Bond, very over the top,” Mr. Etkin added.
Last week, the Treasury Department announced new regulations for financial services companies receiving federal bailout money, barring “excessive or luxury items” at corporate conferences and events. And members of Congress are proposing legislation along the same lines.
So today’s corporate events are more likely to involve an overhead projector in a hotel meeting room than Jet Skis.
No company, after all, wants to receive the same kind of press that the American International Group did last October. Less than a week after the federal government provided $85 billion in bailout funds to the insurance giant, A.I.G. held a weeklong retreat at the luxurious St. Regis resort in Monarch Beach, Calif.
In short order, A.I.G. executives were hauled before Congress and pilloried for providing manicures, pedicures, massages and facials to executives and running up a $440,000 tab on rooms, meals and spa treatments.
The Buick Invitational last weekend in La Jolla, Calif., reflected this new moderation. Rather than flying in nearly 75 car dealers, only 25 went, and they had to pay their own way.
On the 18th hole, there were soft drinks, potato chips and folding chairs. In previous years, Buick’s hospitality suites featured buffets, an open bar and televisions to watch the event.
Larry Peck, promotions manager for Buick and Pontiac, said General Motors was taking a more “bare bones” approach to corporate advertising and it is “just flat-out cutting” anything that it is not obligated to provide under long-term contracts.
Even companies not receiving federal money are trimming back. The North Face, the outdoor apparel and equipment company, hosted dealers and business partners at a Squaw Valley resort near Lake Tahoe in California late last year.
But to save the cost of 400 hotel rooms for the first night, North Face created a base camp where the group slept outdoors in North Face clothes and sleeping bags. Groups gave presentations around a camp fire. “The night was freezing cold,” said Katja Asaro, managing director at Henry V Events, the Portland company that had planned it. “But people really got into it.”
The austerity has even eaten into Super Bowl festivities. Playboy Enterprises, for example, has routinely held outlandish pregame parties. Last year, the party featured a scantily clad woman in a giant martini glass, New England Patriot cheerleaders and Playmates. This year, it decided not to have a party.
“With everything going on, you don’t want to be out there spending frivolously,” said Robert Tuchman, president of Premiere Corporate Events in New York.