The 'AIG Effect:' Luxury travel just isn't cool anymore

Corporate travel has plummeted, and it's not just because companies want to save money. They also want to save face.

The hotel bigwigs of Miami-Dade County are now finding it hard to lie in the bed they spent so long making. There, A-list properties are reporting that a third of their convention business has evaporated since the start of 2009.

''We've worked so long and hard to have a sophisticated and upscale destination,'' said Miami-Dade tourism director William Talbert III. ``[And now] it's being portrayed as not acceptable to meet in this kind of destination.'' To that end, the tourism lobby is launching a search to find a "Joe the Bellman" type -- an average working-class dude a la Joe the Plumber -- whom it can use to shore up public opinion of its faltering luxury-travel niche.

After AIG was caught with its hand in the cookie jar, taking lavish $500,000 spa retreats while it was begging for bailouts on Capitol Hill, luxury business trips are seen as obnoxiously gauche. They could even be bad for business, as customers are now more likely to avoid companies that are seen to be spending their funds (or worse, government funds) frivolously. The Miami Herald says hotels are getting walloped by that "AIG Effect."

Americans are ticked off about the excess, but some hoteliers want to blame the government. "It's perilously close to becoming a witch hunt," says one rep for the travel industry. But if the travel industry built itself up on a foundation of conspicuous consumption and excess, it's not our leaders' fault.

All over the luxury market, you're seeing vendors suddenly bowing to pressure to show some value and some sense. That's good news for the leisure traveler. Brian Ek, a rep for, recently pointed out that the cities with some of the best hotel bargains these days are cities that were once flush with convention traffic, including Chicago, New York, Atlanta, Miami, Anaheim, San Francisco, and Orlando (where air traffic dropped by 11.3% in January). With activity at a low, there are tons of empty rooms in mammoth hotels, and therefore there are currently tons of deals to be had.

In the 1990s, Las Vegas made the mistake of pitching itself as a family destination. When that didn't work, it made the mistake of re-casting itself as a luxury destination. Now it's doubly full of regret -- and of hot deals. Meanwhile, cities that were once overlooked by companies looking for sexier meeting destinations are now entering the spotlight. Goodbye, San Francisco! Sacramento is taking your business now. Farewell, Chicago, We're going to Indianapolis, a city upon which our shareholders will smile.

Although the meetings market is getting slammed both for financial and social reasons, the luxury leisure market isn't faring much better. Places are either closing (Tamarack Resort in Idaho went just went kaput), not paying off their debts (Trump's Chicago tower is in trouble after condo sales stalled) or dealing like crazy.

Bermuda, one of the world's most upscale island destinations, is so hungry for business that it's offering to shave $400 off vacation packages going there. Bowing to the economy, Orient-Express has just introduced "downsized" versions of its grand train journeys--you leave the station in London and come back on the very same day! (Murder on the Orient-Express? There's barely time for a snack!) Yachts of Seabourn, a luxury cruise line sailing in Europe, has pruned its summer rates by 65%. (Doesn't that make you wonder how much we were overpaying before?)

My, how the pendulum swings. A few years ago, the travel industry was going mad. Hotels turned their back on value, peddling instead a carnival of pamper-your-pooch packages, petty added fees, and one-night-free-if-you-stay-for-twelve promotions in a race to see who could offer the most pointless or excessive product.

Now, after years of treating money-minded people like second-class customers, and after years of telling us that conspicuous consumption was the only reason to travel, vacation sellers are crawling back to play a game of "Let's Make a Deal." Even Conde Nast Traveller's cover stories look like they were ripped from Good Housekeeping. It is now, as they say, a buyer's market, and that's great for people who love to travel, even if it stinks for Joe the Bellman.
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