Fallout from this spring’s GSA meetings scandal is having a devastating effect on hotels and other conference venues that rely on government business – to the tune of millions of dollars in cancellations and lost business.
Now the potential for a deep and lasting slowdown in government travel spending is triggering further alarm, including the fear of a spillover effect on private sector business travel.
When excessive spending on entertainment and frills at a GSA meeting in Las Vegas made news headlines earlier this year, it threw the government into a frenzy of damage control that included immediate curtailment of travel for meetings. (See “Industry Goes to the Mat Over GSA Scandal,” April 23, 2012.)
Evidence of the resulting damage includes:
• A report from the American Lodging & Hotel Association that government conferences of over 500 people have come to a halt.
• More than $1.4 million in cancellations of government meetings booked for April and May at the National Conference Center in Arlington, Va.
• More than $4 million in cancellations at Marriott properties of signed contracts with federal agencies within weeks of the GSA fiasco.
While renewed government scrutiny of travel spending dates to the economic crisis of late 2008, the GSA mess spurred new clampdowns on travel by government employees, along with proposed legislation to curtail travel and discussions of reducing the GSA’s lodging per diems for travelers.
Uncertainty in the face of the upcoming presidential election and the possibility of yet another debt ceiling crisis is adding to industry fears that government travel spending is in for a serious hit.
Heightened oversight of travel spending reportedly has extended as far up as the president’s Cabinet, with instances of Cabinet secretaries signing off on meetings over a certain size.
“You would think that (Secretary of State) Hillary Clinton has more important things to do than approve a four-day meeting with 500 attendees,” said Kurt Krause, general manager of the National Conference Center in Arlington, Va., speaking hypothetically.
Millions of dollars in cancellations
The National Conference Center, which relies on government meetings for 60% to 70% of its bookings, has seen business plummet since the GSA meeting made headlines.
In April, cancellations cost the property $650,000 in revenues, and in May it suffered another $500,000 in cancellations, according to Krause. In addition, attendance at other meetings dropped.
“It’s killing us,” said Krause.
The American Lodging & Hotel Association is seeing “a halt to conferences of over 500 people,” according to Lisa Costello, vice president of governmental affairs. “Federal travel managers are waiting to see what happens next.”
Meetings on hold
Several federal agencies have suspended meetings altogether while they work out policies, according to Erik Hansen, director of domestic policy for U.S. Travel Association.
At the National Conference Center, director of sales and marketing Eric Whitson said many agencies are waiting for interpretations of policy from the White House before going forward with meetings.
“Our government customers just don’t want to do anything, don’t want to make decisions or be put in the spotlight,” he said. “And it’s not that they’ve done anything wrong; they’re worried about their jobs.”
While many cancellations of government meetings have been spurred by institutional fear at government agencies, travel industry members say they worry that legislative changes being discussed would create a lasting chill.
“We’re still seeing a few proposals in Congress related to government meetings,” said Hansen. “There are still lawmakers who would like to see action on this front.”
He cited a bill approved recently by a House committee that would severely limit government conferences. Another proposed bill would limit attendance at association meetings to just one person from any federal agency, according to Hansen. No action has been taken on the bill.
U.S. Travel has successfully “put the brakes” on some legislative initiatives to curtail government travel, Hansen told Travel Market Report.
But, he added, “there have been bumps along the road, with several agencies suspending meetings while they work out policies.”
Compounding concerns is uncertainty created by the upcoming presidential election and the very real possibility of another standoff over the federal debt ceiling.
Many government agencies are hesitant to book meetings because they don’t know what their budget situations will be and because the election could result in a change in administration, industry members said.
“A lot of stuff between now and the election will be political. We will see a lot of movement toward oversight and transparency,” said Hansen.
Whitson of the National Conference Center commented that “between the election and possible change of administration, it might be next spring before things level off.”
Kevin Hinton, incoming chairman of Meeting Professionals International, said he feared the global repercussions of a major crackdown on government meetings.
“This is not just a U.S. issue. Our government has people attend meetings all over the world and that could be impacted,” said Hinton, who is executive vice president of Associated Luxury Hotels International.
“If there was legislation that allowed only one government staff person to go to one meeting a year, the implications could be broad.”