Cos. Still Uptight About Board Meeting Extravagance

Many corporations continue to be sensitive to perceptions of excessive perks though demand for high-end executive board meetings has increased this year and companies are spending more on amenities.

John McConahy, president of Pittsburgh-based meetings consultancy Imagination Plus, said although companies have more money for lavish executive meetings, most still try to avoid perceptions of excessive spend.

"Everything in the marketplace is starting to revert back to where it was, but certainly not to the levels of where they were. A lot of people are still being cognizant of the aura of being watched, so the 'executive perk' is still being downplayed," McConahy said.

Even companies that have increased spending on their executive and board meetings have not gone back to luxury resorts in the Caribbean or other locations that might be perceived as extravagant, he said. Many companies are holding their executive meetings much closer to corporate headquarters, he said, an extension of cost-cutting measures adopted over the past four years.

"Most executive board meetings are more localized than they have been in the past. The idea of taking executives to a ritzy resort is not nearly as prevalent as it used to be at one time and, in fact, I would call it a rarity," he said.

McConahy also speculated that many companies found their return on investment for executive meetings increased significantly through localization. Executives could accomplish the same amount of work for a lot less money.

"The effectiveness of the meetings has not deteriorated whatsoever, but the expenditures have reduced significantly," McConahy said.

Such regulations as Sarbanes-Oxley, federal investigations into fraud at major corporations and security concerns after the terrorist attacks of Sept. 11, 2001, all have produced a chilling effect on executive spending that may not ease even as the economy improves, McConahy said.

"There's just so many factors in the last five years that are affecting major corporations that you can't put your finger on just one of them. 9/11 certainly reduced the travel idea, and the federal investigations have certainly limited or reduced the idea of lavish expenditures on one individual, so all of them are playing a factor," he said.

Hoteliers were more enthusiastic about the prospect of increased spending for deluxe executive meetings.

"There's no question about it, luxury is back," said David Gabri, president and CEO of Associated Luxury Hotels, a 70-property luxury and boutique chain based in Washington, D.C. "The luxury hotel sector is in very high demand. There's a tremendous increase in activity, inquiries and bookings across the nation as the market begins to take note."

Gabri said though many corporations localized meetings in 2002 and 2003, many executive board meetings now are held at top resorts in luxury destinations.

"Our meeting sources were advising us that they were restricted by corporate policy, and now we see those restrictions being lifted," Gabri said. "It doesn't mean that the selection won't be in the vicinity for ease of the activity, but we're seeing people reaching out further than we have before in recent times."

Sarbanes-Oxley regulations have been a concern among Gabri's meeting buyer clients, but he said SOX provisions have yet to show up in requests for proposals or contracts with his hotels. "The Sarbanes-Oxley land mine is an issue that obviously is on the forefront for everyone," he said. "It's a hot topic on the circuit of meeting planners and meeting professionals as people try to get their arms around what this all means."

Louis Kievit, director of sales in North America for Hyatt International's Park Hyatt brand, said the luxury and boutique chain launched an aggressive investment into renovations and new construction to meet growing demand fueled in part by high-end executive meetings and incentives.

"We've taken advantage of the shift to upgrade the physical products in many of our key properties and add new properties where our customers have been requesting them," Kievit said.

While the fundamental needs of executive meetings did not change much during the economic downturn, Kievit said those groups now are willing to spend more for upgraded meeting packages that include top-end food and beverage. "While it hasn't been a boomerang per se, we have seen less resistance to pricing, as our clients understand the economy and demands have changed. We also see a tendency for an upgraded meeting package more than there was two years ago," he said.

Park Hyatt has taken advantage of stronger demand to upgrade key properties, including the Park Hyatt Los Angeles, which in 2004 completed a $14 million renovation of its lobby and guest rooms, and start construction on eight new properties in Asia, South America and the Middle East. "We see a lot more demand for incentives and executive meetings overseas," Kievit said.