It’s not frequent when a company’s corporate event budget is available for public analysis – even if it’s partial data, so the recently shared information about an AIG American General (AIG’s life insurance unit) independent agent program at a luxury resort offers an excellent opportunity for analysis.

It’s possible to analyze this information because the House of Representatives Committee on Oversight and Government Reform requested and released this information, announcing that AIG spent $440,000 on an executive event, which was then followed by significant criticism for its extravagant expense at a time when the company required a government bailout. The following two documents were made public:

Unfortunately, AIG spokesperson Joe Norton declined to provide comment or clarification as to whether the event was an incentive trip or an external sales conference.

Norton did indicate that the invited attendees were generally considered in the top 5 percent of revenue generating producers during a 12 month period that ended June 30, 2008. Norton also said that spouses (or personal guests) may have accompanied attendees, but provided no additional clarification as to whether those costs were covered as part of the trip. As many event and meeting planners know, this would be an important distinction that may potentially trigger a tax/accounting related decision.

Although this sounds as if the program may have been an incentive trip, without confirmation it is relatively safe to analyze the program as if it were classified as an external sales conference related to business development.

Summary of Observations

To be sure, regardless of the type of program, it’s reasonable to understand that business meetings and events provide significant and measurable ROI to an organization.

However, despite the fact that AIG’s management opted to cancel all events not required by law(due to the negative publicity the event received), the planners and management behind the sales conference may still be able to identify several opportunities for potential improvements in the future when this ban gets lifted. Event and meeting planners may consider this as a possible case study for their own future hotel negotiations.

After analyzing the data that has been made public, meeting planners are likely to make these observations strictly as they relate to the hotel guest rooms expense category:

  • AIG contracted 494 room nights, and only reduced to 488 room nights.
  • St. Regis resold 48 room nights to reduce AIG’s obligation to 440 room nights.
  • AIG used about 65% of its contracted rooms (287 room nights).
  • AIG’s required contracted rooms cost an average of $427 (includes tax).
  • Based on the final bill, AIG paid an average of $680 per room night (includes tax).
  • The St. Regis final bill is $7,183.50 higher than identified in the exhibit detail.
  • The $7,183.50 remains unexplained. (Were incidental items covered?)
  • Nine staff rooms were contracted, but only three were accounted as used.

The Final Bill

To arrive at these and other observations, event planners should look at the two documents shared: the St. Regis Invoice Summary and Conference Program Breakdown that detailed information related to guest room charges and spa services. According to Karen Lightfoot, spokesperson for the House Oversight and Government Reform Committee, the program breakdown was provided by Starwood and Resorts Worldwide.

The St. Regis Invoice Summary

  • Hotels Master Rooms: $139,375.50
  • Comp Rooms: ($2478.60)
  • Attrition (required per contract): $58,373.12
  • Subtotal: $195,269.82

Based on the conference program breakdown that details the contracted rooms vs. rooms used, the value identified for the comp room was factored into the program (i.e., the hotel simply added the value of those comp to the Master Rooms and then subtracted the comp value). Also these totals reflect a gross amount that reflects the 10.16% occupancy tax. Therefore, it really just demonstrates that the actual Master Rooms Fee is $136,896.90.

There’s a significant amount of useful information in the program breakdown to help event and meeting planners understand more details about the AIG event. It’s important to note that the breakdown data is dated after the completion of the program and the day the St. Regis bill was prepared, so it may be safe to assume that the data should reflect final expense details.

For a lack of a better description for each section of the spreadsheet, simply review the document and view each block of data as a separate section (e.g., section 1, 2, 3 and so on):

Section 1: This is the initial total contracted rooms by AIG General Life.

Section 2: This is the Minimum Room guarantee contractually required prior to the event, reducing their initial contract of $191,275 down to only $189,325. However, St. Regis did attempt to help offset AIG’s obligation by reselling $18,585.60 rooms to offset contractual requirements. This brought the requirement down to $170,739.40.

Section 3, 4 & 5: This reflects the actual rooms used during the event, including no-shows.

Section 6: This is where we find the actual revenue requirements and how the fees were accounted. This is the source of some important data.

The Dollar Amounts in the Conference Breakdown

  • Per Minimum Requirements Listed: $189,325
  • Less Resold Rooms (reducing requirements): $18,585.60
  • Subtotal Required: $170,739.40
  • Minus Actual Used: $117,750
  • Subtotal Determines Room Attrition Requirement: $52,989.40
  • Plus 10.16% Occupancy Tax: $5383.72
  • Total Room Attrition Requirement: $58,373.12

From the above calculation we can recognize the required room attrition charge.

However, the rooms used at $117,750 plus the 10.16% occupancy rate only equals $129,713.40 for Room Charges, which is $7,183.50 less than what the St. Regis charged for Room Expenses. Although the question for clarification was presented to spokespersons at AIG, the House Government Reform and Oversight committee, St. Regis and Starwood, all declined to comment or provide clarification.

With this in mind, possible explanations for the additional charge may or may not include any of the following:

  • The conference program breakdown provided by Starwood may reflect some errors.
  • AIG may have covered incidental room charges (e.g., internet, laundry and/or mini-bar).
  • The meeting planner may have charged legitimate program expenses to the master room bill.
  • It may be a combination of all of the above.

Held at the St. Regis Resort Monarch Beach, Dana Point, CA, the contracted dates of the program spanned September 22 – 29, 2008; however, the bulk of attendees stayed four nights, from September 24 – 28, 2008. Therefore, it’s reasonable to expect that this was a five day/four night program with the following hotel room logistics:

  • 101 attendees projected; 63 actual (possibly 57, see below)
  • 9 AIG staff projected; three staff rooms are reflected as used.
  • 1 complimentary room (probably for an onsite coordinator)

Note: The actual numbers above do not reflect two individuals who were identified as “no shows” to the event, which means rooms were held for 2 additional attendees.

Negotiated Rates Per Room Type

The AIG agreement appears to have negotiated multiple rates for similar room types. This is frequently done by hotel sales departments for many different reasons, but ultimately it’s important to remember that the hotel’s finance officer or sales director is looking for a group event to generate a certain minimum amount.

It’s difficult to identify the difference for each of the various room types to demonstrate the difference just by reviewing the hotel’s web site. However, it’s reasonable to assume that the standard guest rooms were extended to AIG staff.

Initial Room Contracted

  • Staff Room: $250 (64 room nights required)
  • Garden/Resort Room: $325 (16 room nights required)
  • Pool View: $325 (28 room nights required)
  • Pool View: $375 (287 room nights required)
  • Ocean View: $425 (68 room nights required)
  • Executive Suites: $325 (26 room nights required)
  • Presidential Suite: $3,200 (5 room nights required)

Actual Room Occupied and Under/Over Required

  • Staff Room: $250 (21 room nights used / 43 under)
  • Garden/Resort Room: $325 (18 room nights used / +2 nights)
  • Pool View: $325 (0 room nights used / 28 under)
  • Pool View: $375 (216 room nights used / 71 under)
  • Ocean View: $425 (4 room nights used / 64 under)
  • Executive Suites: $325 (20 room nights used / 8 under)
  • Presidential Suite: $3,200 (5 room nights used)*

*Note: St. Regis provided AIG with two Presidential Suites, but accounted the cost of both to total the obligated suites (essentially, providing a second Presidential Suite free of charge).

Review of Required and Actual Room Nights

It’s not enough to look at the projected and actual total attendee count at an event. It’s important to look at the contracted count of room nights vs. the actual number of room nights used.

It may be noticed that AIG either reduced its staffing levels by six or accounted those individuals into what is calculated as the “attendee” count (which would then actually reduce the attendee count down to 57 non-AIG attendees). But because it was communicated heavily in the media that 10 AIG employees attended the program, it could be easily assumed that 57 actual attendees participated (with the 10th AIG employee being an onsite event coordinator). Other observations:

  • AIG used the upgraded standard guest room locations for all guests.
  • AIG eliminated the use of ocean view rooms.
  • One of the AIG executives (or clients) chose not to attend at the last minute.
  • Hotel offered two Presidential level suites for the price of one.
  • Hotel resold 48 room nights, reducing AIG total liability.

Potential Opportunities for Improvement

As they say, hindsight is 20/20, and although we do not have the complete set of documents, it’s relatively clear that there were definite opportunities for improvement to this program. Some suggestions may include the following:

  1. Incorporate a 10% room reduction with no penalty into the contract. It’s not known if there were a clause that allowed AIG to reduce its room count, but it’s a fairly acceptable practice to allow for a 10% room reduction with 30 days notice (sometimes less). If that were the case, AIG could have dropped an additional 49 room nights, and saved more than $20,000 (including tax).
  2. Eliminate the use of Presidential suites. The AIG contract included $16,000 for a Presidential Suite that was likely used as a daily hospitality suite available to guests; however, alternatives exist that would help reduce this level of expense. For example, many luxury hotels will have other locations on the property that may be close to the lobby or elsewhere that may be rented and stocked with a range of refreshments at a lower cost.
  3. Negotiate greater consistency with the number of rooms contracted. On a high level, it appears as if the meeting professionals behind the AIG event made a good decision to avoid putting guests into the ocean view rooms. However, because there were several room types negotiated into the agreement, it puts the organization into a challenging position to either cancel guest room nights or prioritize one attendee over another when it comes to room selections. The choice to move guests to the upgraded pool view rooms was a good one.

Personal note to Edward M. Liddy, CEO at AIG, and Henry A. Waxman, chairman of the House of Representatives Committee on Oversight and Government Reform: Perhaps you should consider hiring a Chicago-based boutique marketing and events firm to help you better understand the buying decisions and value of corporate events as it relates to the historical perspective of the AIG events and its future plans.

(Originally published on May not be reproduced.)