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Congress considers limits on federal meetings
September 2 2013

The travel industry is fighting legislation in the U.S. Congress that would limit travel by federal employees to meetings and conferences.

Highlights
  • Separate bills in the House and Senate would impose slightly different restrictions on travel.
  • The “AIG effect” spurred many companies to cancel or modify their meeting plans.
  • A U.S. Travel Association study highlights why it’s important for federal employees to travel.

REPORT FROM THE U.S.—The United States travel industry is fighting efforts in Congress to place significant restrictions on travel and attendance at meetings by federal employees. Less government travel not only affects revenues for travel-related businesses, including hotels, but it costs the American taxpayer by reducing the effectiveness and efficiency of federal workers, sources said.

According to research commissioned by the U.S. Travel Association, $17.9 billion was spent directly on government-initiated meetings in 2011 with a total economic impact of $24.4 billion. About 30% of direct expenditures, or $5.4 billion, was spent on hotels.

While the federal sequestration has cut travel for many federal agencies, several pieces of legislation under consideration in Congress would further restrict and regulate travel to meetings by federal employees. One bill, the Government Spending Accountability Act of 2013, was passed by the House of Representatives and sent to the Senate, where it is awaiting action by the Committee on Homeland Security and Government Affairs.

Erik Hansen, director of domestic policy for the U.S. Travel Association, doesn’t believe the Senate will approve the bill passed by the House, but he said separate legislation introduced in the Senate takes “a slightly different course” and may be approved.

“It’s a mixed bag as far as its effect on the travel industry,” Hansen said of the Senate bill, the Conference Accountability Act of 2013. “In some sense, it is better but in other ways it is worse (than the House bill).”

Both pieces of legislation prohibit agencies from spending more than $500,000 to support a single conference. In the House version, the head of an agency can waive the limit if he or she determines the increased “expenditure is justified as the most cost-effective option to achieve a compelling purpose.”

The House bill limits agency travel expenses for the next five fiscal years to 70% of what the agency spent on travel in fiscal year 2010. The Senate version increases that limit to 80% of what the agency spent in 2010.

Hansen said another important difference in the Senate bill is its anti-blacklisting language.

“The (legislation) prohibits federal agencies from discriminating against certain destinations for their meetings and conferences,” he said. “For example, (an agency) couldn’t have an internal policy that would prohibit conferences from being held in Las Vegas.”

Even if both sides of Congress fail to pass legislation, existing regulations include many of the provisions in both and House and Senate bills. In 2012, the Office of Management and Budget issued a memo that, among other things, limits conference spending to $500,000 per event and requires agencies to reduce travel spending to 70% of their 2010 levels.

“The lodging industry continues to encourage Congress not to make arbitrary decisions on government travel simply because it is the politically popular thing to do,” said Lisa Costello, VP of government affairs for the American Hotel & Lodging Association, in an email. “Doing so will without questions have unintended consequences that will ripple throughout the economy.”

AIG effect
The uproar over federal spending on travel has its roots in the so-called “AIG effect,” the public and media backlash to reports of lavish spending on meetings by corporations and groups that were in line to receive government bailouts at the start of the recession.

In September 2008, just days after the American Insurance Group got an $85-billion bailout from the Federal Reserve Bank, the insurance company hosted a group of independent insurance agents at the luxury St. Regis Resort Monarch Beach in southern California. News that AIG spent $443,000 on the event sent a ripple effect throughout corporate America, with many companies and groups cancelling or scaling back planned meetings, especially at high-end resorts and resort destinations.

Eventually, the debate cooled and corporate America began to hold meetings again in hotels and resorts. The aftermath of the AIG Effect is still being felt today, as group business has yet to fully rebound to pre-recession levels.

The issue became a topic of Congressional scrutiny following reports of a 2012 General Services Administration conference in Las Vegas that cost more than $820,000. The House Committee on Oversight and Government Reform held hearings on wasteful federal travel, which led to the OMB issuing its rules.

Travel fights back
The U.S. Travel Association has challenged the idea that attendance at meetings by federal employees is wasteful. In fact, its research points out why it’s important for them to travel.

“Most government travel takes place for things like safety inspection, or oversight or training,” Hansen said. “There are a lot of common-sense, everyday purposes for the government to travel, so our job is to put a face on that fact.”

The study asserts that government meetings are more efficient than events held in the private sector. Employees attending government meetings spent an average of $185 per day in 2011, versus the $224 per day spent by private sector meeting attendees.

The report focused on the Military Health System Conference, an annual event cancelled this year as a result of sequestration, as an example of how eliminating government meetings saves money in the short term but costs taxpayers in the long run.

The event typically draws between 3,000 and 4,000 attendees, 95% of whom are military and other government employees. Health professionals in the government use the conference to attain required continuing medical education credits and learn about the latest advancements in healthcare.

Rockport Analytics, which conducted the survey for the USTA, calculated the loss of conference revenues from exhibitors and fees for late cancellation of the meeting costs to be $1.2 million. In addition, the government would need to spend another $3.6 million for travel and course fees for employees to gain this education elsewhere.

Bottom line, according to the study, is the cancellation cost taxpayers $813,000.

Hansen said the industry can use the report to point out the importance of government meetings to lawmakers and the media.

“For those (lawmakers) already supportive of travel, it gives them additional ammunition to fight for our industry. For those who are not aware of the value of government travel it gives us the opportunity for education,” he said. “And for those who are still not convinced about the value of government travel it gives us some hard data to reach out to them and engage their staffs on finding productive policies that can preserve some of the essential things travel does.”

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