USA Government Cuts Hurt Washington Hotels

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The cost of declining government spending on conferences and events is beginning to affect businesses across USA.  Areas such as Washington DC are especially affected as government cutbacks reduce spending.  In real terms, the U.S. government has cut more than $600 million in conference expenses during 2012 and as departmental spending comes under further scrutiny, there will likely be further spending cuts. Since “muffingate” where the Justice Department appeared to overspend on coffee and muffins, to an investigation into the General Services Administration(GSA) meeting in Las Vegas that revealed massive overspending.  The Department of Veteran Affairs had spent more than $5 million on two conferences and the revelations keep coming.

Following the GSA scandal, the agency’s chief resigned and the federal government began cutting costs and President Obama directed agencies to cut conference spending by at least 30%.  In the following cutbacks, government cancelled meetings, cut travel plans aiming to cut $2 billion in conference-related costs by October 2013.

According to hotel managements,  government cancellations have accounted for more than $1 million in lost business this year. Apparently, government agencies have opted to pay cancellation fees rather than pay for the conference.  DC area hotels alone say they have lost millions of dollars this year as federal agencies slash meeting-related budgets and cancel travel plans.  According to one legal firm, the government has spent millions of dollars in cancellation fees.

The GSA has canceled 47 conferences and cut $11 million in related spending since April 2012 and the Labor Department is in the process of eliminating 100 conferences, and the State Department has announced that it will increasingly hold meetings in government facilities instead of hotels.

According to the U.S. Travel Association, the across-the-board cuts and cancellations are having real economic impacts.  In some cases, government spending has been cut by up to 40% and is having a significant impact on their business.  Hotels are turning to other industry sectors to make up for the loss in government spending such as trade associations, non-profits, corporations law firms and pharmaceutical companies to fill meeting rooms.

There has been an increasing trend for government agencies to book meeting space without catering addons and seek contracts without cancellation clauses.  Higher-end hotels are seeing less government conference spending, as it tries to send a message of austerity.  The trickle down affect of spending cuts also affects the service sectors that support the conference industry.  While the hotel sector is seeing the direct affects, Meetings and convention centers are also  seeing significant cancellations.

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