D.C. area hotels lose millions as federal agencies slash meeting, conference budgets

It started with a muffin.

The lowly baked good, a staple of business breakfasts, became an unlikely symbol of government overindulgence when a government audit released in the fall of 2011 claimed that the Justice Department had spent $4,200 for 250 muffins at $16 a pop during a training conference at the Capital Hilton.

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(Jeffrey MacMillan/Capital Business) - The U.S. Army cut back on its participation at this year’s Association of the U.S. Army’s Annual Meeting & Exposition, held earlier this month at the Walter E. Washington Convention Center.

Nevermind that the report was later revised to show that the price had been closer to $14 and the tab included coffee, juice and fruit as well. The fallout has helped crumble an entire industry.

Area hotels say they have lost millions of dollars this year as federal agencies slash meeting-related budgets and cancel travel plans.

The U.S. government has cut more than $600 million in conference expenses in the past six months, as probes of extravagant spending keep coming.

A few months after “muffingate,” there were reports of a $82,300 General Services Administration meeting in Las Vegas that featured a clown and mind reader. Another investigation revealed that the Department of Veteran Affairs had spent more than $5 million on two conferences in Orlando.

In the weeks following the GSA scandal, the agency’s chief resigned and the federal government began cutting costs. President Obama asked agencies to whittle down conference spending by at least 30 percent. The government began canceling meetings and cutting travel plans, with hopes of cutting a total of $2 billion in conference-related costs by October 2013.

At the Regency in Crystal City, government cancellations began rolling in almost immediately and have accounted for more than $1 million in lost business this year. Few agencies are booking meetings, and fewer yet are showing up, said General Manager Jean-Marc Dizard.

“It has been very hurtful for us,” Dizard said. Government agencies “prefer to pay the cancellation fee rather than pay for the conference or food or beverages.”

In August, the GSA said it had canceled 47 conferences and cut $11 million in related spending since April. 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.

“It’s had a devastating impact,” said Erik Hansen of the U.S. Travel Association. “These types of across-the-board cuts and cancellations are having real economic impacts.”

As the Washington area braces for a possible “fiscal cliff,” the sweeping effects of conference-related spending cuts are a glimpse into just how big abrupt reductions in federal spending can ripple through the local economy.

To make up for the widespread loss of government business, hotels say they are increasingly wooing trade associations, nonprofits and corporations to fill meeting rooms. The Madison Hotel in Washington recently hired sales managers to focus on law firms and pharmaceutical companies. Other hotels have set their sights on education-related conferences or wedding receptions.

“We’re looking to the financial community, law firms, gas and oil, food services,” said Michael Snapkoski, director of sales for the Lansdowne Resort in Leesburg. “Anything not associated with the government seems to be doing okay.”