AIG Curse Begins To Lift At St. Regis Resort

As he was getting berated by the infamous Joe the Plumber back in October, Michael Mustafa had no choice but to sit and take it.

Mustafa was just two months into his tenure as director of sales and marketing at The St. Regis Monarch Beach when life at the resort turned upside down, thanks to a bit of—well, let’s call it "aggressive spending"—on the part of bailed-out insurer AIG. The industry-wide AIG Effect that followed is all too familiar to hoteliers, but nowhere was the AIG Effect more surreal than at the 5-star California resort where it originated.

“My phone started ringing off the hook," Mustafa recalls. "I was public enemy No. 2 behind AIG. I had to listen to Joe the Plumber tell me, ‘Where’s my spa treatment, because I’m a taxpayer paying for AIG.’ That was the worst week of my life.” 

The resort did nothing wrong, of course, but guilt by association is tough to escape. "It became the poster child for corporate spend and corporate greed. It was unfairly portrayed, and then the political wannabes out there wanted to keep it on their agenda, and that was very troublesome because we wanted to move on,” Mustafa says. “We’ll never apologize for being 5-star, 5-diamond, because we’ve worked hard toward it. And I never thought I’d have to apologize for having a golf course and fine dining. I don’t know when that became evil.”

Although AIG dropped US$433,000 at the resort just weeks after accepting federal funds, the excursion was a long-planned incentives event, and it never occurred to anyone on the Monarch Beach team that this particular corporate jaunt would trigger a tsunami of political and taxpayer wrath.

“It wasn’t really until after the group had left that we realized something had went awry,” Mustafa says. “Once Congressman Waxman’s office called and the Orange County Register ran a report, we realized, ‘Hey, something went wrong here.’"

But happier times are on the way for Mustafa and his team. “Cancellations have basically subsided over the past 60 days. That means the companies are forging ahead. I think they are doing their due diligence and negotiating, which is absolutely their right; it’s a buyers market right now, and we’re up for that fight.”

The St. Regis saw about a 20% decrease in business in the months following AIG’s infamous event. There is no way to know for sure how much of that is due to the resort’s tertiary role in the saga, but Mustafa attributes about a third of the lost business to it. 

While all luxury resorts have struggled with group cancellations this year, The St. Regis faced a unique challenge; AIG’s hotel folio, which spelled out the company’s lavish spending in great detail—and which featured the resort’s logo at the top—was being prominently featured on nightly newscasts for days on end.

As a result, other companies planning events at the resort needed reassurance that the resort values the privacy of its clients. Under normal circumstances, that AIG folio would have remained confidential, Mustafa told them. But as he explained: "When you get subpoened by the attorney general of the United States, you kind of have to give them what they want."

While the AIG bruhaha may have dealt an unfair blow to the resort’s reputation in the short term, the attention may prove to be a boon in the long run. 

The old adage that any publicity is good publicity applies here. “It’s brought us exposure in a lot of other markets," Mustafa says. The syndicated television shows "Access Hollywood" and "Ellen" have both approached the resort about participating in viewer contests in recent weeks. “We’re taking advantage of an industry, Hollywood, that’s reaching out to us. They’re saying, ‘Hey, you’re known.’ It’s been a good thing; we’ve gotten some better press out of it lately.”