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Luxury Resorts are still Struggling from AIG Effect

The "AIG effect" is still affecting the luxury resort industry.

Indeed, businesses started toning down lavish corporate events after American International Group, the insurance giant, was widely criticized for holding a conference at a luxury resort days after it received a cash infusion from Congress in 2008.

Many resorts that have a heavy dependence on group business are still struggling. The latest victim is Amelia Island Plantation. Last week, the 1,350-acre luxury enclave overlooking the Atlantic Ocean in northeast Florida filed a voluntary petition for Chapter 11 bankruptcy protection.

The resort is very dependent on its group business, which has dropped precipitously over the past year, according to Richard Goldman, its chief marketing officer. "More than half of our business is from corporate groups that hold conferences here," says Goldman. "The AIG effect has basically scared off folks -- even businesses that could afford to have meetings -- who are afraid to hold conferences at resorts."

The company will operate as "business as usual" during the reorganization and an investor group, comprised of Amelia Island Plantation residents and club members, has already collected to aid the resort.

Amelia Island Plantation isn't the only hospitality company struggling during the recession. In Scottsdale, Ariz., the W Hotel recently staved off foreclosure and the InterContinental Montelucia Resort, also in Scottsdale, faced possible foreclosure earlier in the year. The Tropicana Las Vegas casino and the Ritz-Carlton Lake Las Vegas emerged from bankruptcy this year.

This week, Citigroup reached a tentative agreement to sell the very same resort that started the whole mess in the first place. The St. Regis Monarch Beach resort in Dana Point, Ca., made headlines last year when it hosted a group of AIG executives at a retreat just days after the government bailout of the company. Citigroup seized the St. Regis from its owners last summer, after they failed to make payments on the bank's $70 million loan on the property.