Bermuda's hotels are set to suffer a further blow this winter as the economic climate means that business visitors, as well as tourists, are choosing to stay in the United States to save money.

Publishing giant Random House this week confirmed to The New York Times, in an article entitled 'Puttin' Off the Ritz', that it would not be holding this year's spring sales conference in Bermuda. The annual corporate event was held here on the island last year, but with cutbacks and pay-freezes looming, the publisher has postponed the meeting altogether.

Random House spokesman Stuart Applebaum told the Times that, while a new location had yet to be chosen, one thing is certain: the publishing house will not be returning to Bermuda in 2009.

In the words of Times writer Motoko Rich, Random House's decision marks a turning point in corporate hospitality: "That cushy schmooze fest seems to be winding down."

Bermuda has long been a favourite location for meetings, conferences, and other business functions thanks to its proximity to the US east coast and its comparatively pleasant weather and upmarket hotel facilities.

However, the current global recession could see other firms follow the lead of Random House and choose to forego Bermuda as a conference destination in favour of cheaper, closer locations.

The Fairmont Hamilton Princess Hotel's sales and marketing director Rehanna Palumbo told the Mid-Ocean News this week that the hotel has already seen a drop in corporate bookings for the first few months of the new year, adding that she and her team are having to get "creative", working with third-party planners and relying on wedding business to ride out the recession.

"We've seen a decline in corporate business activity at the hotel in this first quarter," she said. "To compensate, we are working every available channel to capture business for the rest of 2009. In some cases, this means we're getting back to basics with our sales strategies and getting creative with others. We have always had a strong relationship with meeting planners in Hamilton, which serves us well when the economy is slow, and we work with incentive houses and third-party event planners off-island to generate more business.

"To drive additional business locally and internationally, we recently hired a highly experienced wedding planner because even though a soft economy typically means less lavish weddings, couples are still falling in love and getting married."

The backlash against 'destination' business meetings started in earnest in October, when it was revealed that bankrupt reinsurer AIG sent executives from a subsidiary on a $400,000 corporate retreat just two weeks after US taxpayers footed an $85-million Government bailout.

The firm spent well over $20,000 on spa services alone at the exclusive St. Regis Monarch Beach Resort in California, drawing criticism from all quarters, including the White House, which proclaimed the expenditure "despicable" in a statement. AIG has since cut 160 conferences and other events that would have cost a total of $8 million – and other companies are following suit.

A recent Business Week analysis on the event planning sector noted that companies were "hosting Web conferences, centralising planning, switching to regional meetings, and axing lavish events" in an attempt to save money during these uncertain economic times.

A local PR executive with hospitality clients told the Mid-Ocean News that she foresees a struggle for the island's corporate events sector this year as both Bermuda-based international businesses and overseas companies cut down on big functions.

"It has not yet got to the point where all the conference rooms at Bermuda's hotels are empty," she said. "But the slowdown is really starting to take effect, and I wouldn't be surprised if international companies with long histories of visiting the island for meetings just decide to hold them at home instead.

"How can they justify some lavish retreat to Bermuda if they're cutting jobs left and right? It isn't a smart move PR-wise and will be noticed not just by employees but by the press, who are waiting to pounce on the next company to make the same mistake as AIG."

In the meantime, the two Fairmont hotels are working together to attract Bermudians to fill their empty beds, offering reduced rate packages and putting on concerts and events to entice locals to book rooms.

"For the local market, we are developing special events like [recent tribute concert] Beatlemania, which combine entertainment with a hotel package especially for local residents," said Ms Palumbo, who works with the team at sister hotel the Fairmont Southampton to plan such initiatives.

"The response to special events like this has been positive, but the economic downturn is significant and no single promotion will offset it. Our sales team is pulling together in all new ways to find business – whether it comes from corporate, leisure or group markets, on-island or off."