Who's at fault when exhibitors complain that a show costs more than it's worth? Show management, for not delivering the expected audience? Suppliers, for charging a premium for their services? Or exhibitors themselves, for failing to define measurable goals?
Point a finger at any group and you'll find cause for criticism. The bottom line is that exhibitor budgets shrunk by 36 percent in 2002, according to theExhibitors Association (TSEA), Chicago. Working with less, companies are more closely scrutinizing every expense and questioning costs that seem out of line.
“If we're not selling the value of the show and the service we're supplying, then we're adding to the perception that costs are too high,” says Gregg H. Talley, CAE, vice president, Talley Management Group, an association and event management company in Mt. Royal, N.J. “We need to build in appropriate value for those exhibit dollars.”
To show value, industry stakeholders must be upfront about total cost so exhibitors can budget accordingly. That means owning up to some deeply entrenched business practices that distort the true cost of exhibiting.
A Better Model
Booth sales account for 72 percent of event revenue, according to the Dallas-based International Association for Exhibition Management (IAEM). Mergers and acquisitions have reduced the number of exhibiting companies, putting pressure on shows to raise rates, levy service charges, or sell moreopportunities to make up for lost revenue.
“Show organizers see exhibitors as an endless pot of money that they can draw on,” says Marc L. Goldberg, CME, partner and founder of Marketech Inc., Westboro, Mass., specializing in exhibitor staff training and strategic exhibit market planning and consulting. “Especially associations — they see the attendee as a customer and the exhibitors as a revenue generator.”
With attendance down an average of 10 percent, according to the Chicago-based Center for Exhibition Industry Research (CEIR), declining traffic density causes exhibitors to question the value of exhibiting — and of the marketing opportunities they've been sold. To counter this, show management must be able to justify the total cost of exhibiting in terms of value delivered. That means disclosing the total cost at the point of sale.
“In most cases, you sign up for the show, you know what your space rate is, but it's not until months later when you get the service kit that you see freight handling, shipping, electrical, and all the other costs that are going into it,” says Michael Bandy, president of TSEA. “It makes the budgeting process much more difficult.”
Exhibit space represents just 40.9 percent of the total cost of exhibiting. Show services comprised 26 percent of the average exhibitor budget last year. For many exhibitors, the second-largest expense is dock-to-booth drayage. As the single largest item on the invoice, it becomes a No. 1 target for complaint, followed closely by overtime charges.
“That's where the problem is because the exhibitor goes into the show thinking it's going to cost x dollars, and when they come out they've spent $10,000 to $15,000 extra on overtime or on on-site orders that they didn't anticipate they'd need,” Bandy says.
The International Manufacturing Technology Show, the largest manufacturing technology show in this hemisphere at nearly 1.3 million square feet and 50 million pounds, found a solution in package plans that include labor hours for drayage, rigging, and assembly.
“That gives you cost certainty,” says Peter Eelman, vice president, exhibitions for the Association for Manufacturing Technology, McLean, Va. “It's often more important to have cost certainty than to be cheaper.”
Another solution is a blended rate for drayage, which is typically billed by the 100-weight, plus a percentage of the base rate for overtime. A blended rate includes overtime and eliminates surcharges. “The published rate is a little higher, but there are no additional charges,” says John Patronski, executive vice president of industry development, GES Exposition Services, Chicago.
Cost-shifting is another part of the problem. When a company signs up to participate in a trade show, it opens the door to a long line of suppliers who want to sell their services — from renting furniture to furnishing flowers. “The exhibition organizer controls access to that market,” says Doug Ducate, CMP, CEM, president/CEO of CEIR. “Access to a market comes at some cost.”
In exchange for access to its exhibitors, show management may receive certain services at low or no cost. Service contractors, for example, may build a registration counter for free or lay carpet at a reduced rate, then recover that lost revenue in the drayage rates. This “cost shifting” is common practice. It becomes a problem, says Ducate, “if it has taken those prices to the point where it is impacting the overall value the exhibitor is getting out of the event.”
When negotiating service, show management needs to be aware of how and where costs are being shifted, and what the impact will be on exhibitor costs. Then ask: Is it more important to get a free registration counter or to keep space rates low? “I'm making a value judgment about where and how those dollars will be allocated,” says Talley. “Will they come out of my budget or the exhibitor budget?”
If asked, exhibitors would prefer up-front pricing. “I realize those things have to be paid for, but I would rather have them in my space rate versus my drayage rate,” says Lynne Parry, CTSM, CME, trade show manager for Apple Rubber Products, Lancaster, N.Y., and an exhibitor in 12 or 13 shows per year. “I don't think costs would be lower, but I'd be able to budget better and make a better decision on whether I want to do the show or not.”
One way to put exhibitor costs in perspective is to revamp the business model for exhibitions. “If one were to design a new business model from the ground up, I'd recommend a cost-based pricing model, rather than a cost-shifting model,” says Steven Hacker, CAE, president of the IAEM. Hacker hastens to add, “If you were to take all of the unrelated cost drivers out of drayage and put them where they belong, it's very likely that the exhibitor is going to wind up paying the same amount to participate in that event.… In the end, no matter how you choose to redistribute the cost, the real cost remains the real cost.”
It's important to note that not every contractor shifts costs to the drayage rate. Further, understanding why the rate is what it is may help diffuse complaints. As Patronski explains, drayage involves handling freight four times — loading it in, removing and storing empties, bringing empties back, and loading it out. The cost of leasing and securing the marshaling yard, forklifts, fueling, warehouse storage, field communications, and other expenses add to the total cost.
With 20 new buildings and 70 expansions scheduled to open by 2005, the market is undeniably overbuilt. Facilities under pressure to cover their operating expenses put together attractive packages to win business, then recoup their costs in other revenue streams, including exclusive services such as cleaning.
Providers of exclusive services pay a percentage of their billings to the facility in exchange for the exclusive. Revenue sharing gets out of whack when, to make their margins, suppliers either raise rates or cut back on quality. For example, if the facility takes a 50 percent cut of alcohol sales, exhibitors end up paying $100 for a case of beer.
“That's one reason why most exhibitors as well as show organizers find exclusive services, with exceptions, to be culprits in driving some costs,” says IAEM's Hacker.
Facilities argue that exclusive services are more efficient services. “In some cases, exclusives can limit the marketplace,” says Dan Graveline, CFE, executive director of The Georgia World Congress Center, Atlanta. “Others would make the argument that exclusives are the only way to control the effectiveness and efficiency.”
That means better quality control for services such as utilities, food and beverage, telecommunications, and data communication. If, at the end of the day, the cost to exhibitors is higher than expected, then “we need to be able to sell those services as having value,” Graveline says.
The alternative, allowing free market reign, would not necessarily reduce exhibitor costs. “If the building doesn't have that revenue, it's going to have to charge it somewhere else,” says Jeff Blosser, executive director of the Oregon Convention Center, Portland. “It's going to go to show management [as rent], and my guess is they'll pass it on to exhibitors.”
Some facilities, such as McCormick Place in Chicago, are bundling services to make the costs more palatable.
Union work rules, jurisdictions, and labor rates vary from trade to trade, city to city, building to building, and show to show. That makes it tough for exhibitors (not to mention exhibition organizers) to know what they can and can't do in a building — and how much it's going to cost them. And, with move-in/move-out on weekends, holidays, or after hours, they routinely incur overtime and double-time charges.
Show management, facilities, and convention and visitors bureaus share responsibility for scheduling. But unions could alleviate the situation by simplifying the work rules — agreeing to shift work versus straight time/overtime, for example — a point raised at the IAEM Exhibition Industry Summit, which was held last summer in Chicago.
Another way to simplify things is to reduce the number of unions involved. In Chicago, for example, new work rules negotiated for McCormick Place reduced multi-tiered labor — with carpenters, millwrights, and decorators — to a single tier, so there is no need for exhibitors to sort out who does what job.
The perception that labor costs are too high is sometimes due to a lack of understanding about what those costs cover. “We have over 100 collective bargaining agreements with trades in the United States and Canada,” says GES's Patronski. “Within those agreements there are base rates, fringe benefits by contract, and then you have your payroll expenses, taxes, etc.” These types of costs are factored into the hourly cost of labor for exhibitors, he says.
Labor is a general contractor's single largest expense. “What we bill exhibitors for labor in hours is a small portion of total labor hours we utilize in the production of an event,” he adds. GES has begun to package services that, in come cases, save exhibitors 10 percent to 12 percent. “They're able to save money and, as important, they're able to budget accordingly and not have surprises,” Patronski says.
In the end, exhibitors are as much to blame as anyone when costs outstrip the value gained from a show. “Exhibitors are looking at trade shows from the wrong perspective,” says strategic marketing consultant Steve Miller, president, The Adventure L.L.C., Federal Way, Wash. “If you look at it from a cost perspective, and if that's all you do, then the cost will never be low enough.”
To achieve a return on investment, exhibitors need to go to shows that have the right attendees, and they need to have measurable objectives for interacting with those attendees when they come to the booth. As Miller points out, “image and awareness” are not measurable. When guaranteed a solid, questions about costs go away. “That's the point of looking at something from an investment perspective versus the cost perspective,” he says.
Show management, service contractors and facilities need to work together to educate exhibitors, help them reduce costs, and better understand what their overall costs will be at the end of the event.
“Everybody involved in the success of this industry is also to blame for the high cost of exhibiting in it,” says Tim McGill, CEO, Hargrove Inc., a Lanham, Md.-based trade show general service contractor. “We have to work hand in hand to tackle that. There is no easy solution out there.”
Cathy Chatfield-Taylor is a freelance writer and editor. She was formerly the editor of Expo Magazine, and she has co-edited editions of the Convention Industry Council Manual and Professional Meeting Management.
When Exhibitors Drop the Ball
The perception that costs are too high can be hard to dispel when exhibitors don't have realistic measures in place. Marc L. Goldberg, a trainer for exhibitors, explains: “They really don't know [if it's too high] because they've never measured whether the cost-per-visitor-reached was realistic or not.” Goldberg is founder of Marketech Inc., Westboro, Mass. Exhibitors need to ask four key questions before going to a show, he says: Why are they going? Who are they trying to reach? What are they trying to communicate? And, how are they going to measure results? “If every association and every exhibit organizer started asking their exhibitors those questions, then they would stop saying it's too expensive.”
Beyond setting realistic, measurable goals, exhibitors need to execute the event more efficiently. But, staff turns over. Departments share responsibility. Whatever the reason, failure to plan ahead and order early are constant culprits in the high cost of exhibiting.
“Putting the operational side together often falls to someone who hasn't done it before,” says Peter Eelman, vice president, exhibiting, Association for Manufacturing Technology, McLean, Va. “Since it's not intuitive, the first thing they do is get frustrated, make mistakes, and end up paying for their mistakes.” To make the process more intuitive, the association reorganized its exhibitor service manual by due-date, and it issues frequent reminders. Exhibitors can also take a two-day workshop. “Training is key. Understanding what has to be done can have a huge effect on the amount of money exhibitors spend,” he says.