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 the 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 shrank by 36 percent last year, according to theExhibitors Association. Working with less, companies are closely scrutinizing every expense and questioning costs that seem out of line. And they're finding some deeply entrenched business practices that can distort the true cost of exhibiting.
A Multifaceted Problem
The first problem is that mergers and acquisitions have reduced the number of exhibiting companies, putting pressure on shows to raise rates and levy service charges. There is also the issue of declining traffic, with attendance down an average of 10 percent, according to the Center for Exhibition Industry Research (CEIR).
Then there are the hidden costs. 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.
“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 the Trade Show Exhibitors Association, Chicago. “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.”
One solution: package plans that include labor hours for drayage, rigging, and assembly. Another 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. “It's a little bit higher rate that's being published, but there are no additional charges,” says John Patronski, executive vice president, industry development, GES Exposition Services, Chicago.
A common practice that raises exhibitor costs is “cost shifting.” 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. In exchange for access to its exhibitors, show managers 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, and then recover that lost revenue in the drayage rates that they charge exhibitors. This can become a problem “if it has taken those prices to the point where it is impacting the overall value the exhibitor is getting out of the event,” says Doug Ducate, CMP, CEM, president and CEO of CEIR, Chicago.
Exhibitors need to be aware of how and where costs are being shifted, and what the effect will be on them. “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 to 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.”
Steven Hacker, CAE, president of the International Association for Exhibition Management, Dallas, advocates a cost-based pricing model, rather than a cost-shifting model. But, he hastens to add, “If you were to take all 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.
With 20 new buildings and 70 expansions scheduled to open by 2005, the market is undeniably overbuilt. Some convention facilities that are 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. This revenue sharing can easily get out of whack. 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 nonetheless continue to argue that exclusive services are more efficient. “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.”
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,” counters 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.”
One solution: Some facilities, such as McCormick Place in Chicago, are bundling services to make the costs more palatable.
Labor Rates Sky High
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 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 doubletime charges.
Show management, facilities, and convention and visitors bureaus all 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.
Another way to simplify things is to reduce the number of unions involved. In Chicago, new work rules negotiated for McCormick Place reduced multitiered labor — with carpenters, millwrights, and decorators — to a single tier, so that there is no need for exhibitors to sort out who does what job.
One company, GES Exposition Services, 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,” says Patronski.
A Matter of Perspective
In the end, exhibitors are as much to blame as anyone when costs outstrip the value gained from a show. “Exhibitors look at trade shows from the wrong perspective,” says strategicconsultant Steve Miller, president, The Adventure LLC, 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 the best return on their 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 exhibitors are guaranteed a solid, their questions about costs go away. “That's the point of looking at exhibiting as an investment rather than a cost.”
Cathy Chatfield-Taylor covers the meeting industry as a freelance writer and editor. She is a former editor of Expo magazine, and co-edited the Convention Industry Council Manual, 7th Edition.
Why Are Labor Rates So High?
Exhibitors are often confounded when they hear from labor workers that their hourly rate is $25, for example, yet they're being billed $75 an hour.
Why the huge gap? It is because of all the other fees that need to be built into that worker's hourly rate. Among them:
- base rate (hourly rate paid to worker)
- contract benefits (written into a labor agreement), which include such items as pension, national pension, health and welfare, supplemental pension, supplemental unemployment, apprentice training fund, vision fund, pre-paid legal, vacation, forced savings, political action fund
- payroll expenses, which may include FICA, federal unemployment, state unemployment, workers' compensation, liability insurance
Source: John Patronski, executive vice president, industry development, GES Exposition Services, Chicago