Associations were just starting to put up Web pages, mostly as informational brochures. Hotels were just beginning to realize that they could charge associations attrition fees and not lose business. The exhibition industry was still celebrating four decades of growth — oblivious to the wall ahead. Convention centers were mostly a big-city phenomenon. And of course, 9/11 and all that has ensured was something no one ever imagined.
Given the transformations in the last 10 years, it's no easy task to imagine how association meetings and exhibitions will change in the next decade. But it's fun to try when you can pick the brains of some of the industry's brightest people — such as those we gathered for a roundtable in December at the International Association for Exhibition Management in Atlanta. Here's what these thought-leaders had to say.
For Francis Friedman, president of the 15-year-old trade show consulting firm Time & Place Strategies Inc., a major question facing the industry in the years ahead is: What will happen when the venture capital and investment companies that have bought up so many shows in the last decade decide to “flip” their investments, looking get a return on their investment? “It's going to be interesting, the pot of gold at the end of the rainbow for all the financial money that's coming from the outside,” Friedman observes.
Friedman started out in the exposition business in 1987 as vice president of corporate development at the Interface Group. “When I first got into this business, it was dominated by family businesses. It was very much a first-person kind of business — ‘my show, my exhibitors.’ They invested in their shows even when they stood to make no money because it was a personal commitment,” he says. “We had a lot of colorful characters back then.”
As venture capital and financial companies have come to buy up more and more shows, a bottom-line mentality has taken over, Friedman says. The industry has lost its “flavor” as a result, but he points to some advantages that investment companies bring. “They have the capability to do lots of things on a large and international scale — to build out Web sites, to take a show and move it around the world.” But at some point they are going to take that money out of the industry, Friedman believes.
Other issues that will shape the future: More and more cash-strapped cities are looking to visitor taxes to shore up budgets; corporate consolidations continue to shrink the exhibitor base in many fields; and technology is eroding the traditional rationales for show participation.
“It used to be that you had to go to the show to get information about a product. Now, that's all online. So it raises the question: What is going to take place at the trade show that will be so compelling? My mantra to the industry is trade shows are the only medium where the customer pays to hear a sales presentation. They pay in time and money.”
Companies will spend lots to exhibit, but often they send the wrong people to the show: They aren't the people the customer wants to see and/or they aren't trained to sell at trade shows. “We have not been able to educate exhibitors to the necessary level of expertise — a level that companies will insist on in using other marketing tools, for example, making TV commercials, where there's an elaborate business process and lots of training. “With shows, you often get people [in the booth] who don't want to be there.”
Margaret Pederson, president of Prism Business Media Exhibitions, can speak directly to the change that Friedman talks about regarding investment companies invading the exhibition space: Prism is funded through the investment/private equity firm Wasserstein & Co. Formerly Primedia Business, Prism was purchased last year from Primedia, a publicly traded company controlled by its largest stock owner — the private equity company Kolburg Kravis Roberts & Co. (This magazine is owned by Prism Business Media.)
Says Pederson: “I think there will remain colorful people out there, and the entrepreneurs I see are thriving right now, partially driven by Wall Street. There are amazing amounts of venture capital out there now, funding and rewarding entrepreneurism very well.”
As for investment companies “flipping” shows to see a return after several years, Pederson thinks the flip is just from one financial player to another. “Has the paradigm changed so much, or is it just layering? You've still got your entrepreneurs, you've got your publishing companies coming in if you go back 15 years. Now you add the venture capital on top of it. The other two groups are still there. Is there enough room for all the players? That's the question.”
Pederson is in complete agreement with Friedman, however, when it comes to the adequacy of exhibitor training. “It's interesting. Companies have been complaining about exhibiting costs for years. But we're just amazed that they make this investment and then almost as an afterthought consider the people they are sending, what they are trying to achieve, who they are trying to reach, and what they need their graphics to say.…Generally, there is a disconnect between the amount of time and energy a marketing company will put into its Web site, for instance, and the time and insight they put into their trade show strategy.”
She says that this lack of preparation is going to have even worse consequence “as you add more global complexity to shows.…TSEA [Tradeshow Exhibitors Association] has struggled for years to get exhibitors interested in education — they've struggled with their membership.”
Regarding exhibitor complaints that show costs are too high, Pederson says that show management profit margins have shrunk in recent years. Moreover, controlling costs is a bigger focus for show management. “One of the areas that we've identified as problematic is switching cities.…Every city has different costs — union costs, hotel costs — which can lead to wild swings in budgets. So we've told our customers that we are going to lock in cities so that there will be steady rates.”
For Pederson, providing a “total value equation” for attendees and exhibitors is critical in a world where travel costs are escalating, online tools and services facilitate information-gathering and networking, and where time poverty is a major issue. “The only way to combat that is to provide lots of value in a variety of different ways: education sessions, new products on the trade show floor, opportunities for competitive intelligence, networking, and very importantly — the fun factor, which we tend to discount. At the end of the day, you've got to make people want to get out of their office and travel to your show. So we continue to do more with special events, encouraging face-to-face interaction — because that is the one thing they can't get anywhere else but at the show.”
What keeps her up at night? “Who is going to be the Jet Blue of our industry? Who is going to come in and totally change the matrix that makes it hard for the so-called legacy players to adapt quickly?”
What keeps Jane Conway, CEM, exhibits and advertising sales specialist, the American Urological Association, up at night? “Stronger pharmaceutical codes are making it more difficult for our exhibitors to market. Getting drugs accepted by the FDA, not even approved, is more difficult, and that makes a major impact on the marketing and the strength of companies. There's a purpose for this, of course, but it does make it difficult for our exhibiting companies, because they are really limited with what they can do.”
She gives as an example: Pharmaceutical companies are limited in terms of the entertainment they can do outside the booth, and in the booth so far as the gifts they can hand out. “They can give a pen, for instance, but not a golf ball. It affects so much of the show…and these regulations can vary by state. We have to approve of everything that is given out — every time they change, they have to submit a form.”
She worries that the red tape involved is going to turn off exhibitors, but on the positive side, given that urology is an important medical field, “there are always going to be new products. And at the trade show there are a lot of hands-on labs, face-to-face learning opportunities.” Those types of learning experiences, she says, are so much more superior to online education.
Another ongoing concern: exhibitors booking outside the block, thanks to lower rates on the Internet. “We lose leverage when we book the next meeting because our block doesn't look as big as it really is.”
Everyone at the roundtable touched on how developments such as a flu pandemic or a terrorist attack on U.S. soil could devastate face-to-face events. For Freeman, one of the country's largest general service contractors, with offices and warehouses around the country, these types of events have proven to be particularly problematic.
“So much of our assets are physical — our warehouses, our equipment to provide services,” says Carrie Freeman Parsons, Freeman's vice president of marketing. “So when something like SARS comes along, which resulted in our assets being shut down in Toronto for six months, that's very frightening for us.” Similar shutdowns occurred following Katrina in New Orleans and 9/11 in New York. “We have to work toward consolidating physical assets so that we can use them more intelligently and cost-effectively.”
Freeman's Parsons goes on to make a larger point about cost-containment: “A couple of years ago the veil was lifted regarding how some show management costs were being shifted onto exhibitors, and that frankly has put more pressure on companies like ours to work more closely with show organizers and to say that something has got to give.” She says that one result of all of these pressures is that Freeman is rethinking its own business model — moving to provide services and solutions beyond being show contractors only. “We are never going to go away from our core business, but we have an opportunity to work with corporations directly to help them achieve their marketing objectives.”
One result has been a move into corporate shows: “With pressure on exhibitor pricing, with material handling being the big red flag, we needed to find new revenue sources. We created a team just for corporate accounts and we are dedicated to generating that market.”
No one at the roundtable was as unabashedly optimistic about the future of the exhibition industry as Prem Behl, chairman of New Delhi — based Exhibitions India Group, the largest privately owned show management group in that country. His company has grown rapidly as the exhibition industry has in India. “I personally think the best is yet to come. The reason is that emerging markets are going to shake up the global order in terms of economies and opportunities. One has to look for them. Let's not be too America-centric as far as trade shows and trade show opportunities are concerned.”
Behl sees opportunity in emerging markets for mom-and-pop shops, joint ventures, large show management companies, venture capital. “I think it's going to be vibrant.” He says emerging economies will drive more international visitors and exhibitors to U.S.-based trade shows as well.
He does concede some challenges. Among them, the quality of venues in some emerging economies, such as India. He also acknowledges issues with U.S. visa regulations, as well as cost concerns. “Space cost is just a fraction of the total cost that an exhibitor incurs. The high cost of travel and of hotels are much more significant factors likely to preclude participation at trade shows,” he says. Another major challenge, one likely to intensify in the future, is the difficulty of getting visitors to shows. “There are so many other ways for buyer and seller to communicate with each other. That's a challenge and that's what keeps me up at night.”
Nonetheless, Behl remains optimistic. “We know what the issues and what the challenges are. And I think the industry is mature enough, and smart enough, to realize we have to work to overcome them. I am bullish about the next five to 10 years.”
Stephen Schuldenfrei, president of the Trade Show Exhibitors Association, responds to several points raised at the roundtable.
On the lack of exhibitor training: “I agree that companies don't place a high enough priority on either exhibitor education or professionalism. Part of the issue is that a fairly large number of people in exhibit management don't see it as a career. It is a stepping stone into other marketing activities.”
He says that TSEA is beefing up its exhibitor programming at its annual show, as well as starting regional training programs. TSEA is also mulling over some new award/recognition ideas for members and is launching a Masters Retreat this fall for professionals with five years' experience.
Regarding exhibitors' complaints that show costs are too high: “Most of the cost to exhibitors is not with the show space costs, but with the cost of services that organizers control — things like drayage, electrical, catering, hotel rooms, etc. Where the show is located and how good the organizer is in negotiating contractor rates (those that are charged to the exhibitor) can go a long way in controlling costs.
“Frankly, I think that during the contracting period, most organizers don't even ask their contractors what they are going to charge the exhibitors. So they can't possibly keep costs under control. So we've got to find ways to lower costs, and organizers need to be vigilant when they are negotiating contracts and locations.
On corporate shows/events: I see no reason they won't keep growing. That means our members are doing more things than just trade shows. It has broadened their responsibilities and many have become the in-house “show organizer”. One result is that they are now much more knowledgeable about how the organizer operates and what his costs are.
On the flow of investment capital into the industry: Many independent shows have become a corporate investment, where the bottom line is more important than the service to the industry that a show represents. Association shows, I believe, largely have not succumbed to that death spiral. Acquisitions usually add costs to shows. When you buy a show for millions of dollars, the debt service and/or the need to recover large purchase costs result in higher booth prices, and that directly affects the exhibitor. We should do everything we can to prevent the demise of the golden goose — and that means a better value proposition for the exhibitor.
— RM
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