Hal Vandiver knew the Great Recession was coming long before most association meeting managers did. He didn’t have a crystal ball, but he did have a system of forecasting meeting and event outcomes that foretold economic trouble. Consequently, he planned his meeting budget accordingly and saved his association thousands of dollars when the economy tanked in 2008.
That was when Vandiver was executive vice president at the Material Handling Industry of America, Charlotte, N.C.Since then, Vandiver has started his own management consulting firm, which offers insights and an exhibition planning tool kit to others.
Too often, Vandiver says, meeting organizers are pressured into producing an event with unrealistic growth expectations instead of developing a plan that takes into account what the economy will look like. Vandiver, who spent more than 20 years as a corporate marketer in the materials handling and nonresidential construction industries before moving over to the association world, developed a system of event forecasting using national economic indicators. And his track record has been nearly perfect.
Budget forecasting is critically important for associations because they rely so heavily on conventions and exhibitions for annual revenue. “Many did not get it right in 2008–2009 and got blindsided,” says Vandiver. “They were left holding a bag that deflated anywhere between 25 percent to 40 percent, and in some cases 70 percent, because they weren’t watching these leading indicators.” If an association projected a 5 percent increase in revenue for 2009, and it dropped 40 percent, that’s a revenue gap that’s difficult to overcome without dipping into reserves.
To understand key economic indicators, one has to understand the audience. “Exhibitors are like investors, who are investing in a show to provide a return,” he says. “Attendees are consumers. They are there to buy or consume content.”
So think of your exhibitors as investors: If you’re trying to forecast business investment, it’s important to be looking at corporate profits, which are reported by the U.S. Department of Commerce’s Bureau of Economic Analysis. “The amount of money companies have to spend is going to have a direct bearing on how much money they can invest,” says Vandiver. If corporate profits are high, chances are companies will have more money to invest in exhibitions as buyers or sellers. Corporate profits typically lead business investment by four quarters.
A key indicator for attendees, or consumers, is the Consumer Confidence Index, which shows the likelihood of consumers making personal expenditures, such as attending a conference. If consumer confidence is up, then personal expenditures tend to go up, with the CCI leading personal expenditures by 6 to 12 months.
Perhaps the most important indicator is the gross domestic product, or GDP, which represents the total dollar value of all goods and services produced. In Vandiver’s experience, GDP has led event performance by about a year, so when the GDP started declining in 2008, it indicated that Vandiver should rein in expectations for his association’s next bi-annual meeting and exposition in 2010. He reduced costs for the 2010 exhibition by eliminating some nonessential aspects of the exhibition. Ultimately, the show generated a profit.
Planners should consider these broad indicators, but more importantly, identify others that are specific to their association’s industry. Watch them monthly or quarterly and they will give you an indication of where the economy is likely to be a year or two in advance. Also, look for industry forecasts that already exist in your industry. “You don’t have to be an economist to do this,” he says.
For the exhibition industry, the Center for Exhibition Industry Research’s CEIR Index is a good indicator, he says. The CEIR Index looks at overall exhibition industry trends, but also tracks performance of different industry sectors For the MHIA show, Vandiver looked at the GDP for the health of the overall economy, corporate profits, and capital spending. “I want to know the forecast for corporate profits and how that’s going to translate into investments and capital spending.” Capital spending occurs when a business invests in equipment or assets. It can be tracked through the U.S. Census Bureau’s Annual Capital Expenditures Survey. The Purchasing Managers Index, produced by the Institute for Supply Management, is another good source.
It’s important for planners to find three or four indicators that best represent their industry. They should provide a fairly accurate depiction of how the event will turn out. Planners should look at their indicators at least a year out from their meeting to see how they are performing. If they are declining, then it might be wise to scale back for next year’s show, and vice versa. “The show really reflects the dynamics of the market it represents, not the dynamics of the organization that puts it together,” says Vandiver.
To help planners protect themselves and their associations from being blindsided by another economic shift, Vandiver put together a tool kit to help planners create their own annual forecasts. Vandiver’s Exhibition Planning Tool Kit is an Excel spreadsheet that enables planners to log their key metrics for each show, whether it’s attendance, exhibit space sold, or other factors. The other tabs allow users to input the performance of their given indicators, both quarterly and annually, and compare it to the performance of the show’s metrics. It will document how the meeting’s metrics track to the indicators, which will show planners and executives how closely performance is aligned to economic factors. Planners can also hire Vandiver to do the forecasts for them. He can be reached at hvandiver@gmail.com.
Macroeconomic Resources
U.S. Bureau of Economic Analysis
National Association for Business Economics