The recession's got a track record – a fact that convention centers throughout the world just might want to embrace.
“This isn’t the first recession we’ve dealt with, [so] we have lots of good data to analyze,” said Steven Hacker, CAE, president of the International Association of Exhibitions and Events. “We know what happens during recessions and those kinds of things took place again during the last year and a half, two years.”
Trade show industry exhibitions are a mirror image of the sectors they serve, all of which are considered by researchers in studying the effects and vagaries of the economy on the industry. After all, what might occur in one might not in another. For instance, energy industry events are doing well because they’re timely, while others in automotive, travel and retail are sputtering.
Ultimately, exhibitors don’t abandon worthwhile events no matter how bad the economy. However, they’re likely to reduce the amount of space they purchase and bring less staff and more senior executives to reflect the level of attendees likely to attend, Hacker says.
According to preliminary data from the Center for Exhibition Industry Research (CEIR) for the annual CEIR Index report, in the third quarter of 2009 the exhibition industry experienced a decline of 13.5 percent compared to the same quarter of 2008, and year-over-year contraction of the exhibition industry is directly linked to the continuing recession. These third quarter results mark a 2.6 percent decrease in performance compared to the second quarter of 2009—and it’s the sixth consecutive quarter of negative numbers.
According to the CEIR Index, the National Association of Business Economists predicts that the U.S. economy will recover during the second half of 2009, with the GDP beginning to grow again. Exhibitions are historically a trailing indicator, so even with GDP improvement, don’t expect to see a great increase in fourth quarter 2009 numbers.
On the Ground
Recession or not, the Anaheim (Calif.) Convention Center has experienced success, which Executive Director Tom Morton attributed to a diverse business mix, including conventions, meetings in varied industries—from association business and SMERF market to corporate clients—major trade shows and a variety of consumer events.
While the center’s business model hasn’t changed substantially due to the economy, what has changed is its ability to move more quickly in this ever-shifting business environment.
And business models will continually evolve, even if not changing substantially. Tom Ackert, executive director of the Orange County Convention Center (OCCC) in Orlando, notes that the OCCC’s major transition reflected its conversion from a local/regional convention center to a venue for national conventions and trade shows. He adds that the revenue and expense models for consumer events differs appreciably from meetings and trade shows, and he senses the industry might be entering another transitional phase in light of the global economic situation.
“Customers everywhere are looking for cost savings but suppliers, too, face the financial pinch,” he said.
Ackert believes the proper strategy is to assist customers and the entire industry by doing all it can to grow events.
The strategy for SMG is different. Gregg Caren, senior vice president of strategic business development for SMG, which has more than 60 primarily municipally owned convention centers in its portfolio, explains the company’s business model as fairly simple with few areas in which to change the model itself. Revenues primarily come from facility rentals, food and beverage and, in some cases, parking.
Expecting 2009 to be a challenging year, SMG managed expenses well in advance—in other words, prepared for the worst. That approach, combined with an even more aggressive sales effort, has helped mitigate SMG’s exposure to negative economic forces.
The story is similar across the globe. The recession certainly hasn’t prompted changes in the business model at the Estrel Berlin. However, in the last two years, the center has spent more than €1 million in the renovation of 36 meeting rooms, in addition to €300,000 for new event technology, primarily light, sound and media equipment. Furthermore, it’s staying the course in a step-by-step renovation of its 1,125 hotel rooms.
Meantime, Austria-based venue HOFBURG Vienna is now more grounded in efficient cost management and long-term marketing even though the buildings have remained largely unchanged. This flexibility is helping the facility better cater to client needs. The center also has a clearer focus on the domestic market, its strongest.
Holding On
The OCCC’s formula for keeping and growing business isn’t complex.
“Quality service delivered in a courteous manner is our foundation,” Ackert said.
The boundaries of the center begin at the end of a phone line anywhere in the world, at the airport arrival gate, on the highway and in the hotel lobby, he says.
“Every piece of the destination needs to be part of the service concept.”
The Anaheim Convention Center’s Morton also feels exceptional customer service is the key to survival in 2010 and beyond. He says the center is raising the bar through a national certification program, Certified Tourism Ambassadors. The goal is to achieve even higher and consistent levels of service citywide.
There was no secret to keeping business this past year and into the next, according to SMG’s Caren—the focus has been on working with existing clients and walking a tightrope to balance fiscal survival of both events and venues. Furthermore, no client wants to cancel its event or suffer too large a financial impact, and no venue wants to be vacant on a date that has been held for months or years.
Caren also says zero is the new growth and that the mantra of holding on and preserving overall business drove most management and sales decisions on both sides of the table this past year. To leverage the recession’s aftermath, he says growth will come only through highly targeted direct sales, knowing one’s clients’ needs as much as one’s own and delivering a value proposition that’s quickly seen as a no-brainer to decision-makers. One+
CHUCK GREEN is a freelance business and finance writer.
The recession hasn’t put a damper on renovation and expansion plans among several convention centers worldwide.
• The 100,000-square-foot Mazatlan International Center recently opened on Mexico’s west coast.
• Toronto’s Direct Energy Centre just added the Allstream Centre, a full-service conference and convention center in the historic Automotive Building of Exhibition Place.
• In the next 18 months, SMG will open convention centers in Wilmington, N.C., and Irving, Texas. Most expansion and renovation projects have been planned and financed years in advance, says Gregg Caren, senior vice president of SMG Convention Centers. “These facilities are also seen as much more long term than to react solely to a down economy,” he said. Those that can proceed will so that projects are ready as the economy cycles back. “Those that wait for recovery to be over will be starting behind the curve.”
• The primary investments now planned at HOFBURG Vienna are in audiovisual in the main plenary rooms. In such historic centers, some basic renovation is often required annually. While most planned investments are followed through on, some will start later in the year so that a part of the cost will fall into the next year.
• The Anaheim Convention Center has selected an expansion development partner for a proposed 200,000 square feet of additional space to give the property more latitude in attracting business.
