 |
|
|
 |
|
|
|
|
|
|
|
|
|
January 2008
Lessons from 2007
What can we take away from 2007, and how might the lessons be best applied in 2008?
By Danica Tormohlen
For most segments of the industry — shows, contractors, hotels, convention centers, exhibitors and suppliers — 2007 was a record-breaking year. The CEIR index proclaimed attendance, revenue and NSF all up for the first three quarters of ’07 fueled by increases in event spending by corporations on both the exhibitor and attendee side. The M&A market for exhibitions was hot — especially for sellers. Contractors posted record gains for trade, consumer and corporate business. And the business travel industry — including hotels and airlines — posted record profits, driven by strong demand for leisure and business.
Unfortunately, the U.S. economy wasn’t quite so lucky. 2007 started strong — the Dow Jones Industrial Average hit a record high 34 times, and private equity funds couldn’t invest fast enough. But by midyear, the market changed. Real estate and housing slowed, driven by the sub-prime lending crisis. Major lenders wrote off billions in debt, and investment cash flow slowed to a trickle. The U.S. dollar fell against every major international currency. And many economists predicted a major slowdown in the U.S. economy.
As we start 2008, show organizers and suppliers are split on their expectations for the New Year. Exhibitor spending and net square footage for many shows is tracking above previous levels. But our industry generally lags the U.S. economy, so a slowdown is inevitable.
Several key issues dominated the industry in 2007 — and will likely continue to reverberate in 2008.
Lesson 1: Sell when the selling is good (and it still is, despite the credit crunch).
The M&A market for the exhibition industry was red hot for most of 2007. The number and value of exhibition and conference M&As rose last year. However, 2007 lacked the megadeals seen in previous years, according to the Jordan Edmiston Group Inc. (JEGI). In total, there were 51 deals during the first three quarters of the year, up 46 percent from the same period in 2006. The value of those deals also rose 15 percent to $733 million compared with the same period in 2006.
“The deals over the last six months have been almost exclusively small market transactions,” says Nick Curci, President, Corporate Solutions. “This activity will surely continue for the better part of 2008.” Why? Because financing mid- to large-size deals in today’s credit market is very difficult because of the lack of supply and the unwillingness of banks and private equity to back sizable deals.
Curci predicts small deals will continue to be popular as larger trade show producers take advantage of opportunities to acquire smaller competitors and finance deals with internal cash flow. A key point, according to Curci: If you look at all the transactions closed in 2007, very few were acquisitions outside of the buyers’ current markets. “In other words, buyers aren’t expanding their reach into new markets, but instead expanding on markets they currently serve,” he says.
■ The bottom line: Multiples continue to be strong for good businesses, and most experts predict the sellers’ market to continue into 2008. “There’s a certain amount of wishful thinking on the part of buyers that multiples are soft because of their perception of the current banking situation,” says Richard Mead, Managing Director, JEGI. “The reality is that JEGI is closing transactions at multiples that are very attractive to sellers.”
Kathleen Thomas, Managing Director, Berkery, Noyes & Co. LLC, agrees. “Mega deals are not happening or are happening slowly,” she says. “In the mid to lower market size, deals will continue to happen. People will have to go back to accepting some of the covenants and leverage levels of 2005 and 2006. But multiples were very strong then. This credit crunch is not driven by the fundamentals of the companies borrowing. This is a marked difference from the M&A recession our market saw in the early 2000s.”
Lesson 2: International markets continue to post healthy growth and present new opportunities.
While the U.S. economy slowed in the later half of 2007, a number of international markets, including Brazil, Russia, India and China (collectively known as BRIC), continued to grow and develop. China’s exhibition industry expanded at a rapid pace, hosting more than 3,800 exhibitions in 2006, up from 3,000 events in 2004, according to a 2007 report by the China Council for the Promotion of International Trade (CCPIT).
The infrastructure to support exhibitions in China is maturing, and Macao is poised to become the Las Vegas of Asia. Last August, exhibition industry pioneer Sheldon Adelson and the Sands Corp. opened the Venetian Macao Resort Hotel, an integrated resort and convention facility similar to its anchor property in Las Vegas.
India is also emerging as a major global economy, as the result of its a growing economy (8.5 percent of GDP) and a large middle class (300 million), but the country’s exhibition infrastructure must be increased and modernized, according to a review of the exhibition industry in India conducted by UFI, the Paris-based Global Association of the Exhibition Industry.
The exhibition industry in the Persian Gulf region is also expanding and offering more opportunities for international partnerships, according to UFI. Dubai has established a stronghold in the Middle East, and many show organizers are flocking to the city. Abu Dhabi, United Arab Emirates, is emerging as a regional player as well, and a number of convention centers and hotels have recently opened or are currently under construction.
Several major U.S. show organizers expanded their international operations in 2007. Reed Exhibitions acquired a majority interest in 26 trade shows with its joint venture partner in Brazil, and expanded its business in India and the Middle East through launches and acquisitions. In addition, Bethesda, MD-based E.J. Krause & Associates (EJK) entered the Indian marketplace by partnering with Gurgaon, Indiabased INTER ADS Exhibitions Pvt Ltd.
■ The bottom line: Some markets are reaching the saturation point, but there are still opportunities in specific industries, particularly for U.S. shows with global brand recognition. And while for-profit organizers dominate most of these markets, U.S.- based associations with international membership should at least investigate spin-offs and brand extensions. Local joint-venture partners or pavilions in existing events will reduce the risk.
A 10 percent decline in the value of the dollar — the drop seen over the last year — could provide opportunities for increases in international exhibitors and attendees at U.S. shows. “We may see some attrition of larger international exhibitors with established business in the United States because of the decline, but new-to-market international companies may be able to afford to exhibit and travel for the first time,” says Cherif Moujabber, an international consultant based in Boston. But difficulty obtaining visas and the cost of marketing to international attendees and exhibitors are still challenges organizers consider.
Lesson 3: Become a part of the green movement.
Being environmentally friendly isn’t just a nice gesture. It’s becoming standard practice in just about every business.
Companies are developing green strategies for running their businesses and producing their products. Local and national governments around the globe are establishing environmentally friendly regulations and policies. Attendees, especially younger ones, are beginning to demand that exhibitions address the issue, as well. What’s now done on a voluntary basis will likely become a requirement in the future.
And many industry suppliers are leading the way. Contractors are recycling carpet. Caterers are offering more locally grown food. Convention centers are becoming more energy efficient. Last March, the Orange County Convention Center (OCCC) in Orlando, FL, became certified by the International Organization for Standardization (ISO) for its environmental management system, becoming the first center in the country to earn the accreditation.
A host of companies cropped up overnight to address the varying needs of this rapidly growing new industry. Green impacts every industry today, and many show organizers are capitalizing on the trend. Some of the new shows launched last year include:
• Hanley Wood entered the green building market by launching the Green Products and Technology network, which will include a magazine, Web site, trade show and e-newsletter.
• The San Francisco Mart launched the Live Green, Live Well Show, a sustainable design and home furnishings show, last September.
• In November, SustainCommWorld LLC announced the launch of SustainCommWorld — The Green Media Show, a new event in 2008 focusing on environmental sustainability in the media.
• Norwalk, CT-based Reed Exhibitions will launch the Renewable Energy Focus Conference and Expo, a sustainable energy event set for November at the Jacob K. Javits Convention Center in New York.
• Los Angeles-based Canon Communications launched its first Green Manufacturing Conference, to be held this month at the Anaheim Convention Center.
■ The bottom line: Develop a green strategy for your organization and exhibition. While you may not be ready to incur additional costs associated with some options, identifying the potential expenses will help you be prepared if and when it’s necessary. In addition, determine the green potential for your industry. Is there an opportunity for a new event for this market niche? At the very least, consider a green product section, pavilion and/or educational sessions.
Lesson 4: No longer just a buzz word for consumer-driven business, Web 2.0 tools offer numerous applications for b-to-b organizations.
The lines between consumer and business applications continue to blur. Business professionals are beginning to demand the online tools and applications they use in their personal lives. And show organizers are learning to harness the appeal of popular Web sites like YouTube, MySpace and Facebook and apply them to the b-to-b world.
While only a handful of show organizers dabbled with Web 2.0 features in 2006, more and more adopted the online tools for exhibitors and attendees in 2007. Social networking, vertical and personal portals, content sharing, blogging, user-generated content and podcasting are all being used to extend show brands and value 24 hours a day, seven days a week, and 365 days a year.
■ The bottom line: Carefully examine which Web 2.0 tools will work for your market before you dedicate time and resources. Not every tool will work for every audience. Beyond the cool factor, evaluate whether it will really help you strengthen relationships within your community of exhibitors and attendees.
Lesson 5: What goes up must come down, and what goes down usually goes back up.
After the dot-com bust and the fall of COMDEX and others, many observers — inside and outside of the exhibition industry — questioned the long-term prospects for tech shows. It appears the naysayers have been proven wrong. As the industry itself rebounded, so too did the tech shows. While many are succeeding by serving niche markets, there are still a number of large, horizontal tech shows, like CES, that are posting record-breaking numbers of exhibitors and attendees.
Many exhibitions that serve the technology industry posted solid growth last year. Needham, MA-based TechTarget reported event revenue rose 17 percent to $6.9 million during the third quarter of 2007, up from $5.9 million during the same period in 2006. Total event revenue through the third quarter was $16.2 million, up 16 percent from $14 million for the same period in 2006. In addition, Stamford CT-based Gartner, Inc. reported that its revenue from events for the third quarter of 2007 was $26.7 million, an 11 percent increase from $24.1 million during the same period in 2006. As of November 2007, Gartner’s year-to-date event revenue was up 10 percent in 2007 to $106.6 million from $97.2 million during the same period in 2006.
Unfortunately, 2007 was not a great year for many medical shows, depending on the specialty served. The once red-hot industry slowed its pace last year. But the news isn’t all bad. With square footage, number of exhibitors, attendance and revenue up from 2005 to 2006, medical shows continue to grow, but at a slower pace than the overall exhibition industry. Medical association show organizers are facing increased competition from for-profit show organizers, as well as local, regional and online providers of continuing medical education (CME).
In addition, marketing dollars from large pharmaceutical companies were lower in many healthcare fields in 2007 because of a lack of new product introductions and increased competition for marketing dollars from other events (internal and external) and direct-to-consumer advertising.
Consumer spending on healthcare is expected to grow as the Boomer population continues to age, therefore shows serving the healthcare industry should rebound — depending on how they address the unique challenges they face.
■ The bottom line: As the industry goes, so goes your show — usually. But show organizers do have some control over their fate. For example, many tech show organizers found success by retooling and reformatting their shows to serve more vertical audiences, while others focused on growing their shows by adapting to the changing needs of their industry as it matures and evolves.
Danica Tormohlen, Editor of EXPO, has worked in the exhibition industry since 1994. She can be reached at 913-344-1303 or e-mail: dtormohlen@red7media.com.
January 2007
• VNU changes its name to The Nielsen Co.
• New passport rules take effect
February 2007
• Prism completes acquisition of Penton
• TechTarget files IPO registration statement
• Questex Media Group Inc. acquires appointmentbased U.K. event company; plans to expand model domestically
March 2007
• Former Penton CEO David Nussbaum launches b-to-b media company with $100 million in backing from ABRY
• Robert Krakoff, Nielsen Business Media’s President and CEO, dies of a heart attack at 71
• Advanstar sold to investor group led by VSS for $1.142 billion, Joe Loggia to stay on as CEO
April 2007
• Advanstar reports double-digit increases in revenue and EBITDA in 2006
• M&A activity for trade shows is brisk in the first quarter, especially for smaller companies, according to The Jordan, Edmiston Group Inc.
• Reed Exhibitions acquires 26 trade shows; expands its joint venture in Brazil
May 2007
• Annual survey reports traffic density at trade shows continues upward trend; attendee buying influence remains strong
• Advanstar revenues up 4 percent in first quarter of 2007
• Nielsen revenues up overall; down for business media segment
June 2007
• Trade show revenues surpass print media revenues in the first quarter of 2007, according to data provided by the Center for Exhibition Industry Research (CEIR) and the American Business Media (ABM)
• SMG sold to investment banker
• Access Intelligence acquires TradeFair Group
July 2007
• ALM acquired for $630 million
• Diversified Business Communications partners with New York University Post-Graduate Medical School and the American Academy of Home Care Physicians to launch medical conference and trade show series
August 2007
• VSS reports spending on exhibitions hit $10 billion in 2006
• Questex acquires Oxford Publishing
• Paul Mackler and Ken Fisher form partnership with private equity firm Alta Communications to acquire HMP Communications
September 2007
• MPEA votes to acquire land for further development of McCormick Place
• PKF predicts slowdown in hotel rate hikes through 2011
• dmg quits home shows in North America, completes acquisition of GLM
October 2007
• Hanley Wood launches green construction trade show and magazine
• 1105 Media acquires three governmentsector trade shows from NTP
• MGM Mirage plans Atlantic City resort complex with convention center
November 2007
• Nancy Walsh to oversee Reed Exhibitions in North America
• Gartner event revenues up 11 percent in the third quarter of 2007
• Canon events revenue and profit up 50 percent since 2005
• Nielsen revenues up 11 percent for third quarter and year-to-date
• dmg world media reports operational profits up 12 percent year-to-date
December 2007
• dmg world media launches sporting goods trade shows
• Reed launches sustainable energy event
• Survey shows 49.5 percent of b-to-b marketers will increase their event budgets in 2008
More on EXPOweb.com |
|
|
Stay informed with Expo's weekly e-newsletter:
Get daily industry news via RSS  What is RSS?
|
|
|
|
|
 |
| |
A Red 7 Media publication - 7015 College Blvd., Suite 600, Overland Park, KS 66211, USA
Tel 913.344.1376 — Fax 913.469.0806
|
|
|
|
