May 2007
State of the Industry
Special Report: 4th Annual CEIR Exhibition Industry Index reveals the overall exhibition industry outpaced U.S. economic growth again from 2005 to 2006. Benchmark your show’s performance against events in 11 industry sectors.
By Kelly Lanigan and Heather Kirkwood
The exhibition industry continues to demonstrate healthy and consistent growth, according to The Center for Exhibition Industry Research (CEIR, www.ceir.org), which recently released its 4th Annual Exhibition Industry Index. CEIR reports a 4.8 percent increase in the performance of the overall exhibition industry from 2005 to 2006, slightly less than the 5.8 percent increase from 2004 to 2005. The 2006 increase outpaces overall U.S. economic growth, which increased 3.4 percent.
The CEIR Index tracks performance based on four metrics: net square feet (NSF), number of exhibiting companies, number of professional attendees and exhibition revenue from all sources. The index baseline of 100.0 is founded on 2000 data. Year-over-year change in each metric is reported in index points. The average of these four index values comprises the “total.”
The overall exhibition industry grew at a compound annual growth rate (CAGR) of 2.3 percent from 2000 to 2006, marked by increases in net square footage, number of exhibiting companies, attendance and revenue. Of the four key metrics, net square footage grew the most, posting an increase of 3.6 percent CAGR from 2000 to 2006. During this six-year period, the building and construction sector posted the highest total gain, with a 5.4 percent increase in the CAGR, while only two sectors — the consumer goods and retail and communications and information sectors — declined in CAGR.
The index reports a year-over-year increase in net square footage for nine of 11 industry sectors. Professional business services reported the largest total gain, an 11.1 percent increase in 2006 compared with 2005. Year over year, raw materials and science increased 10 percent, and transportation rose 9.4 percent. The industry metric that increased the most from 2005 to 2006 was revenue, which rose 9.7 percent.
Forecasting the future of the exhibition industry is riskier than in past years. Several leading economists, including former Federal Reserve Chairman Alan Greenspan are forecasting a 33 percent chance of recession by the end of 2007. Manufacturing data shows a moderation in manufacturing activity related to the slowdown in housing. The general economy suggests GDP growth between 2.5 percent and 3 percent in 2007. Credit expansion has been a key driver of economic growth for more than five years because of less stringent lending terms and easier access to credit. However, this trend may be coming to an end, creating a credit crunch that could impact the growth of industry.
On a more positive note, however, shows are generally not as fragile in the wake of moderate economic fluctuations as other forms of marketing. Expenditures on exhibitions are expected to surpass those spent on print advertising, regardless of the economic outlook.
To help you benchmark your show’s performance, EXPO presents the research on events in the CEIR Index Report’s 11 industry sectors. Find out what this data means for your show and how to use it to sustain growth in 2007 and beyond.
Professional Business Services
Professional business services are a growing component of the U.S. economy, and the industry’s strength is reflected in the sector’s exhibition performance. The sector’s index score for 2005-2006 increased 11.1 percent, outperforming all other industry sectors. The growth was driven by an 18.6 percent increase in attendance and a 25.2 percent increase in revenues from 2005 to 2006. There was, however, a 2.8 percent decline in the number of exhibitors from 2005 to 2006.
All key metrics scores for exhibitions in this sector rose from 2000 to 2006, led by an increase of 6.9 percent CAGR in revenue and 4.2 percent CAGR in attendees. The number of attendees rose 18.6 percent from 2005 to 2006, compared with a 4.6 percent increase in attendance for the overall exhibition industry.
It’s likely that the demand for skills-based conferences will continue to be high through 2007. The professional business services sector represents a large portion of the highly educated knowledge worker economy. An increasing number of Americans are moving from low-wage, low-skill jobs to positions that require higher levels of education. The sector is benefiting from the boom in small- to medium-sized enterprises being created in regional cities, rural areas and home offices, largely as a result of the Internet.
Consumer Goods and Retail Trade
Retail is the second-largest industry in the United States as measured by the number of establishments and employees. Despite the fact that retail sales grew 6.2 percent in 2006, the sector’s exhibition industry performance lagged. All metrics declined from 2000 to 2006, except for attendance, which was relatively flat. In 2006, revenue is the only metric that increased, posting a 4.5 percent rise compared with 2005.
The total sector index score decreased 0.7 percent from 2000 to 2006, compared with a gain of 2.3 percent for the overall exhibition industry during the same time period. Attendance and revenue remained stagnant, however, index scores for net square footage and exhibitors fell 0.8 percent and 2.2 percent respectively.
The sector’s index score for 2005 to 2006 remained virtually unchanged, compared with an exhibition industry score that went up 4.8 percent. Metrics for the sector were mixed for the year as the index for exhibitors decreased 3.2 percent while the revenue index rose 4.5 percent.
The retail market is so far not tracking with last year’s growth, however, there’s reason for optimism that this sector, and thus its exhibition performance, may improve. In January 2007, sales were up 2.3 percent year over year, a deceleration from 2006. However, if job growth continues and the unemployment rate stays at 4.5 percent, personal income growth will expand by 5 percent. As a result, total retail sales are expected to grow 5 percent.
Sports, Travel, Entertainment, Art and Consumer Services
The index score for shows that serve the sports and entertainment sector grew at a CAGR of 5.3 percent from 2000 to 2006, outperforming the 2.3 percent CAGR increase for the overall exhibition industry. From 2000 to 2006, growth was driven by a 10.1 percent and 6.7 percent CAGR rise in the index scores for revenue and attendance respectively.
Exhibitions in this sector grew 2.9 percent from 2005 to 2006, less than the overall exhibition industry, which increased 4.8 percent during the same period. According to the report, growth can be attributed to some of the following factors:
• Of the nearly 1.5 million people employed in the amusement and gambling recreation businesses, 9,000 jobs were created in 2006. In 2005, 31,000 new jobs were created. Total employment for the industry grew 75 percent from 1990 to 2006.
• Increasing wealth of Americans correlates with increases in leisure activities and spending. The current rate of increase is expected to continue through the rest of the decade.
• Personal consumption spending on performing arts and spectator sports rose 3.8 percent in 2006, compared with a 2.5 percent increase in 2005.
Food
Exhibitions serving the food sector had a great year in 2006 after a rough period during the past few years as the industry experienced widespread consolidation. Although the food sector generated a relatively flat index score from 2000 to 2006 (0.0 percent), the sector’s performance rose 7.4 percent in 2006, compared with 2005. This increase makes up some of the ground lost in 2005 when the sector’s performance decreased 10.9 percent.
Going forward, it appears the industry is poised for growth. In 2006, food-and-beverage store sales rose 5 percent to $46.9 billion. The restaurant segment of the industry is also thriving as dual income families spend more on eating out than they do on eating in. Sales at full-service restaurants rose 9.7 percent in 2006.
Government, Public and Non-Profit Services
In the government sector, exhibitions have remained relatively unchanged from 2000 to 2006, in part because of the large federal budget deficit and the drain of the Iraq war on the federal budget. While government receipts increased 11.5 percent from 2005 to 2006, the budget deficit remains at $209 billion and is not projected to change soon.
In 2006, the index score for the sector’s performance grew only 1 percent over 2005. While net square footage for the sector rose 14.4 percent from 2005 to 2006, any gains were offset by the 12.5 percent decline in attendees year over year.
Looking forward, there’s expected to be increased demand for educational conferences in this sector, fueled by a changing legislative landscape. The “No child left behind” Act has fueled demand for educational sessions for educators, for example. Concerns about homeland security fuel the need for conferences demonstrating the latest law enforcement and security techniques.
Building, Construction, Home & Repair
In this sector, exhibitions have increased their performance by a CAGR of 5.4 percent from 2000 to 2006, and all key exhibition metrics grew during that time. The sector also performed very well in 2006, growing its index score by 9.2 percent from 2005 to 2006.
The building, construction and home repair industry remains the second largest in the country after automotive. The industry has been strong since 2001 due to: movement of capital away from the stock market and into the housing market; low interest rates, especially from 2001 to 2004; available credit through advanced securitization in the mortgage market; and strong demographics.
However, following 18 interest rate increases from 2004 to 2005: new housing starts reached 1.8 million in 2006, compared with 2.1 million in 2005; housing starts were down 37.8 percent from February 2006 to February 2007; existing home sales were down 8.3 percent in 2006 from 2005; and new home sales were down 16.8 percent.
The outlook for the segment is unclear. Some indicators show a market still growing at a healthy clip, however, the rise of interest rates coupled with a healthy supply of new and previously owned homes on the market could force a slowdown.
Industrial/Heavy Machinery and Finished Business Inputs
Exhibitions in this sector grew at about the same pace as the average for the overall exhibition industry. While the number of exhibitors and attendees increased CAGR of 2.9 percent and 7.4 percent respectively, revenue has declined 2.3 percent from 2000 to 2006. In 2006, the sector was led by gains in net square footage, number of exhibitors and revenue, while attendance declined.
The industry outlook for this sector appears to be more of the same. Capital spending is expected to grow at a rate of 10 percent in 2007, according to most economists, which is good news for manufacturers and the shows that serve them. Overall, there’s also increased demand for American goods overseas. Two factors that could potentially put a damper on this sector are the rising costs of energy and health care.
Communications and Information Technology
Although the communications and information technology markets have rebounded, exhibitions in this sector have not. The sector’s index score fell at a CAGR of 3 percent from 2000 to 2006. In 2006, however, the overall score rose 3.4 from 2005, including a 14.4 percent increase in revenue and an 8.8 percent increase in attendance. It’s a positive trend for the sector that may continue.
Although this sector hasn’t performed well the past few years, there are a number of factors that bode well for the coming years. Production of computers, office equipment, communications equipment, semiconductors and other related equipment rose 26.7 percent in 2006, up from an 18.1 percent increase in 2005. Some economists predict another “cycle of innovation” from 2008 to 2011. That cycle is likely to fuel the creation of new tech shows, as well as the need to have a place to experience new products firsthand. The growth generated by new events, however, may be offset by stagnation from older ones. Because of the relatively short life cycle of technology products, the report stresses the need for organizers to remain nimble and keep up with change in order to fuel growth.
Medical and Healthcare
The medical and healthcare industries remain strong as a result of an aging population, longer life spans and modern medicine. Exhibition activity reflects that strength, as the sector’s index score grew at a CAGR of 4 percent from 2000 to 2006. CAGR scores for net square footage and revenue increased 5.4 percent and 4.1 percent respectively from 2000 to 2006. The overall index score in this sector increased 3 percent from 2005 to 2006, fueled by an 8.1 percent year-over-year increase in the revenue.
The forecast for this sector continues to look positive. There’s currently an increase in biomedical research generating a plethora of new drugs and medical devices — all of which are ideally suited to be marketed at exhibitions. There’s also a healthy demand for educational sessions in which doctors and scientists can learn the latest techniques and exchange ideas.
Raw Materials and Science
In 2006, the index score for the raw materials and science sector rose 10 percent from 2005, fueled by a 26.0 percent increase in attendance, a 9.1 percent increase in net square footage and a 6.6 percent increase in revenue. These numbers are significantly higher than the sector’s 2 percent CAGR from 2000 to 2006.
The outlook for the sector is rosy as demand for raw materials to fuel industry in places such as China and India will remain strong. The demand from emerging economies has led to high prices for raw steel, copper and other industrial metals. There is, however, a lot of M&A activity in this sector, and shows may experience a drop in the number of exhibitors in coming years.
Transportation
The transportation sector outperformed the overall exhibition industry averages in recent years, generating a 9.4 percent increase from 2005 to 2006. Three key metrics increased by double digits in 2006, including net square footage (10.4 percent), number of exhibitors (12.9 percent) and revenue (10.5 percent). From 2000 to 2006, the overall CAGR increased 4.8 percent, led by a 6.6 percent CAGR increase in revenue and a 4.7 percent CAGR increase in net square footage.
The outlook for this industry sector is strong, especially with the growth of online purchasing. In addition, an increasingly global economy is generating more and more people who travel regularly, thereby fueling the transportation industry. Exhibitions serving this industry will benefit from its growth. The only factors that may dampen the industry’s outlook are the rising costs of labor, largely because of healthcare-related costs and the potential for a rise in fuel and energy costs.
The CEIR Index breaks down the 10,000 business-to-business exhibitions into 11 sectors:
1. Professional Business Services — accounting, advertising and marketing, architecture, audiovisual, banking, business, engineering, financial and legal, insurance, plant engineering and operations, printing, safety, security
2. Consumer Goods and Retail Trade — apparel, gifts, hardware, housewares, jewelry, laundry and dry cleaning, leather goods and luggage, lighting, office equipment and supplies, photography
3. Sports, Travel, Entertainment, Art and Consumer Services — amusement, art, beauty and healthcare, boats, fishing, funeral industry, hotels and resorts, real estate, recreational vehicles, religious, rental and leasing, sporting goods and recreation, toys and hobbies, travel industry
4. Food — food and beverage, food processing and distribution, restaurants and food service
5. Government, Public and Non-Profit Services — associations, education, fire and fire protection, government, libraries, military, police
6. Building, Construction, Home and Repair — building and construction, home economics, home furnishings and interior design, housing, landscape and garden supplies, stores and store fittings, woodworking
7. Industrial/Heavy Machinery and Finished Business Inputs — air conditioning, heating and refrigeration; manufacturing; metal, woodworking and coatings technology; packaging; robotics; sanitation and waste management; welding
8. Communications and Information Technology — communications; computers and computer applications; electrical and electronics; publishing, radio, TV and cable; telecommunications; telephone
9. Medical and Healthcare — dental, industrial, medical and healthcare, nursing, pharmaceuticals, veterinary
10. Raw Materials and Science — agriculture and farming; ceramics and glass; chemical; energy; floriculture and horticulture; forest products; mining; ocean science and equipment; paint; paper; petroleum, oil and gas; plastics; pollution control; science; textiles; water; wire
11. Transportation — aerospace and aviation, automotive and trucking, physical distribution, railroads, transportation
Kelly Lanigan is Editorial Assistant for EXPO. She can be reached at klanigan@ascendmedia.com.
Heather Kirkwood, Senior Editor of EXPO, has written for the exhibition industry since 1997. She was part of EXPO’s editorial team that won the 2005 Folio: Eddie Award for Editorial Excellence and the 2005 min’s B-to-B Best Web Site Redesign Award. She can be reached at (913) 344-1376 or hkirkwood@ascendmedia.com.
Click here to download Excel charts with more information from the CEIR 4th Annual Exhibition Industry Index.
Find links to these EXPO archived articles:
Special report: State of the Industry, Will your sector be a leader or laggard in 2006, January 2006
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