In recent years, conditions have been favorable. Total spending on exhibit space topped $7.8 billion in 1998 and is expected to grow by a 10.4 percent compound annual growth rate (CAGR) from 1999 to 2003 to an estimated $12.8 billion in 2003, according the Communications Industry Forecast, an annual report on business-to-business communications published by investment banking firm Veronis, Suhler and Associates Inc.
Fueling the industry's 11.7 percent CAGR over the past five years have been steady increases in exhibit space rates. Increased demand for limited space at convention centers around the country has driven rates up. Show managers have responded by making higher than cost-of-living increases on exhibit space rates an average increase of 8 percent this year, according to the 1999 Financial Benchmarking Study, sponsored by EXPO and the International Association for Exposition Management (see page 36 for complete results).
But forecasters expect rate increases to slow over the next five years as hundreds of thousands of feet of exhibit space come online as convention centers complete expansions. In fact, exhibit space is expected to grow to 585 million square feet by 2003. As more space becomes available, the average price per square foot is expected to increase by just 2.3 percent CAGR from 1998 to 2003, down from a 4.7 percent CAGR from 1992 to 1997, according to the Communications Industry Forecast.
These ebbs and flows in the industry are an undeniable influence on show managers' pricing strategies. When setting prices on exhibit space, registrations, sponsorships and ancillary products, show organizers consider the show's history, what competitors charge, the value to exhibitors and attendees, and what's fair in today's market. "They're churning all that information in their brains and coming out with an answer," says Manuel Gaetan, Ph.D., PE, President and CEO of Columbia, SC-based MGR Enterprises Inc. "Show pricing is not an exact science. It is a gut reaction to the show manager's question: What price should we charge?"
Setting prices for each revenue source, and raising prices from one year to the next, takes careful balancing of estimated costs, projected sales and market forces. There's no magic formula, but if you know your industry and trust your gut, you can devise a pricing scheme that's fair and profitable.

Price Tolerance
A complex amalgam of factors affect a show's "price tolerance," or its ability to absorb a price increase. External factors, such as the health of the industry, must be balanced against internal factors, such as a mandate to maximize dividends to shareholders. Former President of Bobbin Miller Freeman Inc. and now an industry consultant, Gaetan argues that higher prices may increase revenue but decrease profit.
"There is a point above which you raise your prices, and your profit will drop because people don't want to pay the higher prices," he says. "When asked for a recommendation about a price increase, a show manager might intuitively think he can sell 80 percent of the floor at $20 per square foot, or 100 percent of the floor at $17.50." Which price is right? It depends. "Some shows have a low-price, high-volume Kmart approach, and others have a Nordstrom's approach. A high price with less volume might be more interesting in financial terms, because costs are lower, but that may affect traffic and have a deterrent effect on future shows."
In short, get greedy and you can endanger the future of your show. Gaetan advises, "Know the industry you're serving. If it's battered by imports or government regulations, and you want to increase prices because your costs have gone up, you might have to bite the bullet and recover those costs when it's a better time. There's the wrong time to do the right thing."

Balancing the Budget
The starting point for setting prices is your show budget. Robert Kolinek, CEM, CMP, President of Lisle, IL-based Helen Brett Enterprises Inc., follows a manufacturing model. Each of his gift-industry trade shows is a profit center, with its own budget and expenses. He takes direct costs plus overhead cost allocation, then adds 20 percent profit. Working back from the bottom line, he knows how much revenue to generate and, based on the show's history, can forecast sales and set prices.
Costs for space and labor vary dramatically from market to market and, exhibit pricing varies accordingly. "I can't charge New York prices in New Orleans," he says.
Verne Hulme, President of Plano, TX-based Texas Shows Inc., sees a huge difference between budgets for the public bridal shows he produces in the Dallas-Fort Worth metroplex. "My building costs in Fort Worth range from 3-5 percent of gross, and in Dallas, they're closer to 10 percent," he says.
Hulme charges exhibitors 15 percent more for space in Dallas because the fixed costs are so much higher. "These two centers are 20 miles from each other, but because of demand, they have vastly different prices. Vendors know they're going to pay more in Dallas than in Fort Worth, more in Houston than Dallas, and more in Boston than anywhere in Texas."
Rising costs also need to be recouped, and since exhibitors make up 65-75 percent of the the show's gross revenue, they usually absorb the bulk of these increases. Tom Harris, CAE, President of Indianapolis, IN-based Tom Harris & Associates Inc., raised his rates three years ago in response to increased rent and says next year, "We could be up another 5-7 percent because the cost of rent keeps going up, up, up."
Operating expenses, including union-controlled labor and decorating, have also spiraled upward. "The worst increases in line-item expenses outside of my control have been in decorating," says Hulme. To counter the costs, he started his own decorating company and raised exhibit prices 5 percent a year for the last four to five years.
For Kolinek, the biggest hits have been postage, which jumped 22 percent this year, and paper, which contribute to his direct-mail costs. Though he favors annual cost-of-living increases, he says, "We get to a point where, if we continue to raise prices, sales begin to decline. Then we look for other revenue sources." He's found premium booth locations command premium prices. "If an exhibitor needs to be by the front door, he may pay 20 percent more to get that space. Is there a formula for pricing premiums? We don't have one. We say, "This spot will be worth this value.' If nobody buys it, we know it's overpriced."

Competitive Pricing
Knowing what other shows charge in the vertical and horizontal markets that intersect your industry, and keeping your prices in line, is crucial to staying competitive. Sending staff to competing events, reading trade publications and cruising the Internet are the main sources of intelligence for a competitive analysis. "You don't have to go through deception. The industry now is very free with information," Kolinek says. "You can go to the Internet and get anyone's contract."
Deciding whether to undersell the competition, or create an aura of exclusivity with premium pricing, depends largely upon the image you want for your event, since higher prices will discourage some exhibitors from participating. Harris prices his public golf shows in the middle of a field crowded with about 90 shows a season. To capture a bigger piece of the pie, he offers incentives for exhibitors, who can save up to 20 percent by reserving early and exhibiting in all five shows the equivalent of one free show, he says.
At the other extreme, pricing based on a market monopoly can backfire. "If you're charging 30 percent more because you're the only game in town, you're wide open for competition," warns Hulme.
For example, Northbrook, IL-based IPC Association Connecting Electronics Industries is launching the Electronics Assembly Process Exhibition and Conference (APEX) next year in direct competition with NEPCON West. Produced by Norwalk, CT-based Reed Exhibition Cos. (REC), NEPCON West dominates the electronic manufacturing industry market, with about 700 exhibiting companies expected. At APEX, IPC members can purchase exhibit space for $19 per square foot, less than half of what they might have paid at NEPCON West 1999.
"Over the past 35 years, the show has been venue bound, or sold out, and at those times the prices have been higher," says REC Industry Vice President Lorenz Hassenstein. In response to current industry conditions, Hassenstein's pricing strategy for NEPCON West 2000 was to reduce rates to 50-60 percent of what pricing was the prior year. "We made a decision based on the need for companies to spend less on marketing, so we bellied up and changed the pricing."
Competition comes from not only other shows, but also other marketing media. According to a recent study by Advertising Age's Business Marketing, expositions moved from No. 5 to No. 3 among the tools marketers most use. While advertising continues to rank first, savvy publishers may drop rates to compete with shows and keep their foothold in the business-to-business marketing arena.

Putting a Price on Value
Pricing attendee revenue streams runs the gamut from free admissions to four-digit conference packages. On average, show managers report that 15-20 percent of their gross revenue comes from registration and fees, according to EXPO's 1999 Financial Benchmarking Study.
"The No. 1 issue for putting together a program and charging for it is creating value," says Jim Daggett, President of Chicago-based show and association management company JR Daggett Associates. "You can be a $40-a-day Fred Pryor Seminars, but you'll be perceived as quick and dirty."
As a major source of non-dues revenue, an association conference is priced based on the value to members big-name speakers, textbooks and continuing education credits earn higher fees. "With the pricier ones, you're getting more access to information, resources and people," Daggett says.
Most show organizers are reluctant to raise registration fees dramatically from year to year. And the influx of attendees over the past five years swelling by more than 7.5 million from 1993 to 1998, rising to a total 38.8 million attendees in 1998, according to the Communications Industry Forecast has most likely held attendee prices steady as increased attendance is a driving factor in boosting exhibitor spending.
"We've shielded our members and kept fees down year in and year out," Daggett says. "We're making less on each member over the years." When other sources of revenue dry up, say a major sponsor leaves, "now we've got to increase fees 30-40 percent to make up the difference." He advocates a $20-$50 annual cost-of-living increase. "If you ask members, informally, what they paid for registration at the annual meeting six months ago, they wouldn't know if it was $325 or $345. But if you jump up dramatically, it's a different issue."
Registration fees offset variable costs such as food and beverage, transportation and technology, including A/V equipment and Internet access. Promotional campaigns that combine direct mail and Internet marketing also drive costs up. In response, some shows are placing higher price tags on targeted, high-level educational sessions or charging by the session for celebrity speakers and other special programming. Still, how much you can charge is a function of what the market will bear, and what the competition is charging.
For consumer shows, competition includes all forms of public entertainment. With the average movie ticket priced under $10, public shows charge $3-$25 for admissions, depending upon the market. Harris has kept his golf shows at $7 for four years. "I can see going up to $8 at a couple of our locations, because other shows are getting that in major markets," he says. "But I need to stay generally priced at what other shows are getting."
Hulme's Texas bridal shows cost $8, considerably more than the $3-$6 public shows in his market. "Attendees that come to our shows are concentrating on putting something together for the most important day of their life," he says. "We continued to raise our price, and attendance kept increasing." But, he warns,"If you increase the cost of attendance, you better increase the perceived value attendees are getting." Producing a special event adds value but increases costs. "If you have a $40,000 event and a $4-$6 gate, you've got to draw 6,000 people." And they better be the right people, or exhibitors will complain.

High-margin Opportunities
While nearly three-fourths of a show's gross revenue comes from booth sales, sponsorship revenues now comprise 4-10 percent of revenue, according EXPO's 1999 Financial Benchmarking Survey. More and more exhibitors are paying premium prices for targeted opportunities, and "event marketing" may yield the highest margins. More than a name on a placard, "event marketing is anything outside of the exhibit floor and the concrete you get with it," says Bill Sell, CEM, Vice President and General Manager of the COMDEX Group of Needham, MA-based ZD Events.
For example, "You may have 100 percent of costs sunk in your program guide, and you've never had ads. It doesn't cost you any extra to decrease the font size and add advertising. That's 100 percent margin, and you've created an opportunity for your exhibitors," he says.
The front cover of the COMDEX fall program guide is premium real estate. "You know you're at COMDEX. You don't need the front cover to tell you that, so we have 50 percent of the front cover as ad space," says Sell. The same exhibitor has reserved that space for five years.
How do you place a value on an opportunity like that? "We decided these event marketing programs can't lose money," he says. "You need to know your costs, then add on a contingency of 25-30 percent for the little things you forgot, like temp labor or drayage. Then we look at a number of factors: What can the free market economy bear? If you aim too high, you can lower the cost or adjust elements of the program until you hit the price that's attractive."
The value of the package depends upon the "mindshare" or exposure it gains the exhibitor compared to other opportunities. If it generates an active response, like a digital pager that prompts a reporter to look at an exhibitor's message, then it's worth many times more than an ad in an industry publication. Marketing opportunities are limitless. Sell says, "If you're only doing booth space, you're leaving money on the table."
With a little creativity and a sound spreadsheet, you can widen your margins without alienating your customers. The bottom line on show pricing strategies, says Daggett: "It's a function of how much money you have to make, how much the economy will allow you to make, what your competition is doing, and how much you've made in the past."
If industry trends are an indication, show managers will continue to raise exhibit space rates by nearly 3 percent annually, keeping pace with inflation. Controlling costs and creating new revenue opportunities that add value for exhibitors will improve profitability for independents and enhance non-dues revenues for associations.

Cathy Chatfield-Taylor (cc-t@mindspring.com) writes for new and traditional media from her home in Lenexa, KS. Danica Vasos is Editor in Chief of EXPO.