Big Ideas

Exhibiting Optimism Amid Political Uncertainty at CEIR Predict

The news wasn't all good at CEIR Predict, an annual economic forecasting conference presented by the Center for Exhibition Industry Research at the Waldorf Astoria in New York City on Sept. 12.

But the reports, which came from analysts outside the industry, as well as panelists representing 14 industry sectors, were more positive than they have been at any time since CEIR Predict was founded in 2011.

Although the exhibitions industry was projected to end 2013 with an unexciting 1.1-percent growth, lagging behind the slowly improving U.S. economy, the outlook for 2014 and 2015 is “much rosier,” CEIR President and CEO Doug Ducate told the more than 150 C-suite industry executives who attended — a group that, according to Ducate, represented $36 billion in annual economic impact.

Ducate added a caveat, one that continued to cause uncertainty at press time. The sunnier outlook, he said, is based on the premise that “some of the more onerous political differences can be resolved on a timely basis without negatively impacting the economy.”

Trending Up

According to the CEIR Index, a performance data and annual forecasting report released at the conference, attendance was up for events in most sectors this year. Other indicators were mixed, including net square feet, number of exhibitors, and revenue, although generally trending up. (Education and government were the exceptions; they are the only two sectors expected to decline in 2014.)

Some sectors are coming back strongly, particularly compared with dismal numbers posted in recent years. While most of the exhibition industry was suffering through the recent recession, for the construction segment, “it was a terrible, terrible depression,” said Frank Anton, vice chairman for Hanley Wood. Thanks to a rebounding real-estate market, the building, construction, and home-repair sector, which had dropped by more than 20 percent in 2008 and 2009, was expected to grow by 3.4 percent this year, 5.2 percent in 2014, and 6.5 percent in 2014, the CEIR Index reported.

During a presentation on the outlook for industry mergers and acquisitions and financing, Amir Motamedi, a director at Onex Corporation, a private equity firm, discussed Onex’s purchase of Nielsen’s exhibition unit this past May. “You can’t paint the industry with one brush,” Motamedi said, because different segments have vastly different growth trajectories. But “if you asked the question ‘Will trade shows continue to garner their share of marketing dollars? Will face-to-face?,’ the answer would be that trade shows are not only stable, but are growing. The trade-show format is important.”

‘They Want to Be in the Same Room’

Lunch speaker Clay Shirky, professor in the interactive communications and journalism program at New York University and one of the leading thinkers about the social and economic impact of digital technologies, also was bullish on face-to-face. “The old idea we had about face-to-face contact and communications being substitutes for one another is wrong,” Shirky said. “That idea has been in the press since the 1964 World’s Fair, when AT&T first brought out the videophone.” Every press release for every video product since then has carried the same closing paragraph: “We hope that this invention will finally overcome the need for business travel,” Shirky said. “It has never happened once.”

The reality is that “communications and transportation are complements to one another, they are not substitutes,” he said. “It turns out that when people meet face-to-face, they want to keep in touch afterwards. And it turns out that when people communicate with each other long enough, they want to get together in the same room afterwards.”

Even the most abstract projects proposed online now generate people who want a real-world component. “They want to be in the same room,” Shirky said. “They want to be face-to-face.”

City Talk

For the first time, CEIR Predict assembled a panel of mayors from four large metropolitan areas: Baltimore Mayor Stephanie Rawlings-Blake, Dallas Mayor Mike Rawlings, Houston Mayor Annise Parker, and Orange County Mayor Teresa Jacobs. Dave Whitney, president of Destination Meetings Online, moderated the panel, asking questions prepared by CEIR, including the following:

Many of those gathered in the audience believe that the simple economic impact of having their show in your city should justify subsidies of some part of their convention. Is that something that is a sustainable economic model? Is it sellable to the constituents in your cities?

Rawlings-Blake As far as a sustainable proposition, I think everybody here knows that it’s not…. It’s sellable, because for every dollar we give to the convention center or Visit Baltimore, we get $4 back on that investment. Simple math, it makes sense. As long as we continue to get that type of return on investment, we can justify the investment we make in tourism, which is one of Baltimore’s largest industries.

Parker It’s a buyer’s market right now; we’re all very competitive with each other…. How the city funds its convention center makes a tremendous amount of difference in whether they can do deals. If your convention center is a city department, if I’m going to fund the convention center or the police department, the police department wins every time.

[In Houston] we’ve created a separate enterprise of our convention facilities and our convention center hotel and the one we’re building. It’s designed to break even — it’s not a loss leader, it’s not a profit center. No business can stay in business if you give away your product every time. But for a convention or conference of such magnitude that it will significantly increase the revenues of [the overall region], we, of course, will sweeten the pot.

Jacobs In Orange County, the convention center is run by the Orange County government, and all of the [operating] revenue comes from our dedicated tourist-tax revenues. In most years, we subsidize the operation of our convention centers. We’ve had a growth rate of 14 percent since 2010, and in the past year, we broke even and even had a little bit of revenue to put back into the convention center. But generally speaking, we subsidize every convention by subsidizing the convention center operation.

Having said that, it’s a simple issue of supply and demand. If you’re coming to Orange County at a time when we have excess space and our hotels have occupancy available, then we will be far more likely to work with you. And frankly, most of our working with you comes from working with the private sector. If you’re coming during peak demand, it’s highly unlikely. It’s a business at the end of the day, just like you are.

Rawlings You want to make as much money on your show as possible…. The question for us is, how do we keep it sustainable and know that the customer is always right, and get as big a market share of this room as we can get? How do we compete to do that?

If I’m in our shoes, I can do it in two ways: I can grow my top line, or take the cost out of the middle of the P&L [profit and loss]. What you do for [Dallas] pays off for itself, but how am I going to compete? I know in the long term I will fail if I compete on price. That’s Harvard Business Case 101.1 have to do something to get your top line higher and better. That’s where money comes in. In Dallas, we’ve spent $16 billion in the last decade to build a product that you’re going to have more delegates coming to. You’re going to make more money, and your prices are going to go up. The top line is the most important thing, and that’s where we want to position ourselves.

Barbara Palmer

Barbara Palmer is senior editor and director of digital content.