“Most exhibit space rates are priced as if we were renting out storage space. ”
Jochen Witt, president & CEO
Jochen Witt Consulting
Istanbul, Turkey – Trade show organizers may have to make some fundamental changes to the way they do business if they are to survive the recession that is expected to batter the global economy this year.
That is the conclusion of a think tank chaired by Jochen Witt, president and CEO of the German firm Jochen Witt Consulting during the recent annual congress of UFI – The Global Association of the Exhibition Industry, in Istanbul, Turkey. The group concluded that show organizers in North America and Europe would have to intensify their efforts to find new sources of revenue while at the same time hunkering down to ride out the storm.
“There were a lot of different messages, but the basic ones were ‘conserve cash’ and ‘hope for the best but prepare for the worst,’” said Witt. “But no one has a magic recipe for dealing with this type of situation.”
Pulling Out the Rug
The speed at which the world economy spun out was startling and left show organizers around the world largely stunned at how quickly a promising 2008 had turned to a dismal 2009 in terms of attendance and exhibit sales. While the situation remained in flux as 2008 stumbled to a close, Witt said overall growth for the industry was unlikely. “There will be a decline in all performance areas,” he told Trade Show Executive. “Initial expectations were for between 1.5% and 2% growth per year on a net-square-footage basis. Now, there will be a decline in all key performance indicators in the U.S.”
Witt advised show managements to anticipate decreases in revenues of up to 20% this year and said it could take around three years to make up the lost ground once the economy rebounds.
The economy, he said, will continue to ultimately dictate when the trade show industry will rebound despite whatever heroics the organizers have in mind for growing their events. The matter boils down to the cold hard fact that the overall economy will determine if companies will have the resources to send lucrative delegations to an event. “Our business is driven by product flow and supply and demand; in other words, by GDP (Gross Domestic Product),” Witt said. “The GDP relates quite significantly to the number of exhibitors and attendees. We can be very good at marketing and sales, but our business is driven by GDP.”
March or Die!
With most economists concluding that the intensifying downturn is going to be a doozy, show organizers will have to batten down the hatches, but at the same time, continue moving forward lest they be swallowed up by the gales.
Witt and his Think Tank team concluded that while companies should horde their cash and perhaps even cull some of the weaker performers in their portfolio, they should also not scrimp on spending on their flagship shows or on research and development. “Do not stop investing in new revenue sources,” he said. “That will kill your future.”
Taking the Asia Leap
Now could also be the best time for show organizers to expand their horizons both at home and overseas.
“Merger and acquisition activity in North America is going to increase and even more private equity will come into the market when the turnaround occurs,” Witt said.
“I also believe that U.S. organizers should look to international activity,” Witt said. “If their own market is shrinking, then they have to compensate by shifting their activities to growth markets, and that is most likely Asia.”
Witt said that while China and other Asian Tigers are taking a hit from the economy as well, the Chinese government needs to keep the economy stoked enough to provide the 8% annual GDP growth it needs to create jobs for its growing population. “They need more imports in their trade shows and are pursuing foreign companies to exhibit and attend,” Witt said.
Charging for More than Floor Space
One relatively radical change Witt advocated was breaking away from the way trade shows are priced. The existing pricing model of charging for exhibit space by the square foot is becoming obsolete and should be replaced by a more sophisticated method that emphasizes the services provided and the overall value of the show itself.
“We cannot base our pricing on square meters or square feet anymore,” Witt said. “A trade show is not about renting out square feet; it is about brokering business relationships. We have to find a way to price that relationship.”
“We have to price according to the real value proposition,” Witt said. “Most exhibit space rates are priced as if we were renting out a storage space.”
Whatever changes lie ahead, Witt said, trade shows remain a viable marketing tool that is second only to the powerful Internet in terms of ROI. But at the same time, the industry is facing some significant challenges and is looking for answers, or at least some solid hints.
Reach Jochen Witt at +49 2219 4343 52 or firstname.lastname@example.org