How Some Met the Challenge

New York's Hotel Pennsylvania, just blocks from the Jacob. K. Javits Convention Center, has been hit hard – very hard – over the past few years. Steve Leonard, director of sales and marketing, described the roller-coaster ride that began with the recession in January 2001. About the time he and his colleagues were adjusting to that, the city was devastated by the terrorist attacks of Sept. 11. That was followed in 2003 by the combined impact of the Iraq war and SARS scare, which kept many of the hotel's large number of Asian guests at home.

The most recent hit wasn't felt immediately because many guests' plans were already in place, but there was a quick, steep decline in future bookings, Leonard said.

It was enough for the hotel's 2003 revenues to take a 25- to 30-percent hit when compared to the glory days of 1998 and 1999. At that point, it became apparent that it was unrealistic to continue to compare results to that heady period; 1996 is now the Pennsylvania's point of reference when it comes to financial performance.

Still, things have improved in the past year. Leonard said that he began to see a pickup last July. This month, the 1,700-room hotel's occupancy rate is forecast for 78 percent – about 10 points higher than Leonard expected when the year began and 25 percent better than last April. March occupancy, also 78 percent, was 15 points higher than budget and 17 points higher than in March 2003.

How much can a hotel, especially one that relies heavily on tradeshow and convention business, do to turn things around in the face of so many events beyond its control? Certainly, much of the Hotel Pennsylvania's most recent recovery is due to a resurgence of shows at Javits, and to a weakening U.S. dollar, which makes it more affordable for the hotel's many international guests.

But Leonard took other measures. The hotel did what it could to cut expenses, became more efficient in day-to-day operations, and started offering rate and length-of-stay incentives to guests. "We became creative to try to encourage traffic," he said, "and we're still offering some of our 'come-early-stay-late packages.'"

In 2001, CMP Media's Embedded Systems Conference was riding the same wave as other technology shows.

Two years later, the San Francisco-based show was down 30 percent by all measures. According to the Tradeshow Week Data Book 2004,in 2003 there were 272 exhibiting companies in 81,800 net square feet of space, and 10,079 attendees including exhibitor personnel.

CMP went to work to turn things around. Lisa Ostrom, director of CMP's electronic conferences and events program, said that in 2002 the company partnered with Messe Muenchen's Electronica, which attracts about 80,000 attendees and over 3,000 exhibitors every other year in Germany. Together the two companies put on electronicaUSA with the Embedded Systems Conference 2004,held March 29-April 1 in San Francisco. Apparently, CMP's efforts paid off: Pre-audit estimates indicated a 54-percent increase in exhibitors and a 30-percent increase in attendance over 2003. Ostrom said the increases included a 30-percent jump in international participation.

Why did the strategy work? Ostrom said part of it was building on a successful existing European trade fair, and part was expanding the focus of the U.S. event. CMP added more exhibit categories to the show floor, such as sensors, and testing and measurement. Attendance was also increased by expanding the focus of the educational program to include an Emerging Technology Forum and a Power Electronics event; in all, there were more than 300 classes and 20 general sessions offered.

Sales strategies were tightened: CMP identified and targeted exhibitors that attendees most wanted to see. And the event presented a networking opportunity, E-Quorum, that allowed attendees to electronically find exhibitors they were interested in, as well as other attendees who might be using products of interest.

Ten years ago, it was a typical story. In the mid-1990s, big companies at large tradeshows mounted huge exhibit booths that required lots of heavy equipment and lots of labor. General service contractors, like Shepard Exposition Services, charged by the pound and made a solid chunk of change.

Then along came Sept. 11, and life on the tradeshow floor changed forever. "On Sept. 12, I drove to Milwaukee (from his Atlanta office) because the planes weren't flying," remembered Cecil Adams, Shepard's vice president of national operations. "I was surprised that only 20 percent of the exhibitors didn't show up."

That was no cause for optimism though. Later in the month, an 1,800-booth show canceled and, through the rest of the year, Shepard serviced an average 15 percent fewer booths at each of its shows. Tradeshow attendance continued to drop well into 2002. The size of exhibit booths shrunk (as did their weight) as companies tried to cut costs and, as a result, Shepard's annual revenue for 2001 plummeted by 15 percent compared to the year before.

The service contractor battled back with a strategy that called for it to go both small and big at the same time. Shepard opened new operations offices in Knoxville, Tenn.; Birmingham, Ala.; and Charleston, S.C. It opened new national sales offices in Washington, D.C. and Chicago. Bucking conventional wisdom by expanding, rather than shrinking, its sales staff, Shepard began to win more contracts for work at more shows.

Sure, the number of exhibitors at each show was smaller, but the company made up for the lost revenue by servicing more events. In addition, Shepard branched out into services it hadn't offered much of before: things like cleanup, logistics and booth customizing.

So with more services, a beefed-up sales team and more offices to work from, Adams said he saw 12- to 15-percent revenue growth in 2003, and he expects another 12 to 15 percent on top of that in 2004.

Though he feels positive about the company's recent success, and believes the industry as a whole is beginning to pick up, Adams remains skeptical about ever returning to business as usual. "We can't look to do things in the same way," he said, "and I don't want to. We gotta give the customer a perceived return on investment."

Still, Adams wouldn't share what else he's got up his sleeve.

When Ted Grinstead began his installation and dismantle business back in 1972, there was no shortage of exhibitors or display houses happy to use local I&D service providers, even if they rotated to venues across the country. But even by the late '80s, Grinstead could see there was trouble ahead. Exhibit houses had begun to operate nationwide, and expected their I&D firms to do the same.

The change hit his Exhibit Services West hard. The Industry, Calif.-based company had always operated strictly in Southern California, and 85 percent of its work had always come from exhibit houses. Then, an even harder blow struck in 1996: The large automobile manufacturers – whom Exhibit Services West had come to rely on – switched to exhibit service providers who could do the same work for them regardless of where they exhibited, anywhere in the United States.

"When we lost the auto accounts, we lost 30 to 40 percent of the business," recalled Ted's son, Mark Grinstead. Even though the company's Web site still lists logos from five auto companies, including Nissan and Porsche, as clients, every last one is long gone. "It spiraled down from there," Mark Grinstead explained. To keep up, Exhibit Services West offered deeper and deeper discounts to its other clients.

The travel fears associated with Sept. 11 didn't help. Soon, the companies that hired ESW began to feel the crunch too. "A few went bankrupt, unable to pay $5,000 to $10,000, which is a lot for us," Mark Grinstead recalled. Another longtime client is funneling small payments through a collection company.

As if that weren't bad enough, about the same time, shows began leaving Southern California for bigger, more attractive venues in Las Vegas and Orlando.

Mark Grinstead said ESW hung tough. Perhaps more optimistic than others, the family-owned company began focusing on smaller accounts and on individual exhibitors. Now, they often jump at the chance to pick up the slack for bigger labor contractors that need a helping hand at the last minute. "The more relationships we have, the more we'll get," Mark Grinstead said.

The worst is over, he said, with business finally beginning to pick up. Since last fall, more shows have begun to rotate through Southern California facilities. "It's getting better and better," said Grinstead. Most exhibitors have switched to smaller booths, still not willing to invest quite as much as they did before Sept. 11, but at least they're returning to the showfloor.

"There's a light at the end of the tunnel. It's there. It used to be a pinprick, but it's getting bigger," Mark Grinstead said. "Now it's about flashlight-sized."

If you work in the tradeshow industry, nobody has to tell you how hard the advertising and marketing sector was hit by the economic downturn that started in 2001. So, it's no surprise that the Promotional Products Assn. Intl. suffered blows both to its show and the industry it serves. But, according to Director of Expositions Darel Cook, PPAI didn't take the tough times sitting down.

As Cook recalled, 2001 was the last stellar year for the Tradeshow Week 200-ranked PPAI Expo, for manufacturers and distributors of promotional products. PPAI Expo spanned 362,700 net square feet and drew 10,502 professional attendees that year. Then, in 2002, the show lost more than 7 percent of its exhibitors, dropping to 336,900 net sq. ft. and 9,011 professional attendees.

Combined with PPAI's other events, the expo went from bringing the association $6.7 million in revenue in 2001, to $5.6 million in 2003 – a significant loss since that amount represents about half the association's total revenues.

"As part of our strategy, we decided in early 2002 to open up membership to peripheral markets," Cook said. "We reached out to awards, apparel, document management and other sectors." In addition, PPAI tooled with billing, giving potential members six-month trial periods and implementing other ideas that worked to make up for the 8.5-percent loss in members the association saw during the downturn.

As for the show, first was a change in location. "With where the show and the economy were going, we knew Vegas would help us," Cook said. "We started discussions in April of 2002 and got everything done by that summer." After 25 years in Dallas, PPAI Expo opened at Mandalay Bay Resort and Convention Center in January 2003.

In addition, the association began actively working with exhibitors to keep them in the show. It talked vendors into holding rates steady – or in some cases even lowering them – gave exhibitors additional marketing opportunities, and even offered some of them payment plans on space.

The strategy seems to have appealed to attendees the most, with the new location drawing 35 percent more of them, compared with the 2002 show. Although exhibit space sales were down slightly that year, they were back up this past January to 350,500 net sq. ft. – gaining back the 7 percent the show had lost three years before. Revenue projections for events in 2004 stand at $6.9 million.

That's why, for Cook, the outlook is "very encouraging." He predicts 2005 will again see 5- to 7-percent increases in exhibit space, with attendance holding fairly steady, since the market has been more or less saturated.

But PPAI isn't exhaling just yet. It's still looking at changes that can benefit members, including a collocation of its smaller event, PPAI Business Forum & Marketplace, with the Motivation Show this Sept. 16-17 at Chicago's McCormick Place.

If two words have become synonymous with the recent perils faced by the exhibit design and build sector, they're Folio Group. Evoking the failed exhibit design and build conglomerate's name conjures up memories of unbridled expansion, overwhelming costs and outside investors disillusioned by the tradeshow business.

But one company emerged from the Folio debacle with some hope. A month before Folio closed in July 2002, Tom Iacovone and Ray Montague, managers of the Folio Philadelphia office, got wind that the corporation had hired AEG Partners to liquidate its assets. The two pooled their resources with those of Tom Petrella and Robert Iacovone, and hurriedly formed a corporation, Avalon Exhibits, to buy the assets of Folio's Philadelphia operations. They paid about $1.8 million for $2 million of accounts and property, according to Montague.

"Basically," he recalled, "we went out of business as Folio on a Friday and went into business as Avalon the following Monday."

Remarkably, Avalon lost none of its former Folio Philadelphia employees during the transition. Everyone chose to stay – probably because they knew the partners were committed to the business. In June of 1999, Folio had bought the Philadelphia operation – called Display Arts Studios before being folded into Folio – from Montague and Tom Iacovone, childhood friends who had owned it for 13 years, and who'd stayed on to run it after the Folio acquisition.

From 1986 to 2000, the pair grew the business, first as Display Arts, then as Folio Philadelphia, from $1.4 million in annual sales and 14 employees to $20 million in sales and about 120 employees. But 2001's economic downturn and Sept. 11 terrorist attacks converged with what many observers would in hindsight call bad corporate management by Folio, pushing the company into a downward spiral. By the end of 2002, six months after it split off from Folio, Avalon hit its nadir with $14.5 million in annual sales and about 80 employees.

Montague and his partners got out in time to salvage the business – keeping all but one customer. And, he said, freed from a burdensome corporate structure, the team instituted an aggressive sales and marketing strategy. One recently hired account executive brought in $1 million of business this year, according to Montague. Avalon also has developed its graphics department, now doing about 90 percent of that business in-house; a corporate events division, which generated $900,000 in revenue this year; and its rental services, accounting for about half of the exhibit design business.

"We're enjoying being back as an independent company again," he said. The company forecasts $20.4 million in sales for 2004 and Montague believes there is sufficient pent-up demand to keep the business growing in 2005 and beyond.

Until the stock market began its all-too-familiar plunge a few years ago, the San Jose McEnery Convention Center was the envy of many venues. Situated in the heart of California's then-booming Silicon Valley, the facility was the host for countless high-tech industry events, many of them put on by high-flying (and at the time, free-spending) tech firms in the area.

And even beyond the meat-and-potatoes tradeshow and convention business, there were plenty of benefits in those days to being the closest 200,000 square foot convention center to those Silicon Valley firms. "In 2000, we held over 20 Christmas parties for local high-tech companies," said David Bevans, the facility's general manager.

In 2001, almost everything came to a screeching halt. "The slump took people by surprise, but the effect was an immediate decline in the scope of tradeshows here, followed by shrinkage in the number of shows themselves," said Bevans.

And that was before Sept. 11, which hit the facility even harder. After the tech fallout and the terrorist attacks, it wasn't just McEnery Convention Center that was in trouble; it was all of San Jose and most of Northern California. It affected every aspect of the convention center's business. Those 20-plus holiday parties in 2000? Try three in December 2001, Bevans said.

Of course, what really hurt was the loss of so many major tech tradeshows. The long list of shows no longer held at the facility includes Software Development West; ISPCON; Streaming Media California; WCA's Annual Technical Symposium & Business Expo; Society for Information Display Intl. Symposium, Seminar & Exhibition; and the Communications Design Conference.

In the fiscal year ending June 30, 2001 – the last great year – the convention center reported $6.9 million in operating revenue. That dropped to $5.4 million in 2002 and $5 million in 2003.

Bevans and his sales staff went strictly by the book, looking to new markets and looking to diversify.

They began with the religion component of the SMERF market (short for social, military, educational, religious and fraternal) and moved on to consumer shows, sporting events – anything they could think of. They've met with some success: the Religious Conference Management Assn. will hold its RCMA World Conference & Exposition in San Jose in early 2006. That may have already drawn other religious organizations to the city. Other dates left open by tech shows that were canceled are being filled by fencing competitions and regional and state high school volleyball tournaments.

Even the tech world may be slowly making its way back, Bevans said. Photonics West was held at McEnery in late January; the Game Developers Conference was there in late March. "Attendance and exhibitors are increasing," albeit slowly, he said.

Marit Hansen, director of sales and marketing for San Jose Convention & Cultural Facilities, projects the center will end its current fiscal year (on June 30) with $5.9 million in sales.

An encouraging number but, for a publicly run facility, it doesn't tell the whole story.

"While we have filled the majority of dates left open by these groups, we are certainly not recognizing the same level of revenue and hotel room nights that these events provided," Hansen said.

For years, Philadelphia's Pennsylvania Convention Center was synonymous with labor trouble. Show managers realized exhibitors were shying away from their shows because of the hassles – the onerous work rules and countless disputes among the six unions involved. In turn, show managers went looking for other venues. It was a situation that didn't help anybody struggling through an already rough economy.

The worst, however, may be over. A new labor agreement, reached last October, was intended to alleviate conditions that discouraged and intimidated show organizers and exhibitors alike to a point where state employees nearly replaced the union workers. The agreement allows labor calls at any hour, establishes straight-time pay for the first eight hours of work and permits exhibitors in booths smaller than 300 square feet to perform work with non-power tools.

It simplified and eased the old work rules, making life easier – and cheaper – for exhibitors, contractors and show managers. Some shows may already be starting to return to Philadelphia because of this. Advanstar Communications recently announced that its AIIM ON DEMAND would be held at the facility next year.

But a new era of prosperity is still in the future for the unions, said Bill Hamilton, president of Teamsters Local 107 in Philadelphia. In the short term, the agreement has meant less work at lower pay for union workers.

"Although I don't have exact figures on the amount of new business that has come in since the new rules went into effect, the convention center has attracted some new shows," he said. "But the immediate impact is still small."

Jim Gentile, vice president of labor broker Elliott-Lewis, which manages the facility's six unions as one group, said the agreement's provisions liberalizing work rules have indeed led to an 8- to 10-percent reduction in man-hours.

As a result, union workers' earnings are down. The new first-eight-hours-at-straight-time rule means that for Teamsters, for example, a call that used to mean a time-and-a-half rate of $48 per hour is now $38 per hour of straight time, including benefits and employee taxes. The difference is even more pronounced for the higher-skilled trade unions such as carpenters, riggers and stagehands, Gentile said.

However, these savings are meant to be passed along to customers, and the fact that labor disputes – some of which took place on the showfloor and exasperated exhibitors and show managers – are over is encouraging. "There was a lot of tension here in the past, and that wasn't conducive to attracting more business," Hamilton said, adding that Elliott-Lewis has a workable dispute resolution process in place enabling conflicts to be settled after a show.

"The workers gave a lot up," Gentile said. "But the real issue is whether the new labor agreement helps effectuate an expansion of the facility, which will mean better times for labor."