Associations Hone Show Skills

Their tradeshows may have held steadier than those of for-profit firms, but associations have learned their own lessons from the economic downturn of the last few years. As they prepare to take advantage of the upturn, association-show managers are looking for ways to apply these lessons and avoid losing ground in the future.

A study recently conducted by the American Society of Assn. Executives, the Operating Ratio Report, indicates that the net profitability of associations has fallen by 6.2 percent since 1999.

Still, few association-owned tradeshows went out of business during the downturn, while for-profit shows closed by the dozens. According to Tradeshow Week research, associations still own and operate 50.7 percent of U.S. and Canadian tradeshows, and associations own another 4.2 percent whose management they outsource. And a quick look at the recently released TSW 200 illustrates associations' hold on the market, with six of the top 10 largest tradeshows being association-owned, and four of those six being association-operated as well.

Does this mean associations are recession-proof?

"I wish that were the case," said Peter Eelman, vice president of exhibitions for AMT-the Assn. for Manufacturing Technology, which produces the Intl. Manufacturing Technology Show. "But a lot of associations fund their nut off their tradeshow. There is still plenty of pressure – it's different than stockholder pressure, but it's still pressure."

In fact, it's a central part of Gary Shapiro's strategy to use for-profit techniques with his association's tradeshow. Shapiro, president and CEO of the Consumer Electronics Assn., said Intl. CES is run like a for-profit "in terms of our flexibility as a management team and our focus on rewards for staff. All staff is on incentive compensation, tied to our results."

Combined with favorable market conditions, the strategy has proven effective. Intl. CES has been the leading annual show for three years straight, with its 2003 show topping the TSW 200 again this year. And according to just-released audited statistics, the 2004 event grew another 14 percent in net square footage and 13 percent in attendance over last year.

At the other end of the spectrum, in terms of management styles, is Mary Pat Heftman, who produces the annual Natl. Restaurant Assn. Restaurant Hotel-Motel Show. Heftman said she's so focused on serving members through the show that sometimes she forgets "there are for-profit companies out there that are all about bottom line."

In her view, trade associations exist for the benefit of members. Although it's tempting to cut back on amenities like expensive keynote speakers, raise space rates and make other moves to increase profits during a downturn, that approach would go against the restaurant association's philosophy. "We weren't immune to the downturn," Heftman said. "But we've been around 85 years, and I've been here 13 years. We're pretty adroit in dealing with swings."

Although it remains in the top 30 of the TSW 200, NRARHMS lost about 30,000 net sq. ft. per year from 2001 to 2003. But the Natl. Restaurant Assn. refused to raise space rates during the downturn.

While nobody aims to lose money, one benefit of association ownership is that tradeshows are not the only source of revenue. For the 628 associations surveyed for ASAE's Operating Ratio Report, membership dues are the largest single source of revenue, making up about one-third of their income. Meetings and conventions, tradeshows, educational programming and publication sales, combined, account for about one-fourth of total association revenue.

On the other hand, meetings and conventions account for 13 percent of an association's total costs, behind personnel-related expenses (27 percent), administrative expenses (27 percent), and publications and educational programming combined (19 percent). Seen this way, meetings and conventions appear to be generally cost-effective.

Amy Ledoux, ASAE's acting director of expositions, said associations count on events for that extra revenue. She said they won't stop doing them any time soon "because other revenue keeps membership dues from going up, and the annual meeting and tradeshow brings in money to support the other products and services the organization provides."

AMT's Eelman said another advantage to working for an association-owned and -operated show is proximity to exhibitors. "We can discuss exhibiting options, moves, downsizes. We're able to be more understanding of what people need and this keeps them around for the long term," he said.

Ledoux feels many association-show managers learned valuable lessons about exhibition planning from their experiences of the last few years. Like for-profits, associations didn't have to sell their shows before the downturn; it was just a rebooking process. But having been put through dramatic marketing budget cutbacks, exhibitors have learned to evaluate shows strictly and objectively.

For one thing, the virtues of association membership and industry support have lost some of their meaning. Kim Kee, president of Kee Consulting, said associations often take it for granted that member companies will continue exhibiting because, as the associations like to say, "It's good for the industry." But that's not true anymore.

"We're smarter than that. We have to think about our investment. Supporting the industry means putting our marketing dollars where we'll get a return and be able to keep thriving," said Kee, who spent seven years managing MCI's exhibits, four years managing Hughes Communications Networks' and now does the job as an independent consultant.

Still, exhibitors do recognize the advantages of association ownership.

Sherry Satterwhite, director of global marketing and communications for security-system manufacturer NICE, said she was burned so badly by the proliferation of for-profit shows in her industry following Sept. 11, that now she will participate only in shows with association backing.

Satterwhite said she finds managers of association-owned-or-sponsored shows are better at soliciting and listening to exhibitor input.