VSS Predicts Increases In Tradeshow Spending

Turnaround expected to continue through '04, pick up in later years

By Margo McCall -- Tradeshow Week, 8/16/2004

Spending on tradeshows is expected to increase by 4.1 percent over the next five years, more than triple the compound annual growth rate achieved between 1998 and 2003, according to Veronis Suhler Stevenson's annual communications industry forecast.

But don't expect those healthy growth rates to arrive overnight, since the industry remains in recovery mode. Total spending on tradeshows suffered a 3.2-percent drop in 2001 and a 1.2-percent decline in 2002, and spending increased just 1.5 percent last year.

Despite that, in recent years, trade events have fared better than their business-to-business magazine counterparts. "I think tradeshows have performed very well in the past few years, certainly compared to print," said Hal Greenberg, VSS managing director. "The advantage of a tradeshow is it's very targeted."

Because of that, events are expected to remain a valid marketing medium well into the future. This year, according to VSS, spending on tradeshow exhibit space, sponsorships and advertising is expected to grow by 2.4 percent. The New York-based media merchant bank projects spending increases of about 4 percent in both 2005 and 2006 and about 5 percent in 2007 and 2008.

An increase in business travel during the first half of this year is being credited for the improved outlook. In addition, industry growth should be helped by an abundance of strong shows and vitality in the health care, and sporting goods and recreation sectors. "While there was an overabundance of events prior to the recession, the third- and fourth-tier shows have been forced out, leading to a more stable industry that is poised for growth," the VSS report noted.

Still, not all is sweetness and light. The perceived high cost of traveling and exhibiting is blamed for exhibit space declining 0.4 percent to 366 million net square feet in 2003, slightly less than the 1-percent drop in 2002 and the 1.4-percent drop in 2001.

When price hikes were factored in, spending on exhibit space increased 1.6 percent to $6.7 billion in 2003, according to VSS. The average price per square foot increased 2 percent to $18.41.

Organizers have reacted to exhibitors' cost concerns by offering full-service packages and by rolling out regional, traveling and invitation-only shows. It's also become common practice to work with customers to help determine whether exhibit space, advertising or a sponsorship is the best route, according to VSS. Value-added services, such as private networking events, are also increasingly being offered.

Organizers have also been hard at work trying to staunch attendance losses. VSS credits increased pre-event marketing and stronger content packages for helping the industry recover some of those losses. After declining by 4.5 percent in 2001 and 2.5 percent in 2002, professional attendance rose by 3.6 percent in 2003, VSS said.

Greenberg said he expects even more emphasis on driving attendance in years to come. "At the end of the day, it's really the quality of the attendance that will drive the growth in net square feet and exhibitors. You can't have flat-to-down attendance for any period of time, because the exhibitor base wants qualified attendance and an increase in the quality or the number of attendees."

In the B-to-B industry overall, said Greenberg, there's been an increase in the number of options that various media outlets offer to customers. "It's an ever-changing world in terms of how to reach the subscriber or reader or, in tradeshows' case, the attendees."

VSS — whose private-equity arm backs Canon Communications and Hanley Wood — predicts that the overall B-to-B media market will continue to recover this year as corporations gain confidence in the economic recovery and increase spending on advertising and tradeshows.

In particular, magazines specializing in business, health care and technology are forecast to help drive a 1.3-percent spending increase on advertising this year, according to the report. If the VSS forecast turns out to be correct, 2004 will mark the first time in four years that B-to-B media spending increased.