Exhibit Houses: Nowhere to Go But Up

By Heidi Genoist -- Tradeshow Week, 4/11/2005

Pity the poor exhibit designers and builders. Long after tradeshow organizers started seeing up-ticks in exhibitors and attendance, and general contractors began reaping the rewards of cost cuts, exhibit houses were still in the doldrums.

Witness the tradeshow pair of Viad subsidiaries. While GES Exposition Services posted a $41.4 million increase in revenue and a $3.1 million increase in operating income in 2004 over 2003, sister company Exhibitgroup/Giltspur saw revenue slip $40.6 million and posted an operating loss of $9.2 million, down from a net income of $1.1 million in 2003.

And E/G was lucky compared to some. In February 2004, Exhibit Dynamics filed for bankruptcy, owing one creditor $21.9 million. The following month, Contempo Design began closing offices and laying off staff.

Michael Yag, president and CEO of Access TCA, said a fellow exhibit house executive at last month's Exhibitor Show in Las Vegas told him he'd been keeping track, and more than 150 companies in their sector had gone out of business.

But as 2005 unfolds, Sparks Exhibits & Environments may offer an example of things to come. In 2003, the company owned by Marlton Technologies saw revenue plunge 9 percent compared to 2002, and it warned investors to expect more of the same in 2004. However, with 2004 behind him, Marlton Chairman Jeffrey K. Harrow was pleased to report a 10-percent increase in revenue compared with 2003. As for new business, Sparks added 27 customers or divisions of existing customers.

Of course, some of that had to do with Marlton's August acquisition of exhibit manufacturer Exhibit Crafts and shipping and installation provider Exposition Services. Coming off that purchase, Marlton this year snatched up Showtime Enterprises, which had filed for bankruptcy in January.

"We've been aggressively going after new business and new opportunities, and we're pleased with those results," said Harrow, who added that 13 of his top 20 customers spent more money in 2004 than in 2003.

Closely held companies told similar stories.

"In 2004, our sales were up to a new level," said Yag. "We exceeded our previous year's numbers by 6 or 7 percent."

Results for 2005 so far are even more remarkable, with companies claiming huge increases in first-quarter sales.

Classic Exhibits Vice President of Sales Kevin Carty said the 15-year-old company, which does everything but pure custom designs, is back on a growth pattern of 20 to 25 percent per year, after hunkering down and focusing on operating efficiency for the last two years.

"Nobody expects it to be again like it was in '97 to '99, but when things came back, we were prepared with a whole new product line we had been developing during the downturn," Carty said.

He added that modular and portable manufacturers like Classic benefited from the problems faced by custom houses during the downturn.

"People have half, or a quarter, of the tradeshow budget they had before," he explained. "We can supply a corporate look, but not at a custom price."

But Simon Perutz, president of Nimlok (whose name historically was synonymous with pop-up displays, but now touts custom modular designs), said the distinction between custom and system is disappearing. Gesturing around Nimlok's booth at Exhibitor Show, he said, "Everything you see here was built using a system, but it has a custom look."

Nimlok, which moves product manufactured in Chicago through distributors around the world, has adopted a unified branding strategy. It plans to have 60 distributors branded Nimlok selling its products within five years.

With good reason. Nimlok's branded partners from Orlando to Orange County, Calif., reported first-quarter '05 sales increases of anywhere from 29 to 66 percent, compared with the same period in '04.

Its New York City partner said its business is now divided evenly between rental and purchase, compared with 70-percent rental and 30-percent purchase in 2003.

Even the custom business is strong for some, although nobody's counting on custom builds alone to keep them afloat anymore. In her recent book, "Trade Show and Event Marketing," consultant Ruth P. Stevens tells corporate event marketers that a custom booth should last them five to seven years.

That kind of thinking is partly what forced exhibit houses to diversify.

Michael Westcott, vice president of marketing for George P. Johnson, said: "Every custom house will have to get into modular to survive. Display houses are full service. Service companies are doing exhibits. We've diversified in terms of event type ... Everybody's trying to move up the food chain."

Harrow said Sparks is doing more mobile and private events, marketing, and full integration of services than it has in the past.

One goal of Marlton's acquisition strategy has been to assemble a "diverse and talented group of people," said Harold Jensen, executive vice president of Sparks and co-founder of Showtime. Even before Marlton bought his company, Jensen said, Showtime was shopping around for people with marketing backgrounds in different industries.

Yag said M2 Creative, a company he co-founded in 1992 and has since rolled into Access, has helped provide services like in-booth presentations, pre-show promotions, video production, Web invites, sponsorship follow-ups — "other value-added stuff besides just the exhibit program."

Several companies said museum and retail work has also helped complement their tradeshow business.

But, Harrow warned, "There are some touting services that I'm not sure they have the capabilities to handle."

The shakeout will continue, observers predict, as corporate exhibitors look to their booth designers for other services, then make decisions about whether they're getting their money's worth. Most believe there is enough demand to keep those exhibit houses still standing busy through 2005 and beyond.

Westcott — who each year leads GPJ's collaboration with Meeting Professionals Intl. on an event trends study — said, "Overall event spend continues to rise, but tradeshow spend within that is shrinking."

Indeed, according to Yag, Access' biggest growth area lately has been in creative services, not new exhibit construction.

Harrow expects to see large clients consolidate other elements of event marketing into their tradeshow programs, with attention to consistent branding internationally — giving an edge to global event marketing firms that can handle jobs of scale.

"The industry won't explode," he noted, "but from our perspective, it will get more interesting."