Industry's Impact Not Fully Appreciated

Michael Hughes -- Tradeshow Week, 4/11/2005

Lately, there has been much discussion and press coverage about convention centers and the events industry. Amid this discussion, a number of the industry's vital attributes have been overlooked. In particular, the recent growth and total size and value of convention centers and the exhibition industry to the North American economy have not been fully appreciated.

First on the list of overlooked industry attributes is the growth of conventions and exhibitions. The boom for most of the 1980s and 1990s triggered the building and expansion of most of the major convention centers open today. Since 2002, the events industry has grown at a steady, moderate rate. For 2005, Tradeshow Week counts 4,826 North American trade exhibitions and consumer shows of at least 5,000 net square feet. This is up from 4,778 last year and 4,578 in 2003. That's a 5.4-percent growth rate over the past two years.

Focusing only on conventions and business-to-business exhibitions, in 2004 our studies indicated that total net square footage increased by 1.5 percent, the number of exhibitors grew by 1.6 percent and total attendance rose by 2.7 percent. This was on top of 3.6-percent growth in attendance in 2003. These findings suggest that corporations are increasing their travel budgets, a good sign for shows and cities alike.

Also missed in the recent discussion is the sheer scope and economic impact of the North American convention and exhibition industry. Some key statistics and estimates illuminate this impact:

• TSW estimates that more than 40 million attendees participated in conventions and B-to-B exhibitions in 2004. The Intl. Assn. of Convention & Visitor Bureaus found that the average attendee generated an economic impact of $1,391 per visit last year. That represents $55.6 billion in direct national economic impact. And this estimate doesn't include airfare, so the impact with that included is at least 25 percent greater. It's important to note that this estimate also doesn't include the impact from the tens of thousands of smaller conferences and meetings held in convention centers.
• The average convention center employs about 40 people. That equates to about 16,560 jobs in the United States and Canada and a $1.2 billion annual payroll, assuming the average salary is in the $75,000 range, with benefits included. Of course, the wider convention, events and hotel industry employs tens of thousands more people.
• The TSW Data Book estimates there are 1.2 million exhibiting companies at all shows. But while some exhibitors go to dozens of shows annually, thousands only participate in one. So by a conservative estimate, it's safe to say there are likely 200,000 unique organizations that exhibit at least once a year. Again taking the conservative view, let's say the average sales impact from exhibiting annually is $100,000 (even if for scores of companies the impact from shows is in the tens of millions of dollars). Combining these figures suggests the total sales that result from exhibitions would be well over $20 billion annually, if not many times larger than that. Exhibitor spending alone on booths, exhibit space, event services and travel and entertainment is estimated to be well over $10 billion per year.
• And don't overlook the value of consumer shows, which drive billions in sales for many small businesses. Granted, this may not be new spending for a community, but consumer shows surely "make market" for products and services throughout local economies.

It's critical to note that conventions, exhibitions and their service providers are also in the professional education business. This is often overlooked in the press. The amount of professional education that takes place in convention centers is second only to our college and university system.

According to TSW surveys, about half of the more than 40 million attendees that go to B-to-B conventions and exhibitions pay for some type of conference or educational program associated with events. So tens of millions of adults receive some type of learning annually in convention centers and hotel exhibit halls. By comparison, according to the U.S. Census Bureau, about 17.5 million students were enrolled at U.S. colleges and universities in 2000, including graduate students. In short, convention centers are the classrooms of the adult, post-college population.

Furthermore, it could be argued that the collective value to society of the education that doctors and nurses receive at the hundreds of medical conventions held in convention centers is worth the public investment in new and expanded venues alone. The medical education, along with the learning that takes place at other industry events, make the economy more efficient and raise living standards.

Moreover, the informal networking at events is nearly impossible to quantify financially, but it's clearly substantial. Networking provides the primary value of many events anyway.

It's also important to consider the fact that municipalities invest in convention centers primarily to serve the national association industry with its rotating conventions and conferences that bring new spending to cities. Most associations are not-for-profit (as are convention centers). The public's investment in venues primarily benefits associations that work to enhance their membership through education, information and commerce. Associations help enhance personal and organizational efficiency, which also translates into rising living standards.

So in one sense, the value of convention center investment is real and quantifiable. In another, the impact is so vast that it's nearly incalculable.

Still, municipal convention centers are expensive to build and the public has every right to ask if the investment is worth it. A new convention center tends to cost between $200 million and $700 million. A major expansion can range from $50 million to $100 million or more. In nearly all cases, the investment is worth it, although the ROI may take a number of years to be realized.

Today a number of convention center projects, including a few high-profile venues in major cities, are under-performing according to their original feasibility plans. One reason is that some venue developments have been oversold to their communities, raising initial expectations that have been hard to fulfill. Complicating matters is the reaction to increased competition has been primarily to add additional exhibit and meeting space, leading to increased venue discounting.

Still, the stakes are high for cities that want to win their share of the event industry's substantial economic impact. And expense account-wielding "business tourists" are simply not driven in bulk to cities by any other means.

The challenge to the industry is partly one of public relations. The problem is that this is a sleeping giant of an industry that doesn't promote its own value to the economy or our communities very effectively. Maybe tradeshows and convention centers are so large, we forget that the general public, even people who go to many conventions and conferences a year, never think about the economic impact they have.

But the industry has a captive audience of tens of millions of leaders, executives and managers. Communicating the size, scope and economic value of the events they attend — and the municipal venues they help fund — should be a first step.