Management Structure: Who Owns the Messe Firms?

The German messes, or tradeshow companies, have perfected the technique for hosting and producing exhibitions, first at home and then abroad, with an uncanny sense of where unmined opportunities lay. There's scarcely a region of the world without a show produced by one of the German organizations.

But who owns them? Who runs them? Most know that government is involved, but to what extent?

In short, German cities and states own most of the messes, but have little or nothing to do with running them. From there, however, it gets more complicated. There is typically a mix of public and private ownership and management elements. Cities and federal states own all the large and most medium-sized exhibition centers. The cities involved usually have a share of between 50 and 100 percent; states, a bit less.

"In general, the city is the bigger partner, and the state is the smaller one," said Harald Koetter, director of public relations and market transparency for AUMA — the Assn. of the German Trade Fair Industry.

At Koelnmesse, for instance, the city of Cologne holds an 80-percent share, while the state, North Rhine-Westfalia, owns nearly 20 percent.

At the same time, exhibition centers run by messes operate as private companies. That means they are subject to the same kind of legal requirements as other for-profit companies, yet they are also able to act as venue owners and operators, and exhibition organizers all at the same time.

In some cases, the messe company is the venue operator and show organizer, but doesn't own the facility itself. Such is the case with Messe Berlin, Messe Friedrichshafen and Messe Stuttgart. In other cases, there are different mixes of ownership and operating responsibility: Messes in Munich and Frankfurt own their land and buildings, Cologne retains hereditary building rights and Messe Berlin leases its land from its federal state.

Whatever equity position they hold, German municipalities and federal states generally hire independent management that reports to a trade fair advisory board, according to Detlef Braun, member of one such board — that of Messe Frankfurt.

In many cases, the messe's management or corporate executive board appoints the advisory board, and the the public owners may be represented on it. Still, the cities and states aren't involved much in the day-to-day management of the messes they own and/or subsidize.

So, even though a trade fair manager, a particular show's industry sector and its trade association work together on individual shows, the public-sector owners of the trade fair corporation hardly ever get involved. In fact, many boards include few — or no — representatives from the government. The city or state typically stays in the background, content to let its market partners make decisions on how to organize "their" events.

Although messes organize the majority of the shows held in their facilities, they also rent space to many independent show organizers, both for-profit and association-owned. In fact, according to Koetter, 25 percent of all shows in Germany with major international components are organized in this manner.

The success of the messes in Germany and worldwide is evidence that this hands-off approach works. The governments leave the experts to run the messes, for the most part, and reap the benefits. The government has effectively renounced significant participation — except financial, of course — in Germany's tradeshow business.

As an example, there are virtually no restrictions on competing with tradeshows in neighboring cities or states. The various German governments recognize that a successful show promotes commerce in the city in which it's held and draws outsiders to the city. It's this indirect contribution to the local economy that has proven a rational basis for the public funding of messes.

The Cologne trade fair company, established in 1922, is a case study in how it all works. Today, Koelnmesse Group is a legally and economically independent business with nearly 600 employees all over the world. It has 10 subsidiaries and representative offices in more than 80 countries available to exhibitors, visitors and the media.

One of its private companies, Koelnmesse GmbH, is responsible for the core business: organizing and conducting about 70 exhibitions at home and abroad in close cooperation with 25 various divisions.

Although the majority shareholders of Koelnmesse GmbH are the city of Cologne and the state of North Rhine-Westphalia, the company receives no funding or subsidies for its investments and operating costs, said Mette Petersen, president and managing director of Koelnmesse and head of its activities in the United States. It also has other private companies within its structure to handle overseas ventures and other business.

Koelnmesse events bring not only a large number of visitors to the region, but also their money. Exhibitors and visitors spend close to €1.5 billion ($2 billion) in the Cologne area annually, and 50,000 jobs are either directly or indirectly connected to Cologne tradeshows.

Generally, government support extends to trade fairs held in other German cities or even overseas. Millions of euros are spent on major exhibitions produced abroad, but it's justified by the new railroads, hotels and exhibition halls that those profits pay for.

The German government doesn't share with the taxpaying public details about trade fair subsidies, mainly to keep the information from competing trade fair organizations, including the numerous private show organizers.

The public is, however, interested in how public funds are invested in exhibition grounds, halls and infrastructure. If the investment pays off quickly, opposition is unlikely, but there can be questions about why the task wasn't left to the private sector.

The fact is that usually the investments don't pay off, at least not in ways that a private investor would find acceptable. But the messes' public partners tend to take the long view. In many cases the state will finance trade fair investments even knowing they might not immediately succeed.

It's not swift commercial success that motivates the government, but its indirect return to hotels, restaurants, transportation, tradeshow contractors, ad agencies and the local retail trade. The model is not unlike that of U.S. governmental entities that own convention centers but do not necessarily expect them to be profit centers.

According to AUMA, trade fairs pump more than €20 billion ($26.8 billion) each year into the German economy, 10 times the revenue the fairs themselves generate, and directly or indirectly provide at least 230,000 jobs.