What to Do in an Economic Slowdown

Now that we are two years into the housing slowdown, and nine months into the credit crisis, what has been the impact on events and exhibitions?

Anecdotally, we've heard of a slowdown in corporate meetings, but the convention and exhibition sector is holding up pretty well. According to the TSW Quarterly Report for the fourth quarter of 2007, net square footage expanded by 4.5 percent and attendance grew by 3.6 percent. A preliminary analysis of 23 shows held so far this year has found 3.8-percent growth in net square footage and very healthy – almost surprising – 7.4-percent growth in attendance.

According to Carat, a media buying company, spending on U.S. advertising is forecast to grow 3.8 percent in 2008.

In December, I predicted that “most of today's headline economic concerns should bypass the events industry.” I still feel that way, mainly because the challenging economic news has been relatively contained to the home building and banking sectors.

In a way, there are two economies. One is based on high finance and complex market issues, and the other more on “nuts and bolts,” but few industries are as straightforward as tradeshows. Also, convention and exhibition attendees have higher incomes than the national average and have likely been less reliant on sub-prime borrowing.

In times like these, there is a flight to quality marketing mediums such as major association conventions. No other form of business communication gets marketers up close with buyers the way tradeshows do. In fact, the diverse events industry may benefit from the slowing economy as companies need to get their messages out and meet with buyers.

Here's more good news: The Federal Reserve has aggressively lowered interest rates; and the unemployment rate stood at 4.8 percent in February, down from 5 percent in December.

Still, there is nervousness throughout the industry. Based on recent qualitative research, senior association executives with events are concerned about exhibitors and attendees under pressure to justify costs and the potential effect of the U.S. economy on annual event attendance.

The challenge for the economy and for exhibitions is fear of the unknown and the worry that companies will hold off on spending and investment. There's a crisis of confidence. While conventions and exhibitions seem to be strong, there are risks.

Here is what show producers should do:

• When communicating with exhibitors who are on the fence, focus on the fact that companies are not just exhibiting for today, but to drive sales tomorrow. In fact, according to a 2007 TSW survey of exhibitors, 41 percent said they receive the bulk of their show-related sales more than a year after the event. Exhibitors who cut back now will impact their sales in one to two years when the economy is stronger.
• Attendance may dip this year, but attendee quality should be strong. After the 2001-2002 slowdown, TSW surveys indicated that both show producers and exhibitors felt attendee quality increased as senior executives used shows and conferences to stay connected. If you can qualify this C-level executive trend to stay connected at your show in 2002-2003 with hard numbers – or via an analysis of your pre-registration list for 2008 – you might keep a few fence-sitting exhibitors.
• With corporate meetings slowing, hotels, venues and vendors are focusing on their bread-and-butter convention and tradeshow businesses. Now may be a good time to have discussions with service partners
• Other exhibitor communications should include providing on-site cost savings advice, explaining the creative added value that you're providing this year, highlighting recent exhibitor success stories and testimonials – and that now is the time to support the industry. Many exhibitors feel that they co-own events and have a stake in the show's success. It's time to speak to this sentiment.
• And don't forget your attendees. What do buyers need this year to ensure they come to your show? If you can't answer that, find out ASAP.

To get a sense of how shows in certain sectors may perform in 2008, TSW Research looked at events in major industry sectors that were ranked in the 2002 TSW 200. Only shows held in both 2001 and 2002 in sectors with at least four shows reporting were included.

Shows in sectors where the end users are mainly consumers did better than primarily business enterprise shows. In terms of net square footage growth, the top three sectors were beauty and hair care with 7.5-percent growth, home furnishings and interior design (1.4 percent), and health care and medical (1.1 percent).

The same three sectors were also the top attendance performers in 2002, but with different rankings. The health care and medical sector was No. 1 with 6.4-percent growth, followed by beauty and hair care with a 5.7-percent increase. Home furnishings and interior design was third with 4.8-percent attendance expansion.

Today's worry is that with a prolonged housing downturn and a softening labor market, consumers will be tapped out in terms of spending power. This is the wild card. But businesses may save the economy this time. Corporations are relatively lean in terms of staff and they know that they need to invest in technology to stay competitive.

The showfloor should remain the calm in the storm. Exhibitors and their bosses may simply need to be reassured. The theme for 2008 should be: The more communication, the better.

Michael Hughes is associate publisher and director of research services for Tradeshow Week. He can be reached at mhughes@reedbusiness.com.