Five months into his six-month tenure as EW’s guest editor, and as organizers finalize their 2022 budgets, Paul woodward takes stock of the current state of the world and the state of the industry based on discussions he has had with leaders around the world.
These economists have a way of ruining your day. Are the markets on the rise? âDead cat’s rebound,â they say. Are your wages increasing? âInflation,â they chuckle, or worse yet, âstagflationâ. No wonder some CEOs in the exhibition world have banned providers of so-called gloomy science from the conferencing platforms they run.
So we’ll do our best to leave the Dr. Doom Halloween mask in the drawer. But, before we continue, let’s dismiss the less encouraging news. After rebounding strongly from the rough times of 2020 in the first half of this year, most major economies are slowing down. It was planned. But many are slowing down a little more than expected and the IMF has lowered its forecast for global growth. Supply chain snafus (what Economist the magazine calls “the economy of scarcity”) combined with continued disruptions of the delta variants, take away the luster of growth.
This scarcity economy, combined with cash flow from oil and gas producers, and tight labor markets (we won’t be going down that particular rabbit hole today) combine to drive inflation up. Even in Germany, where they are allergic to it, there is talk of 5%. It is hardly time to bring wheelbarrows of euros to bakers, and economists are generally convinced that this inflationary bubble will be short-lived. But the world has gotten used to it being well under control. It’s a little scary and it shakes business confidence a bit.
So far so disturbing. But what about global trade, an essential engine of international trade fairs which are at the heart of our concerns here at Exhibition world? Here is some good news. The World Trade Organization recently updated its forecast and now expects merchandise trade to resume its pre-pandemic path by the end of 2022. This is an improvement substantial compared to the previous forecast in July and definitely good news for our industry.
So what does all of this mean for the exhibition world? Most of the organizers around the world are finalizing their budgets for next year. Everyone has a very sharp eye on the crystal ball. First, I would like to echo what Phil Soar, currently guest editor of our sister publication Exposure News recently told UK industry: ‘The signs are very good’. It seems clear that a lot of our clients want to take advantage of this rebound in trading. Exhibitors are keen to return to events in person where they can. Some of the major corporate exhibitors remain constrained by ultra-cautious travel policies, but these are starting to clear up.
Visitors were more likely to return than exhibitors in some cases. This led to reports of higher satisfaction levels among exhibitors which may have been more prominent at local events. At the same time, some visitors said they were disappointed not to see all the key players in their industry. This is starting to change for the better.
You have to be careful not to confuse âgood signsâ with âback to normalâ. In several conversations this week, top industry executives have told me that their managers are putting budgets on the table that are still 25-35% down from 2019. Depending on location in the world where one company is weighted and the end of the budget dispute, a number of them hope they will be able to report a decline of âonlyâ 2022 in 2022 compared to 2019. That is. Much better than anyone has been able to handle in 2020 or this year, but that clearly means the road back is still has some potholes that need to be fixed. However, booking change levels for 2022 suggest that in markets that are fully open to travel and without onerous restrictions on event management, we could revert to pre-pandemic fair sizes by the end of the year. next year.
The fact that many fairs are likely to be smaller for another year or so and exhibitors have said they are satisfied with some aspects of these smaller fairs presents an interesting challenge for organizers. The economics of our industry clearly means that the margins of scale have huge advantages. The bigger is really the better for those who are in counting houses. There are clearly ways to meet the needs of smaller, more focused events without having to give up scale. But to do this satisfactorily requires some sophisticated footwork on the part of the show directors.
We still talk a lot about digital, even if the focus among the organizers we talk to is rather to integrate technology with face-to-face events in order to enrich data flows. The exhibition side of the trade events world has largely dismissed pure virtual events as a side show. The focus is increasingly on improving the income that this can generate. As Jean-FranÃ§ois Quentin de Constellar recently told us, the closures imposed by the pandemic have forced the generation of income from digital, which was previously only an aspiration for most of the organizers. Part of that was, of course, âmandatory revenueâ where event repositories were transferred to digital products. Many, if not most, customers will not choose to repeat these expenses. Quentin, however, believes that a 20% increase over revenue from previous events is an achievable goal. Given the levels of investment required, industry CFOs are hopeful.
Which brings me to the margins. Quentin described the industry’s pre-pandemic exposure margins as “juicy.” In the ongoing budget discussions, there’s no doubt that a key focus is how juicy they could be in the future. Not only are we facing significant investments in digital technologies supported by still uncertain revenue streams. We are also facing the increased costs driven by inflation that we were talking about at the beginning of this article. Suppliers are under enormous pressure and, already operating at very low margins, they will not be able to absorb a large part of the costs. How many organizers will have the courage to substantially increase their prices next year?
Venues represent the highest cost for most events. A few places offer either reductions on the rental of rooms or, as in Hong Kong, government subsidies. But it certainly won’t be a universal panacea for margin issues.
Most site managers, even when buildings are owned by the government, are responsible for making an operating profit. And, in some places around the world, we’re actually hearing about big increases in theater rents.
As we’ve said before, all of this is superimposed on continued uncertainty as to exactly how the pandemic is unfolding.
China is cited in some quarters as an example of aggressive management towards “zero Covid”. And yet we have just learned that organizers in Shenzhen have been informed that they too are expected to postpone events scheduled for October and November, following the example set by Shanghai and several other cities in early fall.
Budgets written in pencil tend to be frowned upon, but many in the event world will have little choice as these crystal balls remain quite murky going into 2022.