According to the US-based Centre for Exhibition Industry Research (CEIR), exhibition organisers are experiencing varied recovery paths from the global financial crisis, with the industry’s performance throughout North America in 2013 changing significantly depending on sector.
Success in the industrial/heavy machinery, finished business output and food sectors was offset by decline in government and education sectors as budget cuts hit training, education and travel.
Perhaps the strangest departure from predicted outcomes arose in the building, construction, home and repair business, which declined by 1.2 per cent despite strong growth in the residential construction sector.
Here, in an extract from the 2014 CEIR Index Report, the group’s economists explore the current state of North America’s exhibition industry and its likely performance in years to come.
The current state of the exhibition industry
America’s exhibition industry performance varied throughout 2013. The total CEIR index posted modest gains of 1.5 per cent year-on-year for each of the first two quarters. Despite a pickup in economic growth, it rose by just 0.4 per cent in the third quarter. This figure rebounded to three per cent in the fourth, the highest increase since the first quarter of 2012. The overall CEIR index increased by a single per cent for 2013 as a whole, slightly below the 1.1 per cent forecast in the CEIR Index Report published last year.
Net square metres grew 0.8 per cent, exhibitor numbers climbed 0.5 per cent, the number of attendees increased two per cent and real revenues grew 0.9 per cent. Growth in attendees outpaced other metrics, continuing a strong trend since the end of the recession in 2009. Last year’s attendees, numbered at 68 million, finally matched the peak figure realised in 2007. This bodes well for coming years, since CEIR claims it is a leading indicator of the exhibition industry.
For 2013, the overall CEIR index was 103.5 (2009 =100), still about nine per cent lower than the pre-recession peak of 113.7 registered in 2007. Real revenues fell the most over the recession. Despite three consecutive years of recovery, in 2013 real revenues remained about 13.4 per cent below their 2007 peak.
Exhibition performance still varies by industry. Different sectors respond to underlying macroeconomic and other business trends differently. In 2013, the best performing sector was Industrial/Heavy Machinery and Finished Business Outputs (ID), where the index surged by an impressive 6.9 per cent. After suffering substantial losses during the recession, the ID sector was rebounding by the second half of 2010. It grew by 9.6 per cent in 2011 and 1.4 per cent in 2012.
During 2013, metal products and machinery producers benefited from substantial increases in residential construction (up 12.1 per cent) and vehicle sales (up 7.3 per cent). Strong showings were evident for trade shows in iron, steel and other metal technologies. The Food sector (FD) was also up strongly, by 5.0 per cent, in 2013. It outperformed its underlying macroeconomic factors.
At the other end of the spectrum, the weakest sector was Government (GV), where the index declined by 6.1 per cent. Government at all levels and functions faced widespread cuts in budgets, especially for training, education and travel. Suffering similar constraints as the GV sector, the Education (ED) sector declined by 0.8 per cent.
The biggest surprise for the year was a contraction in the Building, Construction, Home and Repair (HM) business, which declined 1.2 per cent even though residential construction grew strongly during the year. Medical and Health Care (MD) is the single largest sector, comprising 17.3 per cent of the total exhibition industry, and its continued weakness, declining by 0.4 per cent in 2013,is proving to be a significant drag on the overall CEIR index.
Exhibition industry prospects
Though it has not been spectacular, the steady recovery of exhibitions since 2012 indicates the recession largely is behind the industry. On the other hand, it remains to be seen if exhibitions can capitalise on higher economic growth to post more convincing expansion on revenue.
In 2013, business in many sectors not only is lower than 2007, it still remains lower than in 2000. A definitive reversal of this trend will require not only stronger economic growth but improved face-to-face meeting opportunities and new products and technologies. For example, an electronics company may unveil a new cell phone, while an auto-part manufacturer might unveil a new type of engine or motor.
Moreover, the exhibition industry will continue to be affected by cuts to federal spending, especially federal aid to state and local governments, which still face austere budgets for the most part. Almost all major exhibition centres are owned by municipalities. While hotel occupancy taxes frequently are used to retire construction bond debt, many centres experience operating losses that are underwritten by the municipality. Periodically, these centres also ask for funds to undertake system upgrades, replacements or maintenance. Cities reducing essential services may conclude they can no longer subsidise facility maintenance.
The result could be deterioration in the physical plant and service levels, which could hurt the exhibitions held in that facility. On the positive side, the supply of exhibition space exceeds demand. As facilities deteriorate or fail to be upgraded, they no longer can compete for national business and the supply-demand imbalance will begin to normalise.
Economic and job growth should continue to encourage expansion. The overall CEIR index is forecast to grow modestly in 2014 by two per cent and then to build momentum, to grow just slightly below three per cent in both 2015 and 2016. This would represent the fastest sustained growth in the history of the CEIR index.
Attendance, a leading indicator for exhibitions, rose in 2013 for most sectors. In the last 11 years, total attendance has been highly correlated with overall non-farm payroll employment. During the period 2010–2013, attendance rose even faster than non-farm payroll employment. As employment grows over the next three years, after potential setbacks from sequestration, attendance should pace the exhibition industry.
Sector by sector, ID should continue to benefit from a rebound of equipment investment and residential construction, and the ID exhibitions index is expected to lead the sectors again with 4.4 per cent growth. FN saw a disappointing 2013, but should bounce back in 2014 to grow about 3.5 per cent.
Similarly, IT should pick up the pace and gain about 3.5 per cent, paced by new products and new growth in business investment. Consumer related exhibitions (CG, CS and ST) will continue to benefit from strengthening household expenditure and are projected to increase by around three per cent. Conversely, GV and ED exhibitions will remain in the doldrums as government budgets remain tight especially for training, education and travel.
Furthermore, government employment is likely to decrease over the coming years, shrinking the potential attendee prospects for shows that cater to government services.
Unlike just about every other sector in the economy, the number of jobs in the medical and health care industries did not decline during the recession. This makes the relative stagnation of the medical and health care exhibitions puzzling, but it could be a symptom of cost-cutting by doctors, hospitals and other service providers. CEIR expects the MD sector to gain a modest 0.9 per cent in 2014 but gain traction in 2015 (2.2 per cent) and 2016 (1.6 per cent) as medical and health care expenditures rise.
So in summary, CEIR expects the exhibition industry to gain momentum, rising by slightly below three per cent, in both 2015 and 2016 as the macro economy strengthens; the fastest sustained growth in the history of its index report.
The biggest disappointment of 2013 was a steep fall in growth of business investment. Real non-residential construction growth slowed to 2.8 per cent in 2013 compared to 12.7 per cent in 2012, while equipment investment expanded by a moderate 3.1 per cent from 7.6 per cent a year earlier. Given continued weakness in the economies of major US trading partners in Asia and Europe, it is not surprising export growth slowed to 2.7 per cent from 3.5 per cent in 2012.
However import growth was weaker still at 1.4 per cent compared to 2.2 per cent in 2012.
National economic performance aside, CEIR president and CEO Brian Casey (pictured) said attendance trends in this year’s findings paint the future performance of the US exhibition industry in a rosier light.
“The information contained in this latest report was eye opening and reassuring for me,” he says. “Predicting the economy can be like predicting the weather, but our economists really got it right, and it instils even greater confidence that they have a strong pulse on where we are headed.
“An improving economy bodes well for all of us that work in this industry and the millions of people that participate and benefit from our exhibitions.”
This was first published in issue 2/4 of EW. Any comments? Email Annie Byrne
