From EW issue 2: You read the brief history on p22, now Ruth Carter asks the CloserStill chairman Phil Soar about the future and how he thinks the next decade might pan out for the global exhibition industry
Will we see major changes in the ownership of tradeshows?
There will be even more major changes than the last 10 years – only 11 of the UK’s 30 largest events in 2011 are still owned by the same company.
RELX are likely to sell their exhibition assets when they can get a decent price. At the moment they have a Price Earnings Ratio of a very high 28 but would find it hard to get better than 13/14x profits for the tradeshows, which means that selling the tradeshows would reduce the value of the whole business. The only organiser large enough to buy RELX is Informa, but that would create monopoly issues and be a very brave doubling down. So, the likely buyer is a big Private Equity group like Carlyle, CVC or Cinven which would then go on an acquisition spree.
Who else is likely to grow or decline?
It is becoming clear that the mid-size companies with major Private Equity ownership (Tarsus, CloserStill and, to an extent, Clarion) are in the strongest position to expand. They don’t have to report to the stock market. They don’t have to be ‘afraid’ of what the pandemic might mean to uninformed shareholders. They have the funds and can take a five-year view.
Some German Messen have taken big hits and have had big problems in reducing staffing levels. They are likely to start disposing of products bought and launched during their expansion phase.
Comexposium, the other major player not mentioned so far, is in the French equivalent of administration and what happens there is almost impossible to predict. Some close to the story are predicting a breakup.
Mark Shashoua’s Hyve has handled the crisis well to date: raising funds impressively early, and being one of the two big players to benefit from insurance (Emerald being the other). But the level of debt and the complications of being publicly quoted make more major moves (like buying Ascential) difficult. A crystal ball would suggest that Mark takes the business private with a Private Equity partner sometime in the next few years.
Will tradeshows come back strongly?
An unequivocal yes. For most tradeshows, the intangibles are more important than the tangibles. If you think ROI is the only driving factor for a tradeshow, and you keep obsessing about it, you will never understand your business. Humans like meeting other people, they like knowing that there is an industry meeting place in the calendar, they like seeing what other people do, they like travelling away for three or four days, they like touch and feel. These are not ‘tradeshow’ truths. They are human truths.
There are shades of grey. ‘Transactional events’, such as those focusing on giftware or clothing, are different from security events. But the basics still apply.
It has been possible to watch and listen to conference content from most major events worldwide online for nearly 20 years (digital transmission is nothing new). So why do millions still travel to be there?
What makes you so sure that tradeshows will survive?
Above all else rollover rates. We are consistently seeing 90% of exhibitors and delegates saying they are happy to simply be on the floor plan for the next event, whenever it occurs.
We started off assuming that more than 50% of customers would ask for their money back (rather like the airlines). The actual number is around 10%. This seems to confirm that our customers believe in the power of tradeshows. I stress that I am talking about tradeshows here – consumer shows may be rather different given their revenue balance.
We have heard a lot about a ‘pivot to digital’ in the last few months. How significant is this?
Well, the first question to ask, and which seems largely to be forgotten, is ‘why do people go to tradeshows?’ You would not seek to invent a new mouse trap without first asking ‘why do people buy mouse traps?’ And that is the key. Why do people go to tradeshows? Digital alternatives have existed for a long time. All manner of communications businesses, including tradeshow companies, do now and will use digital forms as part of their offering. Some of these will be creative and will be adopted by our industry. The increasing ability to dig down into our exhibitor and visitor data will enhance this. But none of it changes why people like going to tradeshows.
We are already seeing a pullback from the obsession with digital.
(Lord) Stephen Carter was quoted as saying to Morgan Stanley on 1 February 2021: “Virtual exhibitions remain much less effective than physical events, being mainly venues where exhibitors meet existing customers and are relatively ineffective for new product launches, new customer development and new distribution. In Informa’s view, physical exhibitions have substantially more impact in breakthrough and reach with higher quality leads, lead qualification and richness. Informa will host more virtual events and services in 2021 but expects that much of the incremental revenue in this area would fall away on the return of physical events.”
I am not privy to Informa’s strategic thinking, but it seems that the digital obsession may already have reached its high-water mark.
What major trends will we see in the industry?
Consolidation: the shock to smaller organisations, particularly suppliers, has been terrible. The cash flow has just disappeared. When we emerge, some of our brethren will no longer be there. Those that are can only be in a weakened financial state, particularly if the industry, not individual events, takes a couple of years to recover revenue.
There will thus be fear and the need for security. Expect major consolidation with stand builders, registration and AV companies, security and personnel suppliers and, indeed, smaller organisers being combined into fewer entities. I think the landscape will look very different by 2023.
What about employment within the industry?
This really worries me. Some may still be thinking that they are ‘lucky to still have jobs’. I don’t think this is the issue. Exhibitions and events are an attractive industry, but not a particularly well paid one. For a bright 28-year-old in marketing, ops or even sales, we look far less attractive than we did a year ago.
We have been at the very sharp end of a major economic disruption. As activity returns, particularly as we are very London based, opportunities with organisations like Google, Amazon, E-commerce etc or even the public sector will look increasingly attractive. Rather than being grateful they have kept their jobs, my concern is that our best people will look to move on to organisations perceived as far more secure.
On top of that, we have seen our major organisations make up to 30% of staff redundant and put another 40% on furlough. This may have been necessary, but it does not engender love and affection.
And at the senior level there is much food for thought. Major organisers have almost all disposed of many senior as well as junior staff.
If there is no visible effect, then one may ask how our companies were being managed in the past. But we may find that businesses rattle as they try to deal with these losses, with unpredictable consequences. Whether we see a spate of new businesses being formed by these executives is impossible to predict, but it has happened in the past and the sudden arrival of major competitive launches cannot be discounted.
Will life ever be the same again?
I am usually sceptical about pronouncements of this nature. Things do regress to the mean and Chaucer thought the world would never be the same again after the Black Death. Against that, 2020 has probably been the worst year in living memory excluding only 1939 and 1929.
But, yes, things will be pretty much the same again. Hopefully in 2022.
In the end our objectives should remain simple: to create companies which run events, which visitors and exhibitors are eager to attend. To do that we must ensure that our employees are well rewarded, believe in their tasks and enjoy their work. The rest, including the aftermath of Covid, will then look after itself.