In her latest feature, EN guest editor Ruth Carter speaks to Phil Soar about the future.
Phil Soar, chairman of CloserStill Group and Nineteen Events Group, is not new to trying to predict the future, when it is seemingly impossible to do so, and uses a combination of experience, gut feel and data. It will come as no surprise therefore that, back in March last year, when many were hoping for shows in late 2020 and the concept of nothing in Q1 2021 was beyond the realm of comprehension, Soar advised all his companies to be prepared for no shows until at least September of 2021. He may not be too far from the truth.
But let’s forget the next 12 months and look at how the next decade will pan out. Soar, in his usual direct, candid manner gives us a no-holds-barred insight into his personal opinions of how the next decade will pan out for the exhibition industry.
RC: Will we see major changes in the ownership of trade shows?
PS: Yes, I think 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 trade shows, which means that selling the trade shows 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 would 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.
RC: Who else is likely to grow or decline?
PS: 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 or explain themselves. They don’t have to be ‘afraid’ of what the pandemic might mean to uninformed shareholders. They have the funds and they can and are taking at least a five or six year view.
Some German Messen, which have never been as profit-orientated as their core role is very different, have taken a big hit and they have had massive problems in reducing staffing levels. They are likely to be less aggressive and may even start disposing of product 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. It is likely there will be a ‘French’ solution, though some close to the story are predicting a breakup.
Mark Shashoua’s Hyve have 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.
RC: Will trade shows come back strongly?
PS: An unequivocal yes. Just as they have since the very first ones ran in 1240. For most trade shows, the intangibles are more important than the tangibles. If you think ROI is the only driving factor for a trade show, and you keep obsessing about it, you will never understand your business. Humans are humans. They 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 3 or 4 days, they like touch and feel. These are not ‘trade show’ 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 on line for nearly 20 years (digital transmission is nothing new). So why do millions still travel to be there?
RC: What makes you so sure that trade shows will survive?
PS: 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 (like the airlines if you like). The actual number is around 10%. This seems, and I hope this is not wishful thinking, to confirm that our customers believe in the power of trade shows and very much want to be there. I stress that I am talking about trade shows here – consumer shows may be rather different given their revenue balance.
RC: We have heard a lot about a ‘pivot to digital’ in the last few months. How significant is this?
PS: Well, the first question to ask, and which seems largely to be forgotten, is ‘why do people go to trade shows?’ 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 trade shows? Digital alternatives have existed for a long time. All manner of communications businesses, including trade show 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 trade shows.
I think we are already seeing a pullback from the obsession with digital. Stephen Carter is 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 launch, 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.
RC: How will the pandemic affect the way we represent ourselves?
PS: It will be a long time before we will forget the incandescent fury over 1,000 people being allowed in the Palladium and 2,500 in the Albert Hall while we couldn’t have even 100 in Olympia or the NEC.
No one can do anything but admire the efforts which were made on behalf of our industry. But we really have to accept that our voice was either not heard or not heeded in the way we would have liked, despite the visibility of our main Exhibition Halls being taken over by the NHS.
There will be more crises in the future. Given that we now seem to be losing some of the traditional commitment to the UK from the world’s two biggest players, particularly Informa, then it seems inevitable that there will be a reassessment of how we present ourselves.
The question must arise about whether we should commit ourselves to a single body which becomes the clear leading voice of the industry and encompasses the major venues, the major suppliers and the biggest organisers. It is an unfortunate coincidence that the two senior non-execs on the AEO Board, the past-president and the current president who represented the two biggest players, namely Reed and Informa, have now both left those companies. A coincidence yes, but perhaps a straw in the wind.
Can we retain the commitment to major UK bodies, be it the AEO or EIA, of companies which seem to be marginalising their UK activities? All of our major organisers now see the UK as a minority market. This trend will continue apace, with Brexit clearly being a core driver, and the UK will become a smaller and smaller part of their thought processes. In the last major crisis, in 2008/09, three of the five largest organisers said they would withdraw from the AEO if we did not drop auditing, and one of the then majors (DMGT) did leave.
This leaves medium and small UK operators in something of a bind. Can they harness the support of their big brothers? And what happens if they drift away as they see the UK as more marginal? Does this reinforce the need for a re-think on the organisations we need to represent us and the fear that detailed differences might derail such co-operation? We were always interdependent but part of the same eco-system. Covid has reinforced this truth.
RC: Within the whole industry, what major trends will we see?
PS: 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. But those that are can only be in a weakened financial state, particularly if the industry, not individual events, overall take 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 A&V companies, security and personnel suppliers and indeed smaller organisers, being combined into fewer entities. This may be via well-funded aggregators, or happen by mutual agreement. But it will happen. I think the landscape will look very different by 2023.
Venues: Venues cannot easily consolidate, but the three larger ones are well funded. The effects will be seen on smaller venues if we assume, as we must, there will be fewer events and smaller events for one or two years. There will be a flight to quality, to the larger venues, which will now have more capacity for new events, and the smaller venues may find that their local authority funders can no longer support them.
RC: What about employment within the industry?
PS: 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 or 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. Both Reed and Informa have made a large number of their senior, experienced staff redundant. And additionally Informa have been trying to dispose of what is left of their UK portfolio. The other major organisers have almost all disposed of many senior as well as junior staff.
The consequence of this is debatable. If there is no visible effect, then one may ask how our companies were being managed in the past. But we may find that 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. David Wood might be a historical comparator.
RC: Will life ever be the same again?
PS: 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.
RC: So what do we do about it all?
PS: There is too much corporate nonsense, and the bigger the corporates generally the bigger the nonsense. But 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.