The 1-2-1 series by Event Industry News interviews influencers, leaders and champions within the UK exhibition market. We ask them to deconstruct their views on the current market, disclose the drivers within their own businesses and understand their own personal motivations.
This series is brought to you by exhibition specialist and blogger, Jim Curry.
Phil Soar Interview; Multiples, Suppliers, Attendance and Launching
Following on from last year’s very popular interview, Phil Soar sat down to give his views on the UK exhibition industry in 2017 and explained his interpretation of where we are heading. He’s not often wrong.
In this interview, Phil described the story behind the story – why private equity money is flooding the exhibition industry. He also gave his views on exhibition attendance reporting and why exhibitor ROI is just a tiresome subject.
Other subjects include content streaming, the supplier commodity and some gems of insight for anyone kicking around a launch concept in 2017.
A great read once again and one that has plenty of lessons for every level of the industry.
You have a great handle on the three industry trends. Visitor numbers are falling; net square space is falling but PE money is pouring in. What’s the story behind the story?
Clearly the trend numbers on square meters and visitors are down everywhere although there are plenty of markets that try and conceal it. The trend lines appear to be downward but at a far less acute angle than the trend lines in virtually all other traditional media with the exception of course of digital so in that regard exhibitions are doing well but I think it’s hard to look at the exhibition numbers and not to assume that there is a longer-term issue, if not a problem.
That trend line saw the average multiple in M+As at 13.2 last year, how does that sit over the last 20 years, are we at an all-time high?
I’d say it is probably an all-time high, yes. I can only go back to the early Blenheim days but then Blenheim was the first company which ever did anything like this. If you tried to sell an exhibition business in the 2008 downturn even a decent business, you might have only got 7 or 8 times but it has been increasing ever since. It’s never been as high as this and the height is to do with the fact that people can’t get any return on their money anywhere else.
Even on digital assets?
You can’t buy Google. You can’t buy Facebook. You can buy shares if you want to but it’s very, very hard to invest heavily in digital assets so exhibitions I suspect will carry on looking very, very attractive relative to most other available media assets. It’s all relative. It’s relative to other media forms and it’s relative to buy-ability;
So the all-time high is more indicative of the world around exhibitions rather than exhibitions?
You must start with the world economic situation. The money being put into the exhibition industry at its source is coming from gigantic funds like the Ontario Teachers’ pension fund or the Co-Op pension fund and they all have the problem of getting any kind of return on trillions of dollars.
Bank accounts return no more than 0.5%. Share dealing will get them 3-4% return but they have the danger that a share price dip will wipe out their value so the funds turn to private equity companies like Inflexion, Providence and Carlisle to get decent returns.
Working alongside banks, it is not unusual for the private equity companies to return £100million on a £10million stake after all the interest has been paid off over a set period of say seven years.
Ah got it and larger exhibition companies are more attractive because of the scale of their operations in comparison to the funds that need a good return?
Exactly. The PE companies prefer doing deals of a certain size. The due diligence work is much the same on a £500million deal as it is on a £5million deal. It makes it much easier to sell businesses at the top level than the mid-level which is why the multiples are higher when the larger companies are involved.
So the outlook is rosy for the larger organisers. It’s different for the suppliers. We both recently spoke at the ESSA Conference. Suppliers by their nature are commodities yet at the event, it became clear they don’t want to be bracketed as such.
I’ve spent a lot of my life talking to suppliers and of course they are a commodity. They are a commodity because they do their jobs very well. Exhibitions have apparent complexities of many things. Registration systems, catering for 30,000 people, laying out the floor. It looks like complete chaos with hundreds of people involved but it works like clockwork. These guys know exactly what they’re doing and they do it extremely well. The problem is it does become commoditised; it’s like motor car engines nowadays you kind of forget they exist because they never go wrong.
So how do suppliers differentiate themselves?
People. Every year when contracts are being negotiated it doesn’t come down to shell scheme being £11 as opposed to £11.50 it comes down to the people. You work with people that you like and trust and you have relationships with them. When you develop a relationship and they’ve done a good job for you, you’re not interested in the other guy offering you another £1 off the shell scheme.
But they are still commodities right?
Yes, I agree with you of course, they are commoditised. The registration companies are commoditised, no matter how hard they try to offer new bells and whistles they’re commoditised.
I don’t see registration companies existing in their current form in five years.
No, there is a danger that they will become obsolete.
My exhibition research has revealed that people define exhibition attendance very differently. How do you see it?
The greatest source of obfuscation regarding exhibition attendance is always the difference between attendees and visitors. Most of my companies are very clear that a visitor is an independent one-off individual who has nothing to do with the exhibition whereas attendees include organisers, exhibitors and other profiles. They are two very different numbers.
Can independent tech solve the attendance reporting that registration companies and audits couldn’t?
There is a very, very straightforward piece of technology that works on the assumption 95% if not 99% of people that walk into an exhibition hall have got a smartphone. It doesn’t record or capture any data but exhibitors can match it back to the claimed attendance. It doesn’t distinguish between exhibitors and visitors but it gives a good indication of quoted numbers.
That sounds like tech that this industry needs?
Not really. If so few organisers are now auditing and publishing audited numbers yet running successful shows there clearly is no demand for that level of transparency and clarity amongst the exhibitors and sponsors. If exhibitors demanded technology providing more detailed and accurate attendance, the organisers would be deploying it to generate considerably more revenue. They don’t, so the bigger question is why is there no sensitivity to attendance numbers?
I get that logic so why is there no sensitivity to attendance numbers?
I could cite lots of examples but exhibitions are not a media form where the numbers matter like they do in publishing and television. It is clear that the intangibles of an exhibition are more important than the tangibles.
I used to own The Harrogate Gift Fair (now called Home and Gift). It was a good show. It was a big success, we used to pack Harrogate for a whole week every year, every hotel room for 30 miles around was booked and the intangibles were very, very important.
Yes of course, people came and they were looking at lots of stands and they were trying to pick stuff that they wanted to buy but it was also about a two or three day holiday in Harrogate. It was about Betty’s Tea Shop, the Spa and a day trip to The Dales. It was about dinners with family in the area and I think those intangibles were significantly greater than the tangibles and I think you can argue that that’s true of a lot of a lot of shows.
All of those points stack up against the case for demonstrable exhibitor ROI?
I’m just tired of the ROI thing, I’ve heard it for 25 years, I’ve never seen anybody do it convincingly, I’ve never seen anybody use it as an argument and my gut feeling is that it would provide information that actually we would prefer not to see. It would not provide information that would necessarily be beneficial to exhibitions.
So do you think exhibitors are exploiting exhibitions effectively?
Yes. Everyone has a scanner. They all get the names, addresses and details of the scanned. They get the list and more. I think exhibitors are perfectly good at following up, they take the cards, they do the scans, why wouldn’t they do something as simple as take that list and ring everybody up? 8,000 furniture retailers in the UK come to the January Furniture Show, they are definitely placing orders but they are coming for lots of other reasons as well, not just for leads.
What area of opportunity for the exhibition industry have your attention?
Streaming conference content. I wrote a very long piece in EN in 2003/4 about streaming before broadband took off. It is an obvious conclusion that we can draw as an industry by how differently people now consume TV.
I almost always stream my TV content whether it is Netflix, Amazon, BBC iplayer or ITV. I rarely watch live TV and yet we have access to more than 500 channels. That creates opportunities. It has become very, very easy to stream content and in 15 minutes you can access information like never before. We have done it with The Vet Show and it allows people to consume exhibition content in a new way.
What illusions do we push out as an industry?
One general illusion is about pricing. The amount of money we generate is some way a reflection of fair value or conscionable value. I don’t think it is. It’s nonsense in a way in determining whether a metre of space sells for £600, £650 or £700. Larger exhibitors will take the same space whether the rate is £450 or £470.
So it’s elastic…
Except on absolute margins and I don’t believe this on the margins either. It doesn’t make a difference and there is rarely a pricing stratagem mainly because most large exhibitions don’t really have competitors. I think there are a lot of illusions around pricing. Pricing is what pricing is, it doesn’t mean that it’s where it ought to be.
Is that because it is broadly done on a cost plus basis?
It started off like that. I think it probably works the other way around now and is set against a 26% margin. Costs are almost all absolutely fixed, the contractor contract is fixed, the other event costs are fixed, therefore exhibition owners determine a margin to achieve and the exhibitor price is set against that.
Where do you sit with the visitor paid gate?
It depends how on the point of differentiation of the exhibition. As an example, Closer Still run two shows, The Vet Show and The Dentistry Show both produce content of the highest quality. The Vet Show is chargeable and takes a considerable amount of money without seemingly any trouble at all because there is no other comparable show to attend. The Dentistry Show doesn’t charge because there is another dentistry show which was bigger than ours but is not now. Paid gates are determined by the landscape.
What advice would you give a launcher going up against an established exhibition?
There’s no generic answer. One answer is that most successful start-up shows because of an understanding of a particular idea and perhaps a greater understanding about the intellectual content of the idea.
Is it wise to follow an emerging sector for a launch?
It’s really really hard. The emerging sectors get lots of hype and coverage but they can’t sustain numerous events. This year three IoT exhibitions launched and you can get lots of speakers, you can get lots of visitors but the number of companies who have a product they want to exhibit are very, very few and far between.
So it’s not so much about a sector?
It’s about what it’s always been about; somebody who really believes and has an interest. Someone who has enthusiasm and is prepared to take a chance on it. A lot of the time chance doesn’t really make sense. It can start very small, almost at church hall level, but it develops its power because the core people in the segment recognise that it has a quality that the mass-produced ones don’t have. It grows from there and you get lucky or you don’t.
Rough estimates. How many exhibition launches don’t make it to doors open?
It’s obviously impossible to find stats of failed exhibitions but I could guess five out of six don’t work. You don’t get to hear about them because they are small and they are under the radar. The fact is we don’t hear about the failures from the big companies because there is no reason why you should but people are always trying ideas.
What cautionary words would you give a launcher?
Success could be as big a problem as failure and that actually being successful for them is as much of a problem as being unsuccessful because they can suddenly find themselves wall bound with nowhere to go (like a Gift Show at the BDC for instance). It happens quite a lot and in a sense it’s a primer on what to avoid rather than what to do. The other thing is timing – the best time to launch a show idea is ALWAYS last year.
Never play with your own money or put it all on red. How should a launcher approach investors?
It depends who you else you’re talking to. I’d have to say you have to use your own money. If you don’t use your own money, you’re not transmitting commitment and that’s quite a hard sell.
In publishing, when you talk to the guys that provide the money, they don’t actually want to talk to the CEO, the Financial Director or the Production Director. The person they want to talk to is the Editorial Director because it’s the Editorial Director who is the key person who comes up with the ideas, drives the products and wants it to fly.
It’s the same in exhibitions. I think it’s very, very hard not to be prepared to say, ‘I believe in it, I’m backing it and I’m taking a second mortgage’, which is the traditional route.
For launchers what recent exhibition news should have caught their eye?
The obvious one is The Clothes Show going to Liverpool and leaving a hole in the NEC. The replacement isn’t obvious and yet actually if it happened to be fashion profile it would be one of those very, very rare opportunities that someone might just pick it up and make something of it.