Surviving in today's highly competitive business environment is akin to mastering the trampoline. One has to be light on one's feet, with the agility to adjust to rapid change and an ability to perform the business world's equivalent of intricate twists and somersaults. No one knows this better than general service contractors, whose industry is beset by challenging internal and external changes that are creating bumpy rides and raising concerns about the future.
Because general service contractors play a critical role in the success of any exposition, it behooves show organizers to be aware of and to understand their concerns. General service contractors face many of the same concerns as other businesses. For example, like all labor-intensive businesses, they need to find ways to control workers' compensation and other employee health costs. Other concerns, the focus of this article, are unique to the exposition industry and to the roles that general service contractors play within the industry.
Facility exclusives
This concern is definitely at the top of service contractors' lists. Explains Michael Cox, General Manager of George E. Fern Company: "For many years, and even today in some cases, convention facilities were built with the understanding that they were to provide a marketplace -- that they were not responsible for covering their own costs but that hospitality taxes, room taxes and other income they culled would provide a positive economic impact on their communities. But in recent years, these facilities have been called on to be more accountable. In most cases, they are tackling this challenge by getting involved in part of what has traditionally been thought of as the responsibility of the general service contractor. At first, they said they could supply services if exposition managers needed them. This evolved into solicitation of services and then into exclusivity."
Paul Cunniffe, Director of Sales at Brede Exposition Services, adds: "Facilities are afraid to raise their rental rates on meeting space because they want to remain competitive with other cities. By adding exclusive services, they are getting revenue that show management doesn't see. But they are taking away services that have traditionally been profit centers for service contractors. In the past, if we needed to collect a total of $5 from an exhibitor, we were able to take in $1 from electricity, $1 from booth cleaning, $2 from freight and $1 from booth furnishings. Now, as services are taken away from us, we no longer can spread our costs over four or five areas. That is why exhibitors are seeing such an effect on freight rates -- it's one of the few areas of revenue that contractors have been able to keep to themselves."
Carl Mitchell, President of Shepard Convention Services, believes that exclusives have other negative effects on show managers and exhibitors. "When a building provides service under an exclusive label, they have the power to charge more for that service. A good example is catering. You pay a lot more in a non-competitive situation than you do in a facility where there are choices of catering services."
Barbara Lane, Director of Business Development for Excel Decorators, suggests that exclusives may not help the bottom line as much as facilities believe. "Our responsibility as contractors is to keep a dialogue going with facilities, so that they can see that exclusives can sometimes cost them revenue rather than being revenue generators," she says. "The No. 1 loyalty a lot of show managers have is to their service contractors. When I get closed out of the possibility of working in a building, I have customers who simply say, 'that place won't be a choice; we'll go elsewhere.'"
Lane also points out that at present there is an excess of available venues for all but the largest shows. Thus many show managers have a wide variety of choices of where to hold their events. "Having the ability to bring in your own contractor ends up being a pretty big deal," she says. "And telling show managers -- especially independent managers, who are accustomed to going their own way -- that they have no choice is not a good idea. Those managers did not get where they are by meekly following the crowd."
Cox agrees that shows that rotate among cities have more options than in years past. Also, he believes they get respect because many places are eager to attract their business. But some shows have a pattern of being in a particular city year after year -- indeed, they're frequently known not by their official name but as "the Phoenix show" or "the Louisville show." This may make them hostage to a facility and its exclusives. "If they pull out, that leaves a void that a competitive event could easily fill," says Cox. And consumer shows also become hostage to a facility; they seldom have the option of moving since their draw is almost exclusively local.
Specialty contractors
General service contractors also lose revenue sources as floral, audio-visual and other specialty contractors bypass them and directly solicit show management. Although show managers may not really care who handles such services, they may be enticed by free perks or by a sense of greater control over the decision-making process.
However, show managers may not realize all the ramifications of their actions. Toby Aaron, President of The Aaron Group, recalls a client who named a van line as the official show carrier. "A lot of exhibitors who would ordinarily ship commercially shipped through the van line," he says, "We needed 50 trailers to store all the empties. I asked the van line if they were going to provide these trailers. 'No,' they said, 'You didn't assign us this account.' So not only was I not getting an outbound loading allowance, I had to go out and rent 50 trailers. The client hadn't thought of all that. They didn't do it the next time around."
Contractors believe that show managers should have enough trust in their general service contractors' integrity and expertise to allow them to work with the teams they feel best suit the clients. "Why would we want to assign a subcontractor to a client who isn't going to make us look good?" asks Aaron. "That's not going to help us keep the client for the next year."
Responsibility without control
Facility exclusives coupled with the tendency of specialty contractors to solicit show managers directly leave some general service contractors concerned about a loss of control. They're held accountable for getting the shows open on time and seeing that things run smoothly, but they may not have control of all the pieces of the puzzle. If the carpet subcontractor you hired doesn't have the aisle carpeting down half-an-hour before the show opens because the facility's exclusive A-V contractor hasn't completed moving in the big televisions, who do you -- and your exhibitors -- hold accountable? Many general service contractors know only too well what the answer is.
"We took a show with over 1,000 booths into Pittsburgh, which does its own cleaning," recalls Aaron "The show was supposed to open at 2 p.m., and 40 percent of the floor hadn't been cleaned yet. Was there a line in front of the building services desk? No, but our people were being beaten to death! I went to the general manager's office and said, 'You took the revenue away from us and while that doesn't make me real happy, I can live with it -- if you do a good job. But you didn't do a good job, and who's fault is it that the show isn't clean -- mine!' On top of that, word gets around, 'Hey, I hear The Aaron Group was in Pittsburgh and the show didn't go very well; they didn't clean the floor.'"
Educating show managers, improving communication and developing partnerships are key to avoiding such situations. If show managers want to use a certain cleaning service or furniture rental company, that's fine, says Cox. "But subcontractors should be hired by the service contractor and handled through the service contractor kit. And the service contractor should be held accountable for them."
Specialty contractors bypass general service contractors because they feel they can make more money by dealing directly with show managers. But general service contractors can thwart this belief. For example, George E. Fern Co. has a relationship with an A-V contractor that developed after Cox went to the firm and asked what it would be worth to them if George E. Fern Co. handled everything -- answering calls from exhibitors, administering and consolidating the orders, collecting payments and accepting responsibility for bad debts, and providing the A-V firm with a single order list and a one-time delivery time.
"They told me it was worth 8 percent -- that's our percent for administering the service, and it is a source of profit for us," Cox says. "The show manager isn't paying anything, and the exhibitor isn't paying more. When an exhibitor discovers that his TV isn't working, he doesn't have to hunt for the A-V contractor. We're it! We provide one-stop shopping and accept accountability."
Justifying exhibitor rates
"The biggest ingredient of our product is labor. And there's no volume discount -- you cannot buy 5,000 hours worth of labor and get it cheaper than if you only buy 2,000 hours," says Mitchell. "Because show management wants very low pricing on all the services we provide them, our margins are being squeezed more than ever. In a lot of cases, we're asked to make up the difference by charging the exhibitors more. This puts us in the position of being the bad guy when it comes to exhibitor rates. Very seldom does show management get put on the hot seat when it comes to justifying a rate. But we're put there all the time."
"Exhibitors are the people who ultimately pay all our salaries -- show management's, my staff's, union workers' and the facility manager's salaries," says Cunniffe. "We must find a way to take better care of exhibitors and keep expositions a cost-effective marketing and sales tool, or we're going to bite the hand that feeds us. In a lot of cities, contractors and unions have done a good job of acknowledging that we are all in this together, and that there needs to be a good working relationship among us." He points to Chicago as a city that is rightfully proud of its efforts to attack this problem.
Mitchell observes that the evolution of shows from social events to business forums means that companies expect their exhibit managers to produce show results in terms of leads and sales. "They're doing a better job than ever before in justifying their participation in shows," he says. "If shows aren't positive, rewarding, cost-effective experiences for them, we're all going to suffer."
Cunniffe notes: "You hear a lot less complaining about costs from more seasoned exhibitors." He believes that general service contractors can be proactive in helping newer exhibitors understand the charges they face. For example, "On the last day of a show, I think the service contractor should require the account executive to stay at the service desk and help during the bill-collecting process," he says. "As people have problems with their bill, the account executive can walk them through it. If they understand what goes into making the bill, they'll be more apt to pay without complaining. Also, the next time, they'll either make some cost-saving decisions, or they'll anticipate what they're getting into."
Aaron says: "We sometimes point fingers in other directions when we need to turn those fingers around and see what we can do to build popularity." In addition to being more candid with exhibitors, he has dropped penalties and excess charges that typically confront exhibitors. "In the past, for example, if someone came to the service desk and wanted to switch from the 8-foot table he ordered to a 6-foot table, there was a 50-percent cancellation fee, and the new table would be priced at the higher show rate. I realized that the extra revenue we got from this wasn't very much, so we changed how we operate. Now, if someone wants to cancel a table and order another, there's no extra charge. The exhibitor is happy, and we've made a friend."
General service contractors speak approvingly of show managers who invite them to participate in meetings for first-time exhibitors, either during move-in or on the first day of the show. By walking exhibitors through a show, including what happens during move-out and how they can expedite the process, many complaints can be avoided. The contractors also recognize that show management often takes great pains to educate exhibitors through elaborate exhibitor manuals that not only spell out costs but also provide money-saving tips. The problem here, of course, is that many exhibitors don't read the manuals.
Education and communication
Lane sees a movement away from the practice of not charging show management for many services, to a day where they are assessed fair charges for such services as setting up registration areas and entryways. That is, some if not all of these costs are going to have to be paid by show management rather than being passed on to exhibitors. Another possibility is that attendees will be asked to pick up some of these costs through increased registration fees.
"We are the only industry in the world that charged $15 for a blank booth seven years ago and now charge $5 for the same booth," she says. "We did this to ourselves. We all recognize it, but we all keep doing it. It's just not a smart business tactic. We have to educate show managers and make sure they understand that our costs have to be passed on in some manner. And it can't all come from the exhibitor."
Lane also stresses the value of honest communication -- of maintaining partnerships rather than adversarial roles. Because of ignorance of one another's costs and problems, there's a lot of mistrust. For example, many contractors don't understand what drives show managers, or how a booth that the contractor has charged $5 for can be sold by management to an exhibitor for thousands of dollars.
Recognizing this need to understand what drives various players in the industry, service contractors are increasingly joining organizations such as the International Association for Exposition Management and the International Association of Auditorium Managers. They're also developing the right kind of partnerships with their clients. "In all the good relationships we have, we don't negotiate contracts or bid on labor and equipment," says Aaron. "We simply get together with a partner and create a budget -- create the possibilities of success. There's a give-and-take done on a candid, open basis because there is a feeling of trust and integrity."
There's a concern expressed by some contractors that some show managers don't have a long-range view of the industry or a recognition of the pressures being placed on exhibitors. "They're thinking short range -- how to make all the money they can and then get out of Dodge," comments one contractor. "The exposition industry has come of age; we're recognized as being a vital part of the marketing budget. But if we don't all work together, we won't continue to have the growth that we've enjoyed during the past 20 years."
Tighter customer budgets
Of course, show organizers also have tight budgets and are under increasing pressure to improve their bottom lines. They are just as reluctant as exhibitors to absorb higher expenses. As a result, contractors are expected to provide the highest level of products and services, yet at prices that fit increasingly restrictive budgets.
"Our industry has been very slow to get on the technology and efficiency bandwagon. We need to look at how shows are produced and how we can better control costs because people's budgets aren't there to pay increased costs," says Butch Bartlett, Senior Executive Vice President of Sales & Marketing at GES Exposition Services. "We need to become more efficient in how we bring our product to the customer. I think that technology is part of the answer."
To this end, GES is making a substantial investment in design technology. Their objective is to streamline the process of providing a design for the customer, then, after a design is approved, getting it into production and onto the show floor with a minimal amount of change and duplication of effort.
Another of the company's cost-cutting objectives is to improve efficiency at the show site. "We're looking harder at how to schedule pre-show meetings and instituting in-depth training programs for all our people, including the various trades we work with, so that there is greater familiarization with and utilization of equipment and procedures.
Perception and efficiency
The emergence of GES Exposition Services and The Freeman Companies as the giants among service contractors has created a perception problem for smaller firms: some show organizers think smaller means regional. But many smaller contractors service shows throughout the country. Aaron, for example, points out that 70 percent of his firm's business is outside the Washington, DC, area. He and others want to remind organizers -- particularly those of national events -- that they have more than two choices when it comes to general service contractors, and that organizers should include smaller firms in their selection process.
"Someone said that we couldn't be competitive with the larger companies when it came to doing business nationally. Of course that's not true," Mitchell says. He and some three dozen other contractors recently formed an alliance to explore ways they could work together to become more efficient and effective. The group will consider how to communicate the view that alliance contractors are as professional and competent as the larger firms. The alliance also intends to work with their suppliers on bulk purchases. "For example, we're all in the carpet business," says Aaron. "It's not a great revenue source for us, and furthermore it clogs up our warehouses. It would certainly be helpful if we could figure out a way to buy carpet more cheaply and then move it around the industry."
He explains how this might work: "Let's say I have a reason to buy 250,000 yards of purple carpet for a show in February, but I don't expect to need it again. This information could go into a purchasing data bank; other companies could call to say they can use it, so off the carpet goes at a reduced price. And then it might go off to somebody else."
Room for everyone
Initial fears that a quasi-monopoly would result from the growth of GES and Freeman have largely been dismissed. Smaller contractors feel there's still plenty of opportunity. Probably no one says this better than Aaron: "People feared that the big guys would buy up all the little guys. So what? There would be new little companies started tomorrow. And ten years from now, they'd be middle-sized companies, and you'd wonder where the hell they came from. The big guys will never stop the little guys. This is America -- you can't stamp out the little guys in America."
