A comparison of the exhibition industry issues between the Czech Republic and the world Faculty of Economics and Administration Masaryk University Brno (ESF MU Brno) February, 2006 Obsah OE The exhibition industry worldwide and in Europe OE The exhibition industry in Germany l Statistics l Trends l Ownership relations Ž Exhibition markets in Central Europe  Consequences of the EU accession for the exhibition industries in the new EU member countries Trade fair trends worldwide and in Europe ` Foreign and national trade fair associations FKM, CENTREX, UFI, AUMA, SOVA CR 1. The exhibition industry worldwide and in Europe Tradefairs worldwide Trade Fairs in Europe ü data in 2004 Annual market volume according to UFI estimates ( The Global Association of the Exhibition Industry ) n 1.5 million exhibitors n 160 million visitors n ca. 300 large towns n ca. 3600 trade fairs and exhibitions a year The exhibition market with audited statistics makes up a third of the market n 512,000 exhibitors n 49.5 million visitors n 21.5 million sqm n 1,415 trade fairs and trade shows, of this - 45% are intended for experts - 30% for the general public - 25% for B2B and B2C Global trade fair and exhibition market Global trade fair and exhibition market ü by exhibition capacity of the halls Global trade fair and exhibition market ü by exhibition capacity of the halls Comparison of space rental prices ü an average price for m2 2. The exhibition industry in Germany "QUO VADIS" Trade Fair Towns in Germany What does the strength of the German exhibition industry consist in? n Every year about 310 trade fairs are held, a half of these are international fairs ( 152 in 2005 ) n Two thirds of all the world´s top projects take place here n 10 strongest world show organizers have their seat in Germany n Powerful trade unions participate in organizing a number of fairs. Along with industrial leaders, they are involved in making decisions on venues of fairs, creating attractive concepts, and share the profit. Data & facts 1999 - 2005 Data & facts 2000 - 2004 ü number of fairs held* Data & facts 2000 -- 2004 ü rented space in m2 Data & facts 2000 - 2004 ü exhibitor numbers Data & facts 2000 - 2004 ü visitor numbers Development of indices Data & facts 2005 ü audited statistics only n Assumed data: l An increase in area by 2.5 % l An increase in the number of exhibitors 0.5 % l A decrease in the number of visitors by 1% n Internationality of projects is growing, from abroad there were: l 1/2 exhibitors l 1/3 expert visitors n Total sales of trade fair companies in 2005 probably reached almost 2.4 mld. € l The reason why the sales were lower than in 2004 ( 2,45 mld. €) is a different representation of trade fairs. In 2005, some large projects with the periodicity of two or more years did not take place (e.g. DRUPA, Glasstec, Euroblech,..) Trends of the German trade fair industry in 2006 Stabilization at the trade fair and exhibition market - In the past two years, the domestic market, same as the German trade fair industry, was affected by the adverse conjuncture of the German economy German GDP development in 2000 - 2006 n Interest in specialized, very clearly outlined trade fairs n Again, trade fairs rank first in the marketing mix. Ranking of marketing tools: 1. trade fairs 2. personal sale 3. direct marketing Source: A study conducted by the Messe Institut Laubenheim, 2005. In total, 25, 000 responses were evaluated (respondents were marketing experts from companies and economics professors from German univiersities) Future: the growth of investments in trade fair participation Future: the importance of trade fairs in the communication mix will grow TRENDS: Preferred sectors SECTORS THAT PRESENT NOVELTIES AND KEEP UP WITH TECHNOLOGY DEVELOPMENT n Engineering, automation, logistics n Automobile industry n Medicine n Ecology, unconventional sources of energy n Building industry n IT n Entertainment electronics n Food industry n Sports and wellness n Travel trade fairs n Further education n Trade fairs focused on arts Sectors facing difficulties n Fairs focused on consumer goods have shown a drop in attendance Reasons: - On the part of exhibitors: bankrupts of small companies that did not overcome current economy problems in Germany - Certain "customer restraint ", associated with a lower buying power of end consumers - Strong competition of supermarkets that take over the presentation role of trade fairs in this segment TREND: Added value of trade fairs üinnovations in the offers by fair administrations n The offer of "complex marketing and sales solutions " - The focus moves over to services, the offer of which is being extended - The aim is to "prolong the value chain " (from ca. 20% to 40%) - The range of services stretches out from an accommodation reservation to a full organizational back-up of trade fair participation n So called "combined formats" are promoted - Joining trade fairs with congresses - These are more attractive both for exhibitors and experts than traditional trade fairs - It is easier to address relevant target groups n Business-Matching of exhibitors and visitors - It offers efficient visit planning -- due to a shorter duration of stays on exhibition grounds n Online-Community ( www organizer´s communicaiton) - Exhibitors present their products at their websites all the year round - Experts may obtain information not only once or twice a year, but also in periods between fairs, regardless of their course Problems in the German trade fair industry n "Canibalization " = lurking away the existing projects into new exhibition facilities - Reasons: An increasing competition between fair managements - This trend is apparent in Italy, too ( Fiera Milano strives for transferring the projects of competitor fair managements to its new exhibition grounds -- gross area of 530,000 m2, net area of 260,000 m2) n Copying trade fair themes for the same target groups, often in an immediate geographic proximity - Problems: fragmentation of exhibitors´ interests, visitors cannot get comprehensive information in one place - Consequences: cancellation of projects due to a lack of interest by exhibitors, e.g. Reallocation Leipzig, FabForm Nürnberg, Frankfurtrg, Children´s Book Fair in Köln, Fair for Advertising Technology Frankfurt n Building new exhibition space, in spite of not utilizing the existing one = the expansion is not compensated by an increasing demand. In 1998-2003, total exhibition space was increased by 10%. - Reasons: trade fair owners (municipalities, federal lands) rely on cost-effectiveness rather than profit - Consequences: an excessive offer pushes down space rental prices (dumping prices) - Problems: low utilization of exhibition grounds, losses are paid by tax-payers - Solution: privatization of trade fairs that might prevent wasting state resources TREND: Privatization of trade fairs n Ownership structure in Germany - Trade fairs are owned mainly by municipalities and federal lands - Economy becomes a problem because only a few achieve profit in exhibition centre operation. Basically, yields from trade fairs are used for maintenance and investments n Privatization - Capital market capability of German trade fairs is not sufficient for the privatization yet - Modern infrastructure cannot be built at current prices ( e.g. 1 m2 costs EUR 140 in Germany, EUR 260 EUR in the United Kingdom, and EUR 326 in Japan) n What does the EU say? - The European Union is alarmed because public corporations favour their companies and, what is more, provide subsidies at the expense of tax payers n Future prospects - German trade fairs will not avoid the privatization - They can hold up in the international competition only if they take over the implementation of their projects, including related services, on their own exhibition grounds TREND: Strategy of internationalization ü German model n Internationalization = expansion on German trade fairs to foreign countries n The strategic goals - Establishment of German organizers abroad ( building new exhibition grounds, e.g. SNIEC in ©anghai -- based on cooperation among Deutsche Messe Hannover, Messe Düsseldorf and Messe München ) - Export of successful trade fair themes - Transfer of know-how of the European trade fair standard - Efficient support to exhibitors and visitors in international activities - Aid to small and medium size companies at their entrance to new perspective markets, an offer of suitable communication platform - Acquisition of new exhibitors and visitors for trade fairs in Germany n Priority territories of expansion - Economic regions in Asia ( China, Japan, India, Thailand, Korea, Vietnam) - Countries of Central and Eastern Europe (Russia, United Arab Emirates) Participation in trade fairs abroad Messe Hannover profile Messe Frankfurt profile Kölnmesse profile Messe Düsseldorf profile Messe München profile Messe Berlin profile Russia, China Russia -- areas of potential China -- regions of potential 3. Exhibition markets in Central Europe Milestones of the Central European exhibition industry The exhibition market in Central Europe and Germany in 2004 Development trends at the markets in Central Europe and Germany Shares of organizers at the Central European market in 2004 4. Impact of the EU accession on the exhibition industries in the new member countries New borders -- new Europe -- new business Structural impulses from the EU (1) n Changes of the economic environment in the new member countries - Increased efficiency of economies - Increased living standard and consumption by households - Greater confidence of foreign investors regarding the allocation of resources - Better legal environment, respect to proprietary rights and rules of economic competition - Consistent policy of state support and regulation - Assumption of new and demanding EU standards (technical, ecological, social-labour-legal ones, etc.) n Free movement of goods and capital in enlarged Europe - Withdrawal of customs barriers, enhancement of protective duties - Increased labour mobility - Liberalization of capital movement Structural impulses of the EU (2) n Increase in investments by means of the EU funds l Cohesion Fund finances large investment projects in two main areas -- the environment and transport (trans-European transport networks) in the EU Member States, the GDP of which is lower than 90% of the EU average. In terms of the finance volume, the Fund will provide about 1/3 of total aid l Structural Funds -- Operational Programmes ( OP ) - OP Human resources Development - OP Industry and Enterprise - OP Infrastructure - OP Rural Development and Multifunctional Agriculture l Joint Regional Opreational Programme (JROP) is complementary with the sector operational programmes and the Cohesion Fund. The JROP extends their impact at a local level and is oriented at joint development strategies of the regions. New opportunities & new business philosophy n Opening the market without customs barriers encouraged trade cooperation l The market was enlarged for global companies l The internationality of trade fairs was increased due to the increasing competitiveness of small and medium size firms and their increasing penetration to new markets l The culture of exhibition industry in new member countries has been improved by introducing international standards n Drawbacks l Less direct participation of firms from Western Europe (participation by means of local subsidiaries) l Gradual withdrawal of the official support by state institutions that subsidized the participation of firms in trade fairs in Central and Eastern Europe in the past. The support is now provided to new priority interest countries ( other EU candidate countries, markets in Asia, South America...) Trade fair business in Central Europe ü specificities n International trade fairs do not transcend national or Central European borders significantly (no trade fair is No. 1 in the all-European or worldwide context n Central European countries guarantee a higher share of visitors both from the Central Eurpaen countries and from the countries of the former Soviet Union (no language barriers, historical relationships) n Infrastructure of fair grounds is at different levels (e.g. the fair grounds in Brno and Vienna rank among the TOP....) 5) Exhibition event trends worldwide and in Europe Exhibition industry & economy n Consequences of Globalization - More intensive international competition in the exhibition industry - Massive concentration of trade fairs, accompanied by the rise of integrated companies with significant turnover. "The World League of Trade Fair Economy" has been established n Fair administrations look for possibilities of cooperation at the third markets - The goal is cost saving, joint management n Internationalization has two directions. - At the European markets, the share of foreign exhibitors and visitors is increasing - Producers and distributors from Asia push their way to those markets - Competitive producers from Central European countries try to sell at the Western European markets - Top trade fairs are exported abroad - The exhibition industry moves closer to sales markets with growth potential (China, Russia, United Arab Emirates, India..) n Large market players (organizers of top trade fairs) are more distinctively profiled against regional fair administrations General trends in the exhibition industry n Trade fairs have proven to sensitively react to the crisis of conjuncture, although with a delay n At the market, only good projects can be asserted that are of importance for the sector " business to business" ( B2B ) n Quality is preferred to quantity -- this holds good for the visitors, above all. For specialized B2B trade fairs it is the quality and not the quantity that matters (internationality, expertise or decision making powers of visitors) n Effectiveness of trade fair participation (performance to price ratio) is not always quantifiable -- it also is a matter of image, emotions, experience, face to face communication. Experience has shown that the effectiveness of trade fair participation is directly proportionate to the marketing strategy chosen by the exhibitor. Therefore the exhibitor must carry out adequate preparations for the trade fair! n The number of visitors in the segment of small and medium size firms is growing Trade fair projects & the customer n Emphasis on the concept of trade fair - Feedback to the industry, VIP firms and associations n An extraordinary attention must be paid to services. The aim is to - Prolong the value chain of trade fairs - Extension of the offer of services to customers ("key-ready" stands, transport services, hotel reservations, staffing, evening programme....) n Business-Matching increases the effectiveness of trade fairs, both for exhibitors and visitors - "meeting point" at trade fairs - Organized visits by experts 6. International and national trade fair associations a) international audit FKM, CENTREX UFI INTEREXPO, CEFA.... b) national AUMA SOVA ÈR FKM profile n FKM -- Gesellschaft zur Freiwilligen Kontrolle von Messe- und Ausstellungszahlen carries out audits of statistical data for its members n At present, 72 organizers of trade fairs and exhibitions are members of FKM n Goals of the Society are - to ensure the transparency of exhibition statistics of the trade fairs that have applied for participation in compliance with standard rules, as to the division into the categories of area, exhibitors, visitors and data on visitor structure - to issue publications on audited trade fairs by FKM - to provide audited data for the AUMA database CENTREX profile n "CENTREX" - International Exhibition Statistics Union was founded in 1997 n CENTREX is a professional organization with Central and Eastern European impact. It was founded by 4 fair administrations: HUNGEXPO Budapest, INCHEBA Bratislava, Trade Fairs Brno and MTP Miedzynarodowe Targi Poznanskie Poznan. At present, CENTREX has 16 members n Main goals of the Union are - to ensure the transparency of statistical data in compliance with standard rules of exhibition statistics among the members of the Union, and promote the standard rules among other trade fair organizers - to support trade fairs as means of marketing communication in general - to cooperate with foreign professional associations (a member of UFI, cooperating partner to AUMA ) UFI profile n UFI -- The Global Association of the Exhibition Industry associates 334 trade fair companies worldwide, was founded in 1925 n The "UFI Seal" is intended for the exhibitors who plan to participate in foreign markets. It is a quality assurance of certified trade fairs n Goals of the Association are - to watch over the adherence to standards in terms of international aspects - to provide the transfer of trade fair know-how - to take care of exchange of expert information, organize professional educational workshops - to provide for studies and market analyses AUMA profile n The Association of the German Trade Fair Industry AUMA was established in 1907. n AUMA associates the top unions of German economy, professional unions of different industries, exhibiting at trade fairs, trade fair organizers and firms implementing foreign participations, associations of providers of exhibition services (stand construction, design, logistics) and associations involved in organization of congresses n Main goals are - to represent interests of the exhibition industry at the national and international levels against state authorities - to provide information to exhibitors and visitors - to support international marketing of German exhibitors - to be involved in trade fair education - to improve market transparency - to obtain audited statistical data for their trade fair database from FKM - Gesellschaft für freiwilligen Kontrolle von Messe- und Ausstellungenzahlen - to coordinate German activities abroad SOVA ÈR profile n The professional association was established in December 2001 by a merger of three subjects acting in the Czech exhibition industry (SOVA + ÈVVS + Fair and Exhibition Section of the Economic Chamber of the Czech Republic). n Members are organizers of trade fairs and exhibitions and firms providing specific services at trade fairs (stand construction) -- 33 regular members and f4 honorary members. n Main goals are - to integrate and form the Czech exhibition industry in relation to the international market - to support professionalism of all the entities at the Czech exhibition market - to implement international standards - to protect economy interests and prestige of trade fair and show organizers in the Czech Republic - to support quality, transparency, coordination and cooperation in the Czech exhibition industry Thank you for your attention