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1 Mar, 2001

Trade Shows Under Pressure

The International Travel Asia has been scrapped after only two years, a victim of many factors including costs, location and a glut of shows. Meanwhile, the Australian Tourist Commission has just completed its first Global Trade Show Review, and made available some preliminary results. As more such reviews are done by other national tourism organisations, everybody is going to be under more pressure to deliver more bang for the buck.

This dispatch contains four stories:

One Less Show On The Circuit: A look at the collapse of the International Travel Asia.

Aussies Take a Studied Look: A few dipstick results from the ATC’s global trade show review.

Keeping Delinquent Buyers at Bay: Can buyers who are also big debtors be barred from future shows?

Will B2B Transactions Replace Trade Shows? Technology is improving but to what extent will it help cut costs?

One Less Show On The Travel Circuit

Major corporations are becoming good at cutting their losses. Two years after a high-fanfare launch, Messe Berlin and Miller Freeman Asia threw in the towel and announced the end of their International Travel Asia show that would have been held in Hong Kong this September 13-15. Not many were surprised.

The show becomes the second victim of travel trade martitits, like foot-and-mouth disease, a growing affliction amongst the travel industry world-wide. The first was the decision by the Australian Tourist Commission to scrap the Asian-focussed Travel Australia Business Show (TABS) in 1999 and merge it with its mainline travel trade event, the Australian Tourism Exchange in 2000 (see stories below).

In a brief announcement on 21 February 2001, Michael Duck, Sr VP of Miller Freeman Asia said, “Despite the extensive marketing and sales programme and the tremendous support of the world’s most representative travel & tourism associations, there has not been sufficient growth of interest in a regional show of this kind. It’s time to stop and review the market.”

The demise of ITA reflects the brutal shakeout amongst the proliferation of international, regional, national and increasingly even provincial travel shows. The Asian economic crisis has a lot to do with it. Sellers cannot afford to participate in more than one or two. Buyers have even less time to spare. National tourism organisations are under siege to stop subsidies for them. Airlines are baulking at providing innumerable free and/or discounted seats. A few major shows are surviving, the rest are losing steam.

The end of ITA proves that being backed by big companies does not guarantee success. The organisers thought the ITA would ride the upswing of post-economic crisis Asia. They felt the Hong Kong location was perfect for tapping the outbound China market. The database and trade show experience of Messe Berlin would deliver the buyers, and the convention organising expertise and (the then) travel publishing experience of Miller Freeman would take care of that end. The show was deliberately positioned as being not sponsored by the Hong Kong Tourist Association in order to maintain its pan-Asian flavour.

With new travel trade shows taking at least four to five years to get established and even beginning to break even, industry analysts felt the conglomerates would ride out the storm, especially the disastrous show in 2000. Wrong. The Asian economic recovery is taking longer than expected, and projected to be further slowed by talk of a recession in the US. Miller Freeman in 2000 shed its travel publishing division and now decided that it was not going to throw any more good money after bad. Bookings for the 2001 ITA were known to be slow, with little chance of a pick-up any time soon. The time to get out was nigh.

Perhaps the biggest miscalculation was locating it in Hong Kong. Not only did that raise costs substantially, it also sent wrong signals to the Indians that the ITA thought of them as a second-fiddle market compared to China. The Indians noted that Hong Kong already had another show, the International Travel Exchange (ITE), which was focussed on the Chinese market. Now gaining ground as both a major inbound destination as well as an outbound source market, India is mighty sensitive to being ignored.

Such snubs would probably not have occurred in Bangkok which many thought was not only a more central Asian location but much, much cheaper than Hong Kong, with no shortage of convention space nor hotel rooms. It would also have attracted strong seller contingents from South Asia, ASEAN as well as the rapidly emerging Greater Mekong subregion destinations like Cambodia, Laos, Burma and Vietnam. Still, ITA organisers consistently maintained that they had made the right choice by selecting Hong Kong.

The collapse of ITA has left only a handful of regional shows still standing: The PATA mart remains the dominant Asia-Pacific show but is known to be facing faltering attendance. The ASEAN Tourism Forum is the regional show for the ASEAN countries, and also under pressure. Both are under threat from individual country shows such as those being developed and upgraded by Australia, New Zealand, India, Malaysia, Thailand and Indonesia. While MICE shows are regular fixtures, the growth area is in niche-market shows like health products, agro-tourism, sports, cruising, adventure travel and other such events.

Eventually, however, it all boils down to what an event delivers for both buyers and sellers in relation to the time and money they invest in it. Shows like ITB, the mother of all travel trade events, are under scrutiny. Its immediate rival, the World Travel Mart in London, is to be moved by organiser Reed Exhibitions to a brand new site in 2002, much bigger and better than the current one at Earls Court. But that will also mean higher costs.

As currencies lose value in developing countries, it becomes more and more difficult to justify high-level participation in strong-currency countries like the UK and Germany, and cheaper for buyers to fly out to the countries themselves. The gradual death of the bi-annual brochure, thanks to the Internet, also means that timing of the shows is losing importance – prices and products can be updated anytime.

For international events in Asia, the norm has long been to move the shows among the various capitals. Many buyers and sellers were willing to overlook minor organisational glitches in favour of the attraction of visiting a new destination. This is one of the appealing factors of the ASEAN Tourism Forum. The PATA mart once shared this appeal, but has been permanently fixed in Singapore for the last few years. Inspite of the Singapore Tourism Board’s best efforts to add energy and excitement to the event, sellers are getting bored of the city-state. The strength of the Singapore dollar also makes participation more expensive.

Reed Exhibitions, a competitor of ITB organiser Messe Berlin, has been moving into niche-market shows like the MICE business. It is also expanding its geographical base by taking over management of regional shows. It organises the PATA mart under a deal with PATA but other shows like the Arabian Travel Mart are self-managed. Creating special buyer forums like the Meridian club gives Reed the ability to access a broad base of global tour operators.

As the next story proves, a wholesale evaluation of travel trade shows is under way. Organisers have long maintained that shows and exhibitions will always survive because of the basic human need for a warm handshake and eye-contact. That may be true, but the reality of cost-cutting means that people are increasingly looking for less expensive ways to do so. This is only the beginning.

Aussies Take A Studied Look

The Australian Tourist Commission has carried out a comprehensive review of its participation in and organisation of travel trade shows at home and abroad. Described as “the most substantial study the ATC has undertaken into trade show marketing,” the document is set to become the benchmark standard for similar reviews world-wide.

Conducted over a nine-month period in 1999-2000, the ATC’s Global Trade Show Review (GTSR) was designed to answer questions being asked by the Australian travel industry about how to best “to maximise everyone’s time, investment and, most importantly, opportunities” from attending trade shows.

As its role is to market all of Australia, the ATC has to take into account the differing needs of a hugely diverse range of product sellers from several states and cities. It organises the flagship trade-only event, the Australian Tourism Exchange, as well as the consumer show, Dreamtime. In addition, it co-ordinates Aussie participation in global shows like the WTM, ITB, EIBTM, IT&ME and various others.

The GTSR showed that in 1999 / 2000, Australian sellers and State and Territory tourism organisations, spent A$16.4 million participating in all forms of trade events co-ordinated by ATC world-wide. A further A$4.6 million was incurred by the ATC itself in operating these events. While the shows within Australia do see ATC chalking up an operating surplus, after including the costs of the much more expensive international events as well indirect costs and overheads, there is no surplus left.

Respondents to an industry survey indicated that 54% of their international budgets were allocated to trade shows. While this seems high, a review of the overall size of these budgets showed that 25% of respondents’ budgets were less than A$25,000 pa, with a further 23% in the range A$25,000 to A$50,000 pa. A single event like ATE (including airfares and accommodation) can represent up to 25% of the total annual budget. The ITB on the other hand can chew off up to 80%.

While cost-efficiencies were a major part of the overall exercise, the GTSR included an exhaustive assessment of the staffing and operational requirements for trade shows, review of eligibility criteria for participation, the role of industry partners in ATC trade show marketing, I.T. systems requirements, issues relating to global brand positioning, the ability to deliver on financial targets, and numerous others.

Then, much time was taken to clearly ascertain the trade show needs and wants of both Australian sellers and overseas buyers. Online research was conducted with delegates who had attended ATE or Dreamtime during 1999-2000. Face-to-face interviews were conducted across Australia with more than 400 sellers. Separate meetings were held with all State and Territory offices, as well as with RTAs in the international marketplace. Interviews were conducted with organisations that service specific niche markets (such as the meetings, incentives and conference sectors).

Some of the findings are being gradually implemented. The first change has been at this year’s ATE, which will be held between May 31 – June 3 in Brisbane. The GTSR says since 1987, Australian sellers at the ATE have increased by more than 330%, international buyer companies by 107% and buyer delegates by 52%. This has been a significant factor in the complexity of managing the event and maintaining a quality experience for both buyers and sellers.

Now, for the first time, the show has been regrouped and split into two. Buyers from the Western hemisphere (Europe, the Americas) will be flown in for the first four days followed by a break of one day. Then will come the turn of the buyers from the Eastern hemisphere (mainly the Asia-Pacific region and Middle East). sellers have been given the choice of participating in either or both of the sections. This is one way to save time and costs.

The reaction to the ITB was also interesting. Australian sellers said they value the event but are concerned about the costs of attending. One group swears by the event (but would like costs cut in half) and another group includes those who decide to only go every second year. Overall, there remains a strong (albeit declining) interest by Australian sellers in attending the event.

The ATC has considered alternate models for ITB, including the options of targeting the German speaking European market (which ostensibly remain the key focus for those attending this event) at different, and less costly, times of the year. In 2001, the predominant focus of the Australian participation at ITB will be on trade marketing only. The stand format has been redesigned to reduce the second storey area. Additional space has been secured on the ground floor, realising some cost savings for sellers.

However, the GTSR says that dramatic cost reductions are not possible because they are fundamentally driven by the programme of bringing targeted buyers to ITB. “Unless we change the format of pre-scheduled appointments at ITB, our ability to dramatically reduce costs is limited. A comprehensive qualitative and quantitative research program to identify the needs of buyers and sellers, those attending and those who don’t attend ITB, is to be undertaken at ITB in 2001 to assist in modifying Australia’s presence at this important show for the future.”

One of the most useful sections is called “Making Trade Shows Work For You” and includes a list of high-class recommendations. My apologies for not being able to include them here; The study was funded by Australian taxpayers and the recommendations are for their eyes only.

Concluded the study, “The next decade will be a benchmark in Australian tourism. Trade shows have been an important factor in the success (of Australian tourism), from an individual to industry-wide level. No other marketing medium delivers as much face-to-face contact with a company, its products, services and people in such a time effective and cost effective manner. However, trade shows are operating in a rapidly changing environment. The Internet, changing distribution channels and emerging markets are just some of the factors affecting it.

“The ATC will take (every possible action) to ensure the trade shows it organises remain relevant, and deliver the greatest possible benefits to the Australian industry.”

Keeping Delinquent Buyers at Bay

The Australian Tourist Commission has pledged to make every effort possible to ensure that buyers who owe considerable amounts of money and have avoided paying debts to Australian sellers are not invited to ATC-organised shows. However, it has also cautioned that a 100% exclusion may not be possible due to legal issues.

The ATC Global Trade Show Review said the ATC understands that sellers are aggrieved at seeing participation by buyers inspite of them owing sellers considerable amounts of money, or due to a change in company structure have avoided paying debts.

Said the review, “The issue of dealing with these buyers has long been questioned by sellers and has been considered at length in the GTSR both from a legal and commercial perspective.

“In the past, the ATC has attempted to develop standards to qualify buyers in an effort to exclude those who are known to owe large amounts of money to Australian suppliers. Furthermore, the ATC has dramatically tightened up the criteria in the buyer registration prospectus to limit the ability of unwanted buyers attending.

“However, given the many international legal jurisdictions that needed to be covered, it became evident during the GTSR that substantial legal costs may be incurred in defending the exclusion of buyers on the basis of their debtor status or poor commercial dealings with the industry. The judicial system in the USA particularly may leave the decision to exclude buyers open to expensive legal challenge.

“Furthermore, there are always sellers in pursuit of building their business that may be prepared to work with those buyers who may not have strong credit credentials.”

Instead, the ATC recommended that if sellers are unsure of the credit status or risk associated with dealing with a particular buyer the best approach is not to extend credit, and to maintain the relationship on “a cash in advance basis” until sellers have a better understanding of the commercial relationship being developed.

It added, “The ATC trade show prospectus has been revised to ensure the ATC has total rights to exclude or admit anyone from ATC events. The ATC welcomes ongoing feedback from industry on any buyers with a poor commercial record who it is felt should not be attending a trade show.”

Will B2B Transactions Replace Trade Shows?

Though the growth of the Internet and Business To Business ( hyperlink mailto:B@B B2B ) transactions has been touted as a potential cost-saver for those seeking alternatives to expensive travel shows, the ATC’s GTSR says it sees no chance of any major impact over the next three to five years.

Says the report, “Typically, the use of cybermediaries is limited to providing product information to potential buyers. It was concluded that at present the on-line environment couldn’t replace the fundamental need for personal interaction and the relationships that are provided by trade shows.

Said the study, “Discussions with a number of virtual providers and members of the Australian tourism industry revealed that there was a broad understanding of the potential of online marts as a possible trade show substitute. It is widely acknowledged (at this time) that this medium is not strong in developing relationships between buyers and sellers.

“Very little credible evidence could be found to support the premise that online marketplaces and events would replace ATC’s trade events during the next three to five years. In fact, the opposite view has been formed. The on-line trend could paradoxically see an increased significance of face-to-face B2B encounters at trade shows.”

The Review concluded that one reason for this is that the product needs of buyers are highly varied and the significance of personal relationships in B2B tourism transactions remains important. “The ATC will continue to review the relevance and potential of cybermediaries, with the view to introducing online trade show-style activity when the technology and medium warrant such a change,” the Review said.