While 2012 has been a generally good year for the tradeshow industry, 2013 might prove to be difficult as the nation approaches the so-called “fiscal cliff” and the federal Affordable Care Act takes firm root.
Federal lawmakers continue wrangling over the pending “fiscal cliff” slated to potentially occur at the end of December and the implementation of the federal health care law largely beginning in 2013. The potential impact on the tradeshow industry has officials at many firms weighing their options while attempting to navigate the murky waters of uncertainty.
“Concern about the fiscal cliff and the global economy has continued to take a toll in the exhibition industry,” said Allen Shaw, chief economist, Global Economic Consulting Associates. “The results show the exhibition industry continues to grow, but attendees and exhibitors are being cautious due to the uncertainty about the global economy.”
The Global Business Travel Association predicts a $20 billion reduction in domestic business travel spending in the U.S. during 2013 if lawmakers cannot come up with a reasonable plan to avert the fiscal cliff. And recent studies by the Center for Exhibition Industry Research (CEIR) show the tradeshow industry spend has slowed in recent months, posting only an about 1 percent growth rate during the third quarter of 2012 when compared to a year ago.
“The economy, certainly in the U.S., is slowing,” said Joe Popolo, CEO, Freeman “The event marketing spend is very closely tied to GDP. And if the GDP is not growing, it will have an impact on event marketing spend. Which is why it is critical that leaders in Washington figure out a path forward for us so we can get the economy growing again. The only way we are going to work our way out of the debt challenge is to grow our economy, which would be great for event marketing.”
Federal lawmakers are working to create an economic plan to move the U.S. forward, and federal officials continue creating rules to implement the Affordable Care Act. So the impact of their decisions in the coming weeks is a greater concern for U.S.-based firms in the increasingly global tradeshow industry.
“We’re based in Canada and have an office in Las Vegas, so it’s not as tough for us,” said Mark Murphy, vice president, ShowCare Event Solutions. “We just did a big cost-savings plan three to four years ago and reduced our space. It’s not going to affect us as much.”
While firms outside the U.S. aren’t as concerned, those based in the U.S. are having mixed reactions to the economic and regulatory uncertainty.
“I don’t think we see it on the radar now, but there is a lot of uncertainty in the general economy,” said Shura Garnett, regional vice president, Global Spectrum. “So far, the housing and construction markets are coming back. We’re seeing some stabilization of markets, so it’s going okay.”
Even as some key U.S. markets show promise, the fiscal cliff talks leave room for caution.
“It’s a huge concern for us,” said Chris Casconi, national sales manager, George Fern Exposition and Event Services. “We’ve been paying very close attention to what’s going on.”
That’s because what’s going on could have a huge impact on the tradeshow industry. Tradeshow firms based in the U.S. in particular face a great deal of uncertainty regarding implementation of the federal health care law and fiscal cliff deliberations occurring in the nation’s capital. And officials at some firms already are weighing options for an uncertain future.
“There will be an impact,” said Popolo. “It will, unfortunately, cost us more money. All our coverages for our current employees have gotten more expensive with the changes we’ve seen to date. And the IRS just released 159 pages of incremental rules. So there will be cost increases for the company and most likely cost increases to our employees.”
With cost increases often come reductions in labor force or pay and sometimes both. And with some 32,000 part-time workers, Freeman, like other tradeshow firms, might have to make adjustments.
“We do use a lot of part-time employees, some of whom do not have coverage through a collective bargaining agreement,” said Popolo. “And for those individuals, we are going to have to determine the impact to the company and our relationship with them going forward.”
The federal Affordable Care Act requires health insurance benefits for all employees averaging at least 30 hours per week, but questions remain regarding how the weekly average will be determined as well as other aspects of the law slated to begin taking full effect in 2013 and 2014.
“We don’t know exactly how much it will cost, because the rules are in transition,” said Popolo. “Unfortunately, one can run different scenarios that show it likely would be very expensive for the company.”
Once rules have been determined and their consequential costs, officials at tradeshow firms will be able to determine an appropriate plan of action.
“That’s the challenge. Not just with the health care law but what’s going on with the fiscal cliff, debt limit, taxes – it makes it very challenging to put forward any kind of long-range plan,” said Popolo. “And, at the end of the day, just about every dollar that makes it into our industry comes from a corporate marketing budget, and if corporate profits drop or if corporations decide to cut back on marketing spending, that’s going to impact the entire industry.”
While the fiscal cliff, health care law and general economic conditions have created a great deal of uncertainty within the tradeshow industry, hope remains.
“The good news is: our industry continued the chain of nine consecutive quarters of growth after nine consecutive quarters of negative numbers,” said Doug Ducate, president and CEO, CEIR. “And while the rate of growth slowed, we are still on a positive growth track.”