Exhibitor Pullback Costs GES; Q1 Revenues Down 28%

HIL ANDERSON, SENIOR EDITOR
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Phoenix, AZ – The slump in the trade show industry will mean continued tough sledding for GES Exposition Services after a First Quarter in which revenues were 28% below what they were at the beginning of 2008.

Viad Corp., the parent company of GES, said in its 2009 First Quarter earnings report that it anticipated the full-year earnings for GES in 2009 would be off 23% to 27%. Factors include an expected negative show-rotation revenue of $85 million, down around 20% from 2008, plus an assumed 20% decline in same-show revenue and unfavorable currency translation of approximately $27 million.

“The severity of the recession on the exhibition industry is greater than we had anticipated,” said Paul Dykstra, chairman, president and CEO of Viad. “We are seeing fewer exhibitors at the shows and a general decrease in spending by the exhibitors that do participate.”

“A significant pullback in trade show spending led to a larger than expected same-show revenue decline at GES,” Dysktra said. “The combination of the broader economic recession, negative show rotation of $31 million in revenue and unfavorable currency translation of roughly $15 million resulted in a revenue decline of $94.5 million, or 28%, versus the 2008 First Quarter.”

Dykstra and GES CEO Kevin Rabbitt said in a May 1 conference call with investors that while they had not seen the outright cancellations of major trade shows, there was a definite pullback by many exhibitors who cut back on the size of their exhibits and the amount of giveaways and samples they sent to the events, which cut into GES’ shipping and material-handling revenues.

“Exhibitors have been delaying their decisions regarding participation, which makes it difficult to accurately forecast the size of shows,” Rabbitt said.

In the First Quarter, GES also experienced a drop in the number of smaller corporate conferences and user events. “There has been a noticeable decrease in the number of opportunities to win short-term bookings of smaller shows, and exhibitor participation in shows has declined at a faster rate than previous downturns,” Dykstra said.

In response, GES is attacking its variable costs in an effort to carve out about $10 million in savings this year. About 200 jobs have been trimmed away and GES has further emphasized customer service and cost savings for its exhibitors. In addition, the company is making what it termed an aggressive sales campaign to increase market share.

The strategy is aimed at enabling GES to get a fast start when the economy begins to recover and exhibitors presumably jump back into aggressive trade show marketing as a starting point for their own rebound. “The industry has an established history of long-term growth,” Dykstra said. “It has always emerged from recessions and resumed its upward trajectory.”

Reach Paul Dykstra at (602) 207-4000 or pdykstra@viad.com; Kevin Rabbitt at (702) 263-1508 or krabbitt@ges.com