There is a major issue rising in Shanghai, a giant of bricks, glass and thousands upon thousands of cubic metres.
The Chinese city will soon be home to the world’s largest venue, a soaring tower of capitalism, an exhibition venue opportunity on an unprecedented scale in Asia.
But how will the super-venue impact business around the world. Have we overdone it? Is new space always a good thing, or are we biting off more than we can chew?
In many cases, the benefit of an abundance of new space depends on where and when the exhibition space is built. In many cases when we see one appear, we wish we could package it up and take it to a place such as India or Russia, both in dire need of large, modern exhibition space.
How sustainable are mega-venues?
“Before planning, whoever is responsible should do their homework,” says Michael Kruppe, general manager of Shanghai venue SNIEC.
“Look into the market – is there a need for the space? How big should we plan? You probably have an idea as to what business you will bring in the future. If I was in their shoes, I would have a look for 400,000sqm shows. They do not need many 10,000sqm shows because that would not make much sense, it might fill up empty space but in the end I need mega shows too.
Kruppe makes the point that despite being able to house such giant shows, how many of these shows exist, in the country, or city in which the venue is based? How many of those that are not based locally would be interested in moving to that city?
“If you talk about return on investment, then I think the profitability is questionable. I do not believe there are that many mega-shows in the world, and even if there are, would these shows be able to move? Probably not,” he says.
Flexibility is important. During his time working in the Netherlands, CEO of UBM Asia Jime Essink was present when his company decided to decrease the size of its venue, knowing there was only one show that occupied the whole space. “Why keep that size when there is only one show? You decrease it and you find another solution for that large event,” he comments.
“My advice would be that if you invest then don’t make it too expensive. Construct venues pragmatically. Sometimes you see venues being built where the design is more important than a pragmatic layout. You fly over them in a plane and see a beautiful roof 30 metres high, but we as organisers are not asking for this, and our exhibitors are certainly not. Don’t be too expensive with your builds.
“There will be a change of tide. Break it down and use the space for another purpose. Be pragmatic,” he says.
On this issue of strategic thinking and planning, chairman of Shenyang New World Expo (Management) Cliff Wallace points out that many of the world’s venues are being built as public sector projects, often conceived on the back of some degree of misinformation.
“Governments don’t understand strategic thinking about our industry; because they don’t understand our industry,” he says. And we do a great job of confusing them, because we are inconsistent with what we tell them.
“How many times do we stand up as organisers and professionals and tell KPMG or PriceWaterhouse [examples of companies that prepare feasibility studies] to put more quality into what we’ve got, rather than expanding or adding a new building a few kilometres away? We don’t speak out. How many times have we really talked about quality instead of quantity at industry forums?” he asks.
In most cases, Wallace says we think we can build the industry if we get more and more venue space. “That way of thinking is now, in my opinion, working against us. If you look at the major cities with multiple venues, the case studies are there to evaluate the impact. What good has occurred? What bad has occurred? We know what happens, we just don’t do a good job of evaluating and admitting the reality; being honest with ourselves, being honest with the consultants and being honest with governments.”
He also suggests that global associations such as UFI need to talk more and take a position about venue quality standards. This will help us as an industry grow from a quality standpoint, not just construting more and more buildings.
“How many hotels, roads and hospitals are built based on just more space instead of real demand?”
Economies of scale
There is another, less straightforward problem that arises from the arrival of a mega venue in a city. Much of the development of these new venues takes place in the public sector. And while such commitment to the future of the exhibition industry is to be applauded, this fact carries with it a significant threat to private companies operating in the same location.
One of the major concerns in Shanghai is that the largest venue in the city is now Government-owned and managed. The competition for SNIEC may not be played on an entirely level playing field.
“Overall I would say competition is healthy because it makes you more innovative, and sometimes an organiser in a leading or dominant position may become too comfortable,” explains UBM’s Essink. “Competition really wakes you up and forces you to give better service to your exhibitors because you really want to win the fight in organising the best exhibition. But it’s important that that competition is fair.”
So what is fair? Essink points out that between two private or commercial competitors, competition is fair because they have the same tools available to them. They can provide some discount, but not too much because in the end they still have to make a profit.
Unfair competition takes place when one of the operator has a real benefit over the other.
“In some cases – and not only in China of course – government linked organisations mean you have to be more careful how you compete.”
Wallace shares the same view. “I think we have to get down to considering reality,” he comments. “We have to be honest with ourselves. We want governments to facilitate our industry – in other words, we want them to build these venues – but we should not be willing to accept they are going to build them due to their own agendas.”
