The Real Cost to the Trade Show Industry of Weight-Based Drayage
One of the principal reasons for the formation of the Exhibit Industry Council was to advocate for full disclosure and better control over exhibitor costs at trade shows and conventions. Nowhere is this need more pressing than in the area of material handling (a/k/a drayage). The cost of material handling is a huge source of frustration for many exhibitors, and poses a significant threat to all trade show industry stakeholders.
Drayage rates can vary by as much as 35% from show to show within the same city and the same convention facility. Worse yet is the survey of drayage rates in several convention cities over the past 10 years. Drayage rate increases over the past 10 years in these cities are three times the increases of the cost of labor, and more than four times the increase in the Consumer Price Index over the same period (source Tradeshow Week). These rates have increased so dramatically, that in some cases, it can prove to cause the “trade show death spiral.”
Inherent Threat of Weight-Based Drayage
The trade show death spiral can be caused at shows that unabashedly continue to escalate material handling rates and charges. Increases in material handing rates (along with special handling fees) have the same effect as those we experience with drastic increases in gas prices – demand goes down and customer frustration goes up. Or, in the case of trade show drayage rates, exhibitors, who work on fixed show budgets, bring smaller and lighter exhibits to the show in an effort to maintain their presence. Smaller, lighter displays result in smaller show footprints, a decrease in space sales for the organizer, and a decrease in weight – the primary revenue source for the general service contractor. In addition, the smaller footprint accommodates fewer exhibitor products so the attendee has much less to see and experience on the showfloor. This then leads to shrinking attendance – the ultimate result being a downward death spiral for the show.
Possible Solutions
There are forward looking associations and show organizers that are addressing the problem. It has been noted on this site, as one of our Case Studies, that Pack Expo responded to this threat by taking their general contracting services in-house, and by making material handling charges a part of the booth space fee. This move has proven to be hugely successful for Pack Expo. Not only did the show curtail the death spiral of exhibitor downsizing, the show has experienced tremendous growth in recent years, along with a great resurgence in exhibitor enthusiasm.
Many automotive industry shows require their general service contractor to charge for material handling on a time and material basis as opposed to weight-based charges as a means of keeping their show alive and thriving. We hear that other events are considering this option as well.
Collateral Damage
The weight-based drayage model has another significant downside as well. It’s the damage done to the collective psyche of the exhibitor customer, and their flagging enthusiasm for show participation. Faced with material handling costs that are impossible to predict, or rationalize, the exhibitor can be led to presume that the association/show organizer and its general contractor are out to get them. Stung by drayage rates and special handling charges that don’t make sense, or have no justification, the exhibitor, and their representatives, can be driven to a frenzy of mistrust that can border on hysteria.
Evidence of this was a recent discussion that took place on LinkedIn posted by a display builder. This showfloor supervisor thought that the general service contractor was charging exhibitors for Empty Labels at the show. He was so outraged that he posted his comment online.
After much online back and forth, and gnashing of teeth, the allegation proved to be completely false. What really happened was that the service desk informed the showfloor supervisor (when he came to grab some empty labels) that they didn’t have a credit card on file for the material handling charges. The supervisor mistakenly connected the request for a missing credit card with his need for Empty Labels and overreacted.
While an unfortunate misunderstanding, stories like that one are too often fueled by stories that aren’t as easily explained, or excused. A couple of recent examples include:
• “My client was charged special handling for their entire load as well and they were charged $146/cwt for special handling vs. the $111/cwt normal rate. My supervisor talked to the dock foreman and he produced pictures of the back of the truck before they unloaded. The few items he referred to were not even booth property and did not get moved to the exhibit hall. They were items owned by the driver!!”
• “I exhibit at a show where the cost of drayage exceeded the cost of prepping and shipping the booth to the show, the cost of the I&D at the show, and the annual cost of storing the booth.”
The resulting damage from all of this, real or imagined, is the negative impression it makes upon our industry’s exhibitors – setting up a significant threat to their continued participation.
What’s Next?
It’s time that associations/show organizers take a serious look at this issue – particularly those that are seeing dramatic trends in booth space reductions. Understanding that association / show organizers and general service contractors both need to make a profit, we encourage them to look for a new model for material handling that can better sustain long term growth. Working with their general service we’re confident that solutions can be found that work for the organizer, the GC, and the exhibitor alike. Whether it’s incorporating material handling into the booth space fee or changing to a time and materials basis, it seems clear that the time has come for a new approach.
We just hope that those changes come sooner than later.
I think it is also important to know that there are Show’s out there that are doing something about this problem just not as many as we would all hope for at this point. We learn of more each day that has either gone to a time and materials basis or a fixed fee that is part of their booth space fee. We did an analysis on a recent show that our exhibitor client attended and put down all the costs associated with moving their freight from the dock to their space and then back to the dock. The amount was in the hundreds, yet their bill came in at $34,000.00! They have already told us that they are downsizing next year and will also make the exhibit much lighter. This is exactly what we are trying to stay away from. Everyone loses in this scenario. We all need to keep educating the Associations and Show Managers to prevent this from happening.
Great job explaining the problems our industry is experiencing with drayage. And you are exactly correct on the long term effects of this. Exhibitors have only so much to spend and as drayage increases, spending on other things must decrease. The ridiculous prices, the inability to budget accurately and the confusion this all creates is badly hurting the trade show industry.
But the problems are only one side of the coin. The solutions are even more important. While you touched briefly on what Pack Expo has done, what the industry needs is a solution to grab on to and ride. Perhaps a “Fixed Drayage” system (although I’m sure a cooler name could be found) based on booth space size (e.g. $400 per 10×10). Floor space is sold that way so it is easy for exhibitors to understand and budget for. Shows that use the “Fixed Drayage” system could be endorsed by EIC, promote it to their exhibitors, etc. A logo could even be created. Exhibitors could petition other shows to adopt the system. Momentum could build. Show managers could feel the pressure and have to change.
In summary, we all know the problems, but we need to develop answers and then sell them to the industry. I wish the EIC would be FOR a specific new way or charging for drayage (promote a new way) instead of against something (the current way of charging).
One other advantage the fixed Drayage Model would fix is the open opportunity for the drayage to become leverage for exclusive service discounts or bundling packages where drayage discounts become the chief incentive. What is unfortunate is that this is not a benefit that can be exercised by any EAC who has a client exhibiting on the show floor. Only one entity has the option to directly discount drayage and that creates an unfair and unlevel playing field for vendors who provide service to their exhibitor clients.
Companies are forced to counter this drayage discount by discounting their core competencies. Exhibitors suffer because they are forced to make a financial decision when choosing a trusted partner. It’s then not about who can provide the best service but who has the leverage to discount services that the other company cannot. There are not too many other places where this phenomenon exist. If it does, you can look to the proliferation of exclusive services, where offering a higher quality of service for the exhibit dollar is not the first choice. And that is where the problem lies. Instead of competition causing an improvement in service to attract the buyer, it promotes an air of entitlement that creates business for themselves at the expense of others. Unfortunately most of the “others” in this equation are the other exhibitors who are now paying inflated standard drayage bills to pay for all the discounts offered and all the incentives offered to the show organizer. In this sorry case, the ball rolls uphill. Jim rightfully calls it the death spiral. I like to call it the death viral, because everyone gets infected before the reality that this is a failed business model sets in.
There’s one underlying issue that hasn’t been mentioned in this conversation which is why the show contractors are not only motivated to increase drayage prices, but need to in order to stay in business. That reason can be boiled down to what it costs a show contractor to sign the business in terms of freebies, or out and out cash payments to the associations. Yes you heard it right, they BUY the business, and by golly, if the show contractors have to pay for it, they’re certainly going to get a return on their “investment.” Unless you think that I’m absolving the show contractors of all blame in this, no I’m not. In fact, they’ve doubled down on their investment just to be certain that they come out with a modest or better return, but the show managers have let it happen and now too many of them are counting on those offers of free aisle carpet and registration areas to be profitable themselves. And as far as the show managers, once they’ve taken the money either on top or under the table, it’s pretty difficult to criticize the contractors for doing what they do. The associations have made a conscious decision to allow their own exhibitors, the very people that keep them in business, to take the risk so that they don’t have to. This isn’t the only issue that’s in play here as the ever growing union appetite is another, but if you get the show managers out of the show contractor’s pockets, it would be a start. Good Luck!