EUROPEAN VENUES: Slow boat to privatisation - Europe's venues have a history of municipal ownership, which could explain their reticence to go private, says Chris Mooney

One legacy of Lady Thatcher's reign is her belief that 'you can't buck the market'. The end of nationalised railways, airlines and utilities gave the private sector the chance to snap up infrastructures and customer bases, while aiming to improve product and efficiency. The result was stiff competition between providers and more choice for the consumer.

One legacy of Lady Thatcher's reign is her belief that 'you can't buck the market'. The end of nationalised railways, airlines and utilities gave the private sector the chance to snap up infrastructures and customer bases, while aiming to improve product and efficiency. The result was stiff competition between providers and more choice for the consumer.

Within that context, the exhibition markets in Europe have been conspicuously slow to embrace private enterprise. In France, Italy and, in particular, Germany there is a common history of municipal ownership, with most exhibition centres owned, at least in part, by governments, municipalities or local chambers of commerce.

But Reed Exhibition Companies (REC) caught everyone by surprise in July with a deal with Messe Berlin, which gave them an inroad into the German exhibitions market and took control away from the local authorities for the first time.

Beyond raw economics, there's also an impending legal threat to municipal ownership of exhibition centres. Under the new common market rules, private centres will be able to challenge the state-owned venues over unfair competition - as these centres continue to receive government financial subsidies. European venues will have no choice but to move forward if or when the new rules are applied.



Change is imminent

NEC group development director Simon Mason is in no doubt that change is imminent. 'It is nothing less than the unbundling of the in-house system of exhibition organising which is prevalent in many parts of Continental Europe,' he says. 'This business is not owned by exhibition centres, or by organisers. It is owned by exhibitors whose sole interest lies in contacting visitors - by the most effective means possible. To this end they will climb any mountain, cross any stream and follow any rainbow.

'Unfortunately, the same cannot be said of the visitors who want exhibitors to come to them. They will travel a maximum of about two and a half hours, preferably by car and, for the most part, that is your lot.

'So the larger show organisers need to become international and pan-media. If not, they will find it difficult to operate outside their geographical boundaries'

Against the context of a more global market and a smaller number of major customers, attracting private investment and breaking free of municipal restraints is becoming the obvious way of finding investment to keep the venue's offering at the high level it needs to compete.

European Major Exhibition Centres Association (EMECA) vice-chairman John Cole says: 'There's a need for a more international approach by all those who were conceived more in terms of a national market. I think each one is at least exploring the best technique for them to move towards some form of public-private partnership - if not further. But there needs to be a balance.'

The security that state subsidies bring cannot be underestimated. Large-scale, innovative exhibitions need large-scale facilities. And to have large-scale facilities you need major, long-term investment. Leaping into the private sector, which by its nature cannot guarantee long-term support and funding, means that sort of money is not easy to come by. Especially given the limit to the amount of income coming directly from the exhibition business year on year.

And municipal ownership is a form of infrastructure delivering benefits beyond funding. Not only can local political clout secure long-term funding, it can also offer help in finding accommodation for visitors, granting licences and planning permission and myriad services.

Roger Shashoua is managing director of Expocentres, which is developing facilities in Warsaw, Budapest and New Delhi. 'The city municipal exerts a lot of influence in the way the centres are run,' he says: 'For example, trade fairs provide a good PR vehicle for many politicians (some retired) many of which are on the trade fair committees. Trade fairs are also considered an important source of income to a city's economy.

But privatisation will be inevitable because state-owned venues are not competitive. Many of the larger venues are not run cost effectively or on a commercial basis.

'Privatisation will be successful, but there will always be, say within the next ten years or so, some element of public ownership because of the city and municipal politics tied to the centres.'

As Europe faces a tough economic battle for customers, how are exhibition centres reacting to the push for privatisation?



Tradition of civic enterprise

Germany has the strongest tradition of civic enterprise in the exhibition market. Few of the big venues are privately owned. The Frankfurt, Dusseldorf and Hanover messen are all wholly owned by local authorities and chambers of commerce.

On the surface Germany's mainly municipally owned messen have been a success story, generating an annual turnover of more than pounds 1bn (DM3.5bn).

High unemployment and investment in the east are huge tax burdens to the German population, and that is placing pressure on the public messen to stop draining resources and start making profits.

NEC's Mason says: 'It's a different concept. It's more a tradition in Germany. The concept that, say, one of the big German messen might one day sell its exhibitions to independent organisers is difficult to imagine. Objectors can point to several legal, technical and economic reasons why this would be very difficult.'

But James Elliot, the UK representative of Messe Berlin which has broken the mould with its deal with REC, sees the wind of change reaching even as far as the musty Germanic mayoral chambers.

'Keeping public funding is crucial to staying in the relevant areas. And the reason there's an exhibition centre in any area is because one was needed in the first place - the north and east of Germany for Berlin then Munich for southern Germany. But that's not enough - increased competition in a harsh economic climate means action is now needed.

'Markets are becoming similar, and national boundaries are becoming less important. There are so many international exhibitors now who come to all the shows and they don't see a huge difference between them. They're all looking to take any opportunity, and we have to be ready.

'The deal between REC and Messe Berlin took a lot of people by surprise. Deals like that are going to become more common, there's no doubt about it.'

On the other side of the fence is Silke Reipe, UK representative of Messe Frankfurt, a completely publicly owned messe. She recognises the mounting pressure to make money and relieve the burden on local authorities and ultimately the public themselves.

'Frankfurt is owned by the county and the city, and they've been thinking of selling it. The discussion has been around for a while now but nothing's been done about it. The reason is to free some cash to allow spending.

'Frankfurt is building more halls and it could do with more capital to offer more, and even expand overseas. It does give a lot more security to be publicly owned - but it is something that's going to have to change to go with the competition.'

Palais des Congres de Paris is one of the few completely privately owned exhibition halls in Europe and is a good example of what may happen across Europe in the near future. Sales and marketing manager Eric de Gal is in no doubt as to the strength of his position.

'In France we have seen people shifting to privately owned venues because they recognise they'll get a more professional service which is not influenced by local political considerations,' he says. 'In Germany the local authorities are getting more involved in the large trade show venues and organisations, which causes inefficiency and delay in the service.'

And, as Eric points out, a privately-owned centre in a big city will benefit the city authorities in different ways.

'It makes sense for the municipalities to allow completely private and professional exhibition centres. If we are hosting an event, for example the International Water Association for 3,000 people, the professionals arriving in Paris will need transport, food, sleep and drink, and the city's going to derive indirect revenue in taxes. And best of all, the people of Paris, don't have to provide any subsidies to derive that income.'



Informal partnership

To demonstrate exactly how local professionals benefit from exhibitions, the main shareholder of the Palais Des Congres is, in fact, the Paris Chamber of Commerce and Industry. It has invested pounds 50 million over the past three years. This type of informal public-private partnership with the private company in complete control is a model we may see more of in the coming years.

Irrespective of ownership, size matters. In Holland, Amsterdam RAI is privately owned, internationally renowned and hugely profitable - something that the Maastricht Exhibition and Congress Centre (MECC) was aware of when it entered into a cooperation deal in 1996. MECC is now 75%, owned by the RAI Group, with 25 % remaining with the local government of Maastricht.

MECC sales and marketing manager Edwin Ummels has been made aware of the benefits of private expertise in marketing and international expansion.

'Amsterdam RAI is constantly looking for worldwide integration and takeovers, and it provides us with opportunities that simply weren't there before 1996,' he says. 'It works well - effectively it's a very successful public-private partnership. And the regional influence is helpful because if there are restrictions they can give permissions and licences.

EMECA's Cole quotes another example where public-private cooperation is working well - Messe Basel. 'Since the venue changed its corporate structure, and updated its shareholdings, the city of Basel remains a 30% shareholder. And they're proud of what they're achieving in terms of the economic impact of that facility. It's been a great success.'

Clearly one of the driving forces behind the rush for private funding is the need for international expansion and clout in an economic world where boundaries and locality is becoming less important. And the result is expansion into markets previously considered minor.

Expocentres' Shashoua says. 'Our objective is to provide modern, smaller (5,000 sq m) purpose-built facilities that cater to the industry's demand for more space in these countries. Lack of space and venue monopolies on themes and shows has created the opportunity for developers like us to offer organisers an alternative option to launch their events in these countries.'

So, is the end nigh for the old municipal structures? Will the market sweep away hundreds of years of infrastructure and tradition to preserve the all-important bottom line?

NEC's Mason has some words of warning for those rampaging ahead. 'The whole exhibition organising industry in Europe will be privatised. But the first businesses to do so will lose out as they will be forced to compete against other shows, which are, effectively, subsidised by other local stakeholders. So too will the last to privatise, because delay will prevent them from diversifying fast enough into foreign markets and other media (especially journal publishing).

'Every day that goes by allows the established independent, pan-media, organisers to consolidate their positions. Therefore, at some point the dam is going to break and there will be a rush to sell to the likes of REC.

'Were this to occur, independent exhibition organisers would be best placed to exploit the opportunities. And there are more independent exhibition organisers in the UK than in the rest of Continental Europe put together,' Mason concludes.

So in ten years' time, there's every chance we could be working in a fully privatised worldwide exhibitions industry with little regard for national boundaries, local politics or subsidy. Lady Thatcher would be proud.



PLANNING FOR THE FUTURE

MESSE BERLIN

Exhibition area: 160,000 sq m

Strategy: joint venture with Miller Freeman Asia for a travel and tourism show and joint venture with Reed Exhibitions Companies. Open to overseas organisers for shows that complement its portfolio



MESSE MUNCHEN

Exhibition area: 140,000 sq m indoors, 280,000 sq m outdoors

Strategy: doesn't attract overseas organisers and is expanding its business into Asia and China



MESSE BASEL

Exhibition area: 142,900 sq m

Strategy: agreed a partnership in December with ZD Events to form Orbit/Comdex Europe, Europe's largest IT exhibition. Actively looking for future partnerships



PALAIS DES CONGRES (Paris)

Exhibition area: 19,000 sq m

Strategy: Larger events using maximum capacity, rather than multiple clients



MECC (Maastricht)

Exhibition area: 30,000 sq m

Strategy: Aiming at exhibitions which want the venue to double up as a conference site.




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