Overview: Convention Business in Chicago
By Theodore Mandigo Professor, Kendall Coillege | September 13, 2015
An understanding of the cycles in the convention and meetings business and current trends in this important segment of the market is important to the profitability of hotel properties with significant convention and group meeting business. This bears further discussion since it represents about half of the room business in the city of Chicago and represents a significant share of the hotel business for larger properties and those located proximate to major meeting facilities.
Convention business remains the dominant source of demand for the Chicago market. We estimate that it accounts for approximately 48% of all demand for the central business district, or 4.9 million room nights out of a total of 10,250,000 for the calendar year 2014, and convention room night demand is expected to be about 5 million for this year, out of a total demand for the central business districts 113 properties (currently) with 38,538 rooms, up from 2014's level of 37,049 rooms in 106 properties. That's approximately a 2% growth, a level we expect to continue for the foreseeable future.
Here's our take on the convention business. It has changed dynamically but the changes are only now being appreciated. Conventions and traditional trade shows, as we knew them, are shrinking along with corporate budgets and increasing technology applications in the wholesale trade and manufacturing areas. In general, attendance is down, length of shows is shortening, length of stay of both exhibitors and buyers is shorter, and exhibit space is shrinking.
Here's the basis for those statements: technology and the pace of innovation has changed the function of the largest shows. Historically these were the "roll-out" for the new model year, and major organizations staged announcements based on the major shows to create maximum impact. We all remember the big Detroit Auto show when the latest modes were presented to the public and the press attention and consumer interest in the "latest models." The focus on release of new products was historically a major focus of the events.
Look at the roll-out of the initial Apple products in the mid 1900's where Steve Job was the key focus at the consumer electronics show and everyone held their breath to see what new products were being introduced. With the current pace of evolution in technology that impacts products across the board, companies can no longer "wait for center stage" to introduce products because they will lose months of revenue and risk obsolescence. Now the trade shows become a platform to provide an opportunity to "test drive" and compare products, evaluate features and contribute to the purchasing cycle by permitting "kick the tires" direct comparisons.
It's still important to be represented on the floor and it's still important to walk the floor. However, it's not done the old-fashioned way. Today's buyer is more informed and prepared for the trade show, having done a virtual search before going to the show, and even a logistical plan to be most efficient on the floor. This means that a buyer team of 5 to 7 persons at a show has shrunk to 2 to 3, and what was once a 4 day stay accomplishes as much in a 2 day stay.
This is matched from the exhibitor side, where massive displays were needed to exhibit the full range of product offerings. In today's environment that can be accomplished using technology including direct links to the factory and the home office to expand contacts and information available. Today only the key and innovative products are exhibited and displays including touch screen and large screen displays are introduced to provide information on the full range of products without requiring the extensive floor space of the past. Exhibitors control costs and maximize the impact using technology on the display floor within a much smaller exhibit space. Contact information is gathered electronically, and reduced booth coverage can handle the trade floor traffic. It is interesting that anecdotal information indicates that the quality of the buyer and the dollar volume of transactions remains strong, boosting the perception of value of these trade shows, but on a different scale.