The Evolving Industry Member Trends & Outlook Survey

1. The Evolving Industry Member Trends & Outlook Survey July 1st, 2011 San Diego, California USA Michael Hughes Managing Director, Research & Consulting

2. Objectives • About the Survey & Key Themes • Growth Rates • Revenues & Pricing • Investment & New Development • Client Trends • Conclusion & Q&A

3. About the Survey & Response • In May 2011 AIPC conducted an executive-level member survey, an update to the 2010 “Tomorrow’s Congress Centres” study. • The survey was sent to all AIPC members; 112 responded for a 70% response rate. • Data has high validity, as even a small number of responses in certain regions equates to a high percentage of total venues. • Respondents’ break-out: Europe 58%; North America 14%, Australia 11%; Asia 9%; Africa 4%; Latin America 1%; Middle East 1%. • There will be a new report for AIPC members with all of the data presented by major region of the world. This presentation is just a summary of some of the key findings.

4. Key Themes • Two main risks worldwide – growing competition and economy. Also, concern about oil prices and government restrictions on meetings and other policies. • Geography is destiny. • Competition will increase; the number of events is flat, corporate cyclical. • Event clients are still negotiating more and booking closer to event periods. • Technology won’t hurt major events/meetings; the key users are medical, IT and financial. Also, associations will remain vital and need to meet. • In terms of revenue growth, 2010 ended better than expected. Will the economic recovery be sustained or is slow to moderate growth expected?

5. Strength of the Economic Recovery All Respondents 63% see moderate to strong recovery; 37% see weak to no recovery. But each region is very different. Survey Question: How do you characterize the strength of the recovery?

6. Strength of the Economic Recovery Europe Europe is forecasting ZERO revenue growth for 2011, but 51% of members say the recovery is “strong” to “moderate”. Survey Question: How do you characterize the strength of the recovery?

7. Strength of the Economic Recovery North America In recent surveys of North American event producers and exhibitors, ZERO percent said the recovery is “strong” and only 36% of event producers and 46% of exhibitors said it is “moderate”. Survey Question: How do you characterize the strength of the recovery?

8. Strength of the Economic Recovery Asia Asia is diverse with a segmented growth story – 31% of Asian members say the recovery is “weak”. Survey Question: How do you characterize the strength of the recovery?

9. Strength of the Economic Recovery Australia The Australian outlook is positive. Survey Question: How do you characterize the strength of the recovery?

10. Risks to Recovery by Region Survey Question: The global economy is considered to be growing and recovering from the 2008/2009 economic downturn, although each region of the world and market is rebounding at different rates. What are the remaining perceived risks to the recovery to your business in your region?

11. How the Current Recovery is Different from the Past Economic Rebounds – All Respondents • Key Regional Findings • 57% of N. Amer. respondents say growth has been slower • 90% of N. Amer. respondents say decision/contract time is shrinking Survey Question: How has this economic recovery period been different from past recoveries in terms of the impact on your business?

12. Gross Revenue Growth 2010 by Region The industry ended 2010 stronger than expected with nearly 7% top-line growth The global forecast was for 4.2% growth. Survey Question: By what percentage did your facility's total gross revenues in 2010 change compared to 2009 (or your current fiscal year compared to last fiscal)? 

13. Expected Gross Revenue Growth 2011 by Region Solid rebound expected in 2011, except for Europe. Asian venues see growth slowing. Survey Question: By what percentage do you expect your facility's total gross revenues in 2011 to change compared to 2010 (or your current fiscal year compared to last fiscal)? 

14. Total Attendance Growth 2010 by Region In 2010 attendance worldwide grew slightly less than expected – 1% vs. the 1.6% forecast. Survey Question: By what percentage did your facility's total number of event attendees and delegates in 2010 to change compared to 2009 (or your current fiscal year compared to last fiscal)? 

15. Expected Attendance Growth 2011 by Region North America has many concerns and headwinds, but still optimistic about attendance growth. Survey Question: By what percentage do you expect your facility's total number of event attendees and delegates in 2011 to change compared to 2010 (or your current fiscal year compared to last fiscal)? 

16. Strongest Areas of Bookings & Revenue Growth – Common Themes • Europe • Association and corporate markets, key sectors medical, IT, energy, finance; F&B and gala events rebounding • North America • Mixed view: associations, corporate rebounding; medical events; smaller events and meetings; event services; some say consumer shows and trade shows in industries significantly impacted by recession are still weak • Asia • IT corporate meetings, trade shows and scientific/medical association meetings; events in China and related to the Chinese growth story • Australia • International and national association conventions, events focused on natural resources industry Survey Question: What are the strongest areas that you are seeing currently in terms of event and group bookings or revenue streams?

17. Revenue “Movement” 2010-2011: % of Venues Seeing Increasing Revenue Streams – All Respondents Survey Question: Which of the following revenue streams at your facility experienced an increase or decrease in terms of total revenue growth from 2009 to 2010?

18. Venues with New Revenue Streams 2010 & 2011 The 2010 survey questions asked about adding new revenue streams “in the past five years” – the 2011 survey asked “in the past year”. Are venues running out of revenue ideas? • New Revenue Streams by Region 2011: • Europe: Advertising; consumer-based and entertainment events; expanded services mainly for exhibitors; digital signage; renting space for offices and non-traditional groups to diversify • North America: Digital signage/advertising, entertainment-based events, non-traditional building rental • Asia: Focus on F&B, short “quick” meetings services • Australia: Launching own events and F&B Survey Question: Are you engaging in more incentive or subvention activities (i.e., rent reductions, added value services, cash incentives, hosted functions) than previously?

19. Convention & Exhibition Space Pricing Power Changes 2011 vs. 2010 – All Respondents Mixed pricing power around the world, overall competitive, slower growth markets are seeing eroding pricing power, while less competitive markets can hold or increase rates. Survey Question: In general, is your convention and exhibition space / hall pricing increasing or eroding?

20. Convention & Exhibition Space Pricing Power Changes 2011 by Region Survey Question: In general, is your convention and exhibition space / hall pricing increasing or eroding?

21. More Incentives & Discounts – All Respondents Overall, the need for incentives and discounts is being reduced around the world. Although the need is still high in competitive markets North America and Australia. Survey Question: Are you engaging in more incentive or subvention activities (i.e., rent reductions, added value services, cash incentives, hosted functions) than previously?

22. More Incentives & Discounts by Region • How Sales & Marketing Has Changed – All Regions: • Pursued local business alliances: 50% • Started pursuing other markets: 43% • Switched tactics: 42% • More investment: 40% Survey Questions: Are you engaging in more incentive or subvention activities (i.e., rent reductions, added value services, cash incentives, hosted functions) than previously? And, How have you changed your sales and marketing in response to changing market conditions?

23. Service and Technology Areas that Will Require Investment – Common Themes • Europe • AV, Wi-Fi, network infrastructure, F&B/catering, building services infrastructure improvement • North America • Digital signage, network infrastructure, Wi-Fi, facilities services upgrades • Asia • Mainly AV; secondarily IT infrastructure and kitchens • Australia • AV, IT, Wi-Fi Survey Question: What are the main service and/or technology areas that will require investment by your organization over the next two years?

24. New Building & Expansion Activity 2010 vs. 2011 – All Respondents New building and expansion activity is slowing, while renovations are rising. Still, 60% of member venues are planning a new development project or have one under way. Survey Question: Are you planning a new build, expansion or renovation currently, or is one underway?

25. New Building & Expansion Activity 2011by Region Survey Question: Are you planning a new build, expansion or renovation currently, or is one underway?

26. Government Inclination to Invest in the Industry – All Respondents Survey Question: Do you feel that currently government is more or less inclined to invest in the convention and congress centre industry, especially in terms of facilities and infrastructure?

27. Government Inclination to Invest in the Industry by Region Nearly half of European and North American respondents feel government is less inclined to invest in venue development. Survey Question: Do you feel that currently government is more or less inclined to invest in the convention and congress centre industry, especially in terms of facilities and infrastructure?

28. Arguments Required for Financial Support & Investment – Common Themes • Europe • Competition, market demand; economic impact; “return on knowledge” especially in medical industry; more revenue; sustainability; improved destination marketing, stronger local economy • North America • Economic impact, tax projections, jobs; client meeting/breakout room requirements; combination of traditional tourism metrics and support for local industries; “green” impact of improved facilities • Asia • Book more very large events; lost business; using private funds • Australia • Economic impact, lost business, area improvement; detailed research on value beyond tourism economic impact; capacity and competitor developments Survey Question: If you are planning a new build, expansion or renovation project, what kinds of arguments do you think you will have to make to generate the required financial support and investment?

29. % Event Clients Using Virtual Meetings More Regional Findings, % Seeing More Virtual Meetings Europe: 41% North America: 31% Asia: 46% Australia: 29% • Impact of virtual meetings, common themes: • Very mixed opinion… • Some feel it’s a compliment to physical events, some see minimal impact; others see a serious growing threat; others don’t know… • May compete mostly with smaller events Survey Questions: Are you seeing more of your event and group clients incorporating virtual meetings during their physical events in your facility? And, What do you see as the impact of virtual meetings and events on the convention and congress centre industry over the next 2 to 3 years?

30. Key Event & Group Client Trends – All Respondents Shorter booking windows 96% of venues Increased negotiations 90% Requiring more technology capabilities/services 73% Requiring higher-quality food and beverage 51% Focusing more on event design and ambiance 31% Requiring attendance promotion assistance 31% Asking for more PR assistance/outreach 30% Longer booking windows 4% Strongest Event and Group Types Today: Associations Local corporate meetings National and International corporate meetings Entertainment events Survey Question: Which of the following trends are you seeing from your key event and group clients?

31. What Events Need from Venues • Event Producer Venue Requirement Changes Over Past Few Years • Additional, higher-quality meeting rooms and improved Wi-Fi and Internet access • Improved F&B and more options • Improved esthetics and ambiance • Higher-quality AV • Improved transportation to the venue • More customer service attention with focus on attendee/exhibitor use of technology • Using meeting rooms as flex space Source: R7M

32. Greatest Challenges All Respondents Good news: only two core challenges. Bad news: The competitive industry is becoming more competitive. Survey Question: What do you see as your facility’s greatest challenges over the next three to five years?

33. Greatest Challenges Europe No growth expected this year in terms of revenue or attendance. Survey Question: What do you see as your facility’s greatest challenges over the next three to five years?

34. Greatest Challenges North America More challenges seen than in Europe, concerns about rising travel and hotel costs. Survey Question: What do you see as your facility’s greatest challenges over the next three to five years?

35. Greatest Challenges Asia Number of concerns including airfares and changing government priorities. Survey Question: What do you see as your facility’s greatest challenges over the next three to five years?

36. Greatest Challenges Australia Highest concerns about growing competition; also concerned about air travel and hotel rates. Survey Question: What do you see as your facility’s greatest challenges over the next three to five years?

37. Percentage of Centres “Better Integrating and Working with the Community” • What venues are doing, common themes: • Better and more frequent communication • Marketing the venue to local companies and groups • Working with government more closely • Working with local businesses, universities, government agencies, industry associations, etc. • Joint marketing and sharing of promotional activities • Support of local charities; active with chamber of commerce Survey Question: Are you working to better integrate and connect to the community, such as with businesses near-by the venue and key institutions? And, If you are working to better integrate and connect to the community, what are you doing specifically?

38. Elite Global Events’ Core Value Propositions This is how leading events want to be perceived. How can venues match these requirements and add value? Source: R7M Research & Consulting

39. Conclusion • Real recovery underway but uneven around the world. • The new building and expansion trend is slowing but still underway – continued shift to renovations and refurbishments. • Governments don’t want to invest but are desperate for economic development. Plus, venues wear-out, get out-dated more quickly. • New revenue stream ideas and options are looking limited. • Still a buyers market in most regions, and associations are the strongest event sector. • Nearly all event and group types are negotiating more.

40. Conclusion • Is the growth in 2011 mainly from “easy comparisons” or is a more sustained recovering happening? • Bad news: during the boom period of 2004 to 2007, in North America, conventions and exhibitions only grew 2% to 3% annually. • Good news: There’s not much concern about the health and outlook for the key event and group sectors. • The main issues are macro: the economy, oil prices and competition.

41. Q&A