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General Contracting 101
The major issues facing general contractors
This issue's focus is on several important issues facing general contractors (GCs), companies "officially" designated by show management to provide labor, equipment and services to exhibition managers and exhibitors at an event.
By contrast, an independent contractor, also called an exhibitor-designated contractor, is any company other than the "official" contractor designated by show management and hired by the exhibitor to provide event services, including I&D, photography, floral arrangements, models/demonstrations, audio-visual, electrical, etc.
Familiar with the key people who manage shows, GCs work hand-in-hand with event managers, and do everything from I&D and drayage to hanging signage and banners, laying carpet and providing booth furniture. GCs also help clients avoid costly on-site modifications by keeping up the rules and regulations - often subject to updates and new legislation - that affect show construction and preparation.
Nevertheless, GCs face challenges both old and new. Through interviews with two industry executives, this article explores five major issues facing GCs today: typical misunderstandings that arise between GCs and exhibitors; bundling; the trend toward smaller venues and away from mega-events such as E3; and the possibility of convention center involvement in materials handling.
A separate Q and A segment follows the main discussion.
Misunderstandings between GCs and exhibitors
Bill Nixon Jr., president of Easton, Mass.-based Teamwork Labor Services Inc., a GC/I&D company, said a careful reading of the show kit can help prevent many of the common misunderstandings between general
contractors and exhibitors. He said Teamwork has a fully staffed customer
service department ready and willing to answer all questions exhibitors have
about their kits.
"All too often, exhibit managers are so strapped for time, they don't have the luxury of thoroughly reading the show kit," Nixon said. "If that's the case, they may misunderstand deadlines, shipping instructions, or rules and regulations."
Fortunately, technology has come to the rescue: Nixon said online capabilities for floor plans and show kits are helping eliminate confusion and saving exhibit managers a good deal of time. "By allowing exhibitors to order services online, we have simplified their lives, saving them time and aggravation," he said. "And we fully believe that the more educated exhibitors are, the better their experience will be at the show."
The stress factor
But misunderstandings still occur and generate stress on both sides.
"There's a tremendous amount of stress for both the GC and the Exhibitor," said Sal Longhitano, vice-president of sales and marketing for New York-based National Convention Services, LLC. (http://www.ncsevents.com), said, "There's a strict window of time for the exhibitor to prepare for the show, and also for us to move the show in and out," he explained. "That can generate a lot of frustration on both sides."
Longhitano said the solution comes down to communication.
"Exhibitors need to understand that most GCs are aware of and do care about the huge expense it involves for the exhibitor to attend a show," he said. "But there's often a feeling that the GC or someone working for the GC just doesn't care. What's crucial to keep in mind is that many people in the GC's employ are union workers. They don't work for the GC on a regular basis, so it's important for an exhibitor to stay in touch with someone from the GC's management team, especially when there's something the exhibitor needs and he believes it isn't being provided."
Longhitano agrees that online access to floor plans and show kits online is a boon to both exhibitor and GC. "It speeds up input from exhibitors and allows them to be interactive with us," he explained. "For a number of private and special events, they can go in and change floor plans themselves rather than wait for one of our designers to do it. It speeds up the process and the exhibitor often gets more of what he wants.
Bundling
Bundling for exhibitors has been defined as combining different types of services and products into one package, leveraging some costs into other costs.
"Teamwork does not and will not bundle services," Nixon said. "It's a very dangerous practice that's going on in the world of general contracting. By engaging in this practice, general contractors are flirting with disaster, since they're inviting scrutiny from the federal government. It's a flat-out violation of anti-trust laws," he stated.
Longhitano stopped short of outright condemnation of the practice, but he clearly has concerns about its ethics and legality, depending upon exact circumstances.
"I'm not a big fan of bundling or packaging," he said. "It's a way to try to capture business you didn't have. And because there's usually a discount structure involved, you may be turning profitable business unprofitable, and reducing its quality when you package it with other services."
Asked if such bundling is restraint of trade or merely healthy business enterprise, Longhitano said, "Depending on what you're bundling and how it's bundled, it can be restraint of trade. For example, drayage is an exclusive service, so combining it with other services at an overall discount when other companies can't provide drayage, gives an unfair advantage."
He added, "If you're doing your job properly and pricing your services properly, there should be no need to bundle. When you're the GC, it's easier for an exhibitor to use you for all the services. National Convention Services' belief is that if you service your client, do your job right and price it right, you won't need to scheme to get the business."
The trend toward smaller venues and away from mega-events (like E3)
"Teamwork sees this trend as a huge opportunity instead of a negative," said Nixon. "Many other general contractors aren't positioned to handle the high level of customization, account management and customer service demanded at some of these smaller events. And many of these customers are Fortune 500 companies, used to the red carpet treatment. They don't want just the standard tradeshow look and feel. They want something different, new and exciting, and they want the audience to be wowed. By offering boutique-style services, we can help them achieve that wow factor. We're excited by this trend and we're perfectly positioned to handle client needs."
Longhitano also found a silver lining in the trend toward smaller shows:
"It substantially reduces revenues generated from a show the size of E3 when it downsizes, but it can create opportunity for new business," he said. "Depending on the scope of the show, it may create rental opportunities for properties, plus larger scale audio/visual and media planning. And if a GC wants to adapt, it could also present opportunities for involvement in event planning and managing hotel and registration for the event."
He also mentioned a spin-off effect.
"When a show the size of E3 downsizes, it gives way for new events to develop," he said. "Spin-off shows and smaller lateral shows come in. Comdex went away, but now you see strong growth in the satellite entertainment shows and home computer entertainment shows like CEDIA."
The possibility of convention centers going into the materials handling business
"We've seen this in the past, but we don't see it as a trend going forward," Nixon said. "That's partly because of the complicated logistics involved and partly because of insurance requirements. Also, we feel convention centers should focus on what they do best, which is to provide venues, and let us handle what we do best, which is to handle the onsite logistics."
Longhitano agreed. "In the interest of the exhibitors, I hope convention centers won't try to manage the handling of materials and the responsibilities of a GC," he said. "Moving a show in and out is very complicated and isn't the business of a convention center."
He said quality of service at a venue typically matches level of competition, and that the very presence of a monopoly means there is no motivation for that company's employees to work any harder or try to service clients any better when they can take the attitude that the clients have no other choice. The result, Longhitano said, is typically a pronounced decrease in the level of service.
"If you look at any closed hall in the country, Boston and Cleveland for example, exhibitors are reluctant to go there," he said. "That's because they know they'll have a much harder time in those cities because the level of service in them is minimal compared to what they can get in open cities."
Further, he said that since most centers are either state- or city-owned and their purpose is to generate hotel stays and to rent space, there's no benefit to either shows or exhibitors for the centers to become involved in the management of materials handling. "It would neither reduce costs nor improve services to the exhibitor," Longhitano stated.
Q and A
Why is the GC frequently made out to be the "bad guy" and how do you counteract that perception?
Nixon: By focusing on a higher level of customer service, Teamwork is changing the negative perception of GCs. Many other GCs focus only on servicing the show management company or association. Teamwork understands that not only is the association our customer, but all of its exhibitors are our customers as well. Our employees know that if the exhibitors are pleased, it reflects well on the association. And if the association is pleased, that means return business for everyone. By treating everyone on the showfloor with respect and professionalism as well as a high level of customer service, we're changing the atmosphere of the tradeshow floor.
Longhitano: Historically, GCs have often been perceived as "the bad guys." At one time, the GC was often thought of as the "monopoly" at the show, and there was not much exhibitors could do about it. They just had to use the GC for most of the services at the show.
The good news is that this mentality gave rise to independent I&D companies, which gave exhibitors a choice of services, at least on the labor side. I believe the same holds true today for the GCs themselves. Although there aren't a lot of choices, the business has become so large that show managers are paying attention to the service a contractor provides. They will - and have - changed a longstanding contractor at a show. An example is the Chicago Auto Show, which just changed from Freeman to GES.
In that way, show management has helped to change the GCs from being seen as "the bad guys" to being much more service-oriented companies. Show management also provided a way for completely service-oriented companies coming from the I&D side, like National Convention Services, to expand and take our high-level brand of client services into the GC world.
Industry studies show that about 30 percent of exhibitors order additional items and services onsite at added costs of 30 to 50 percent. How does this affect the GC?
Nixon: Ordering services onsite is costly for everyone. By being prepared ahead of time, exhibitors can save themselves a lot of money. One of the ways Teamwork assists exhibitors with this is by calling each and every exhibitor before the show to make sure that all orders are placed and confirmed. This helps us to be prepared and avoids any last- minute, costly rushing around, which in turn saves the exhibitor money.
Longhitano: Taking orders onsite is not as much of a moneymaker as many people think. There are large costs associated with having those services available onsite. Take labor, as an example. A GC has to have manpower on standby in case someone needs more help. But if those workers don't get a call, the GC must still pay them. The same thing holds true for rental equipment. It must be trucked in, moved and stored. If nobody needs it, you still incur the cost of having it on hand. Higher onsite costs are actually fair: the alternative would be to raise standard prices and have no up-charges onsite, but then you'd be penalizing the exhibitors who were able to get their information in on time.
What factors beyond the GC's control most impact your work?
Nixon: Time is the most important factor impacting our business. The timing of move-in and move-out schedules can be a huge cost factor for exhibitors, show managers and general contractors alike. Obviously, if we can move in and out of a facility on straight time, everyone saves money. But that can't always happen. Convention center scheduling determines how much time we have to move in and out of the building. It can force us to work on overtime. Unfortunately, this cost is then passed on to the show managers and exhibitors, which gives people a negative perception of the general contractor. But this is beyond our control.
Longhitano: All of the above impact a GC. Usually, you would know the move-in and move-out dates prior to bidding on a show, so overtime costs should be figured in. But if it's a multi year-contract, hard dates often don't exist two and three years out.
Also, rapidly changing fuel costs have added to the cost of trucking. That's definitely a factor when moving freight from advance warehouses to show site, especially if a marshalling yard is too far from the facility.
And there are many other factors beyond the control of a GC that affect the move-in. Weather is a big one. We have done many shows where the install had to be delayed due to a snowstorm, hurricane or other extreme weather. Such conditions make it difficult for workers and clients to get in, so crews are reduced and you run much more overtime than anticipated. We were up against a hurricane in Miami last year at the auto show, which forced us to bring in 30 percent more manpower from other cities to combat anticipated shortages in local labor. It was a very large expense that we can't recoup, but our clients had to be serviced.
How are company transitions, including buyouts and acquisitions, plus personnel turnover (often resulting in bringing in younger, less experienced managers) affecting GCs?
Nixon: Teamwork has definitely observed this trend in the industry. Again, instead of seeing this as a negative, we see this as an opportunity. We encourage them to ask questions and learn from our experiences. By offering a higher level of customer service, we can walk them through the process of how to read through the show kit, how to order services, and what exactly is going to happen once they hit the showfloor. We take the extra time to help make the experience a pleasurable one for them.
Longhitano: The aspect of younger, less experienced personnel is not always a bad thing. New ideas often come from the inexperienced. In our industry, we often do things in a certain way, but no one really knows why other than to say, "That's the way it's always been done." I think new people bring new ideas, and often valuable ones.
As for buyouts and acquisitions, they're easy ways to grow, but often a company loses its personality and identity in the process. You can wind up with a very large company that's lost the ability to make decisions not completely revenue-motivated. Throughout National Convention Services' 20-plus years of development, we've focused on preserving the same family business feeling our clients have grown to love. That feeling is hard to maintain when merging different corporate cultures.
What do you see as the strengths of your company in this business? Weaknesses?
Nixon: Teamwork's strength and what sets it apart in the industry is our team and its focus on the customer. Because many of our employees started in the tradeshow industry as installation and dismantle specialists, we approach the general contracting business from a different perspective. I&D takes more focus and customer service skills. It demands individualized attention, creativity and the ability to think on your feet.
Once you're trained to think that way, there is no other way. Our employees have taken that thinking to a whole new level with general contracting, and clients are taking notice. It isn't just about price, especially with smaller, special events. It's about service, focus, effort and concern. It's about creativity and the ability to customize services - giving the customer options and suggestions. Teamwork has the ability to do all of these things. And we have the skilled labor force to back it all up. From pre-show planning through the execution of the event, Teamwork is able to handle every detail for the customer flawlessly.
Longhitano: Our strength has always been in our people and our service. We have grown over the last 20-plus years mostly by word of mouth and through the loyalty of our clients. They know that no matter what the situation, no matter where or when, they can depend on us to meet any request. They know we'll make it work for them, that we are their partners in the good and the bad.
If there's a weakness, it comes from the same service-oriented mindset. If there are last-minute requests, or there's an emergency at a show or event, our bottom line is never the driving factor. Helping our client out is always our No. 1 priority and profit is the last concern. These things are often not moneymakers for us. On the bright side, we're building long-term partnerships with our clients.
What new opportunities lie ahead?
Nixon: As the larger tradeshows dissipate, many companies are noticing that the best return on their investment is the private events we've been seeing lately. They're having their own shows, either in addition to or instead of attending established tradeshows. That way, they can invite current customers and target customers to their venue of choice and have a captured audience free from the influence of competitors. This continues to be a great opportunity for Teamwork as well as many other service providers in the tradeshow industry, such as graphics vendors, PR firms, event managers, hotel personnel and others.
Longhitano: There are always opportunities for both new shows and new types of events. As the industry changes, you need to adapt. We're looking toward new décor to upgrade the look and feel of shows and how they lay out, and we're steering away from the typical pipe and drape or Octanorm with aisles. We're putting emphasis on providing more intimate and comfortable space in which to conduct business.
As some of the larger shows give way to smaller more intimate events, there's a greater need for better décor. Also, some shows are revising whom they target and how. Some auto shows and manufacturers have started auto shows in motion, often outdoors in a smaller environment and targeting specific groups. Such events yield new areas for motivated contractors to explore and not just look to business as usual.
Is your company facing any specific threats to its bottom line from competitors or other factors?
Nixon: What competitors? The best thing for Teamwork is the lack of competition in our specialty niche.
Longhitano: In the last few years, the business has changed to a very purchase-driven world. It makes it difficult for us when service is less important than "the numbers" to some clients.
This article appeared in November 2006 issue of Exhibit City News.
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