Three years from this December, when the International Association of Fairs & Exposition (IAFE) invites the fair industry to the IAFE Annual Convention & Trade Show, it will be in a different city. In October, the organization announced that after nearly 40 years, the major fair industry meeting of the year is leaving Las Vegas.
In 2018, the IAFE is moving south and east to the Henry B. Gonzalez Convention Center and nearby hotels on the Riverwalk in San Antonio, Texas for the 2018 and 2019 events. The organization has three more conventions (2015-2016-2017) that will be held in Las Vegas at The Paris & Bally's Hotels, its host venue since 2005.
Since the inception of the IAFE event about 38 years ago, according to Jim Tucker, CEO & President, Las Vegas has always hosted the annual gathering, although at different venues - first at the Stardust Hotel & Casino property, then in 1974 switching to the MGM Hotel (now Bally's) - then in 1995 switching to the Las Vegan Hilton before making a return to Paris & Bally's.
But it seems that Las Vegas has outgrown the IAFE and showed little interest in giving the IAFE an acceptable proposal. Las Vegas was named the Trade Show News Network's No. 1 trade show destination for the 21st consecutive year in 2014, which noted that Las Vegas hosted 60 of the largest trade shows in the U.S., up from 53 in 2013. Las Vegas is hot among trade show organizers, and a reported $9 billion is being invested in its meeting and convention properties and related infrastructure.
When the IAFE issued its RFP for the its meeting after 2017, Las Vegas was a reluctant suitor and the fair industry felt spurned.
In a letter to IAFE members announcing that the last Las Vegas IAFE convention will be held in 2017, Tucker somberly noted: "Only one Las Vegas hotel submitted a bid on the 2018-2019 Convention. That hotel's proposed room rate was the highest of all responding hotels in the final review."
Tucker told CarnivalWarehouse, that proposal from the MGM Grand, "was approximately 1-1/2 times the projected costs of any other location."
In addition, "the hotel demanded an unreasonable minimum guaranteed expenditure for food and drink at the convention," which he clarified to be " 2 times higher than current expenditures."
The most egregious deal breaker was a new stipulation - which Tucker admitted he had never received from a Las Vegas property - a penalty for members booking at non-convention hotels. According to Tucker, there was a non-negotiable clause that made the association liable for upwards of $250,000 if too many attendees sought less expensive rooms from non-MGM hotels. The stipulation is particularly problematic for the IAFE's Annual Convention & Trade Show. The event is operated concurrently with events by the Outdoor Amusement Business Association (OABA) and the Showmen League of America (SLA). Some conventioneers attend both events, although not renting rooms in the official convention hotel, skewing the room block numbers.
While the other attendance streams for the IAFE Trade Show & Convention have grown, that growth falls shot of fulfilling of the new stipulation. The IAFE even had an exhibition floor of more than 390 trade show booths in 2015, with a total attendance in excess of 4,000, but as Tucker explained, attendance for the has been on an upward trend.
The IAFE event "has enjoyed steady growth the past five years, growing over that period at approximately 2 per cent each year," he said. "We do not have a hard count on overall attendance because many who attend only OABA and SLA functions don't register as delegates of the IAFE convention. We have seen a trend of more OABA and SLA attendees registering as convention delegates, however as they recognize that supporting the convention and trade show makes us all better and promotes communications."
Unlike some industries whose trade shows and convention attendance has been depleted by a sluggish economy and the perceived convenience of teleconferencing and online vendor contracting, the fair industry seems to value face-to-face meetings. Tucker said that "approximately 25 per cent of our attendees each year are first time attendees, and 75 percent have attended a previous convention," a sign the industry is an upward swing and enticing new blood to replenish its professional ranks.
The IAFE may be growing, but perhaps not as fast Las Vegas, whose popularity has surged due to several factors, including high-profile exposure like the Hangover movies and the increase in high-caliber restaurants and entertainment venues. The city has also expanded its hotel room capacity, but the downside is that there are more less-expensive rooms available, which made the new room block stipulation- known as the Attrition Clause -financially unrealistic. "Because of the city-wide aggressive marketing of hotel rooms in Las Vegas, it is very difficult, if not impossible to get a high percentage of the convention attendees to stay in the convention hotel, to avoid the attrition clause penalty," said Tucker. "Our $250,000 figure is based on hypothetically applying an attrition clause to our current contract performance."
What further soured the IAFE on continuing its relationship with Las Vegas was the unprecedented nature of this new clause from its long-term convention partner. "I began drafting convention/hotel contracts for the IAFE in the 1980's," said Tucker. "Attrition clauses, which require the association holding a convention to pay for rooms in its contracted room block if its delegates don't pick them up, were not in common use. By negotiating extensions to the early contract IAFE was able to avoid having an attrition clause through its current contract which ends in 2017. Only one hotel property in Las Vegas submitted a proposal for the 2018-2019 Convention and it included an attrition clause the removal of which we were told was non-negotiable."
With the new room block penalty, combined with higher room and F&B rates, Tucker said that in order for the event to be financially feasible, "we would have to increase delegate registration approximately 40 to 50 percent."
Tucker stated that "Las Vegas had over 41 million visitors last year and the occupancy rate was over 80 percent," and in addition, the IAFE convention -held after Thanksgiving during the Christmas holidays - dates that were usually a slow period for the city's convention business, had become more desirable. "Our long history with the convention properties has helped keep those dates available."
However, Tucker said that the dates have become more coveted. Most Las Vegas facilities were not interested in IAFE business for this period. "Paris/Bally's did not respond to a request for proposal for 2018-2019," he explained by email. "MGM negotiated with us for several months but the estimated increase in delegate registrations mentioned above were made after the negotiations. Their initial response to our RFP was for a food and beverage minimum that was four times our current spend."
The cooling down of the relationship between Las Vegas and the fair industry appears to be mutual. "In a feedback survey conducted prior to the decision made by the IAFE Board of Directors, respondents identified as current "non-attendees" had a decidedly negative impression toward holding the convention in Las Vegas," said Tucker.
He added that "our members have been telling us for the past five plus years that they are tired of the Las Vegas atmosphere, do not like the increasing costs for meals, and will not return to meetings held in Las Vegas because of becoming ill from the smoke inside the casinos and hotel properties."
Also, with the proliferation of casinos throughout the country, gambling is far from unique to Las Vegas. In fact, there seems to be a backlash by IAFE members against the activity that once made Las Vegas so enticing. "Gaming does not seem to hold the interest of delegates," he said. "In fact, for many members it presents an image that does not fit with their community and thus they will not even attend a convention held in Las Vegas."
Perhaps the most long-lasting change will be that that IAFE convention contracts, unlike the most recent one that concludes in 2017 which ran for five years, will be for a shorter term. "Going forward we anticipate contracts for 2-to-3 years per site," he said. "The entire process - from RFPs to site inspection and selection can take up to two years to complete. The practice has been to try to have a convention location booked approximately five years into the future. We have negotiated during periods when Las Vegas was a "buyers market" seeking multi-year contracts to give us the leverage of greater numbers."
But for Las Vegas, the meetings business has become a seller's market and longer-term contracts are no longer in the IAFE's interest. The San Antonio contract is for 2018 and 2019, and it seems that Las Vegas's loss will be the IAFE member and convention attendee's gain. According to the IAFE website, "The Henry B. Gonzalez Convention Center will be the center of activity for the Convention. The Trade Show will be on the ground floor and directly above will be educational sessions, informal networking areas and meal functions. The general sessions will take place in the elegant Lila Cockrell Theatre, also located in the Convention Center. The Convention will be in the new section of the Center, just opening in 2016... Six hotels are all closer to the meeting space than the distance between the elevators in The Paris hotel and the Bally's Event Center meeting space in Las Vegas."