Fewer, Bigger Events Means More Money, More Margin

By: Jacob Cohen Donnelly

Event powerhouse Hyve Group transformed its business by slashing its portfolio from 269 shows to just 50—and saw average revenue per event soar from £500,000 to £3.3 million (£134m to £165m in revenue). They’re not alone: Questex’s life sciences division drove financial growth while reducing the number of events it hosts from 75+ to 20.

The “less is more” approach comes down to very basic financials and this strategy is something investors are hungry for. Being just another event rather than the event in your industry can be the difference between getting acquired and not. And, just as importantly, due to the fixed costs associated with events, having more attendees and sponsors at a single event can mean margins improve. 

Consider your typical trade show. On the fixed side, some examples include:

• Venue
• Audio/Visual
• Insurance
• Technology

And on the variable side—costs you accrue as you add more attendees or sponsors—some costs include:

• Booths
• Food & beverage
• Promotional materials

There are costs that you’ll have irrespective of the number of people at the event. As you add incremental exhibitors or attendees, your revenue—and margins—rise.

Take the AMO Summit as an example. In total, the event generated $330k in top line revenue with costs of goods sold (COGS) of approximately $177k. We generated ~$153k in profit, which comes out to approximately a 46% margin.

But here’s the thing about The Times Center. For this year, it accounted for over 40% of the total cost of the event. What if we had sold more tickets? The theater can actually hold 378 people whereas we only had ~235 people there (speakers, sponsors and attendees). Let’s assume we sold an incremental 100 tickets for $1,200 a pop. This is where things get interesting.

Revenue would have grown to ~$450,000, up from $330,000. This isn’t all profit because I had to cover catering for all of those people. I did the math and the variable cost came out to $413 per person, which increases our COGS to ~$218,000, up from $177,000. That’s an increase of only ~$41,000 while adding revenue of $120,000.

In that new scenario, my profit margin gets much stronger. I’m in the same venue hosting the exact same event, but I generate an incremental $79,000 and grow my margin from 46% to just over 51%.

My event is small, though. At CoinDesk, we saw this play out even more aggressively. We were at the Marriott Marquis in New York in 2016 and 2017. We grew attendees from 1,200 to 2,400—with an average ticket price of over $1,000. Our food and beverage costs went up, but the venue rental stayed the same, so margins improved.

This strategy only goes so far because at some point you run out of space in your current venue and have to make a decision about upgrading. That’s what happened between the first and second AMO Summits. In year one, we generated a 53% margin. But we had maxed out the space, so we had to upgrade. It was the same at CoinDesk. In 2018, we had to go to the Hilton Midtown, which was significantly larger and more expensive. 

This also goes for the operating expenses associated with hosting events. As the event gets bigger, the costs of your full-time event staff become a smaller percentage. Yes, you may need to hire additional staff as it gets bigger. But this, like the fixed COGS, doesn’t grow with every incremental ticket or sponsor sale.

On the M&A side, the dynamics are similar for a couple of reasons. The immediate is that buyers are willing to pay a premium for the top event in a respective industry. In Collingwood’s recent Media Acquisition Report, they discuss this. “Tradeshows and events with a scalable exhibition still achieve a premium compared with pure-play conferences.”

For conferences with 1:1 meetings generating $4.5m+ in EBITDA, deals got done at an average of a 9x multiple. Trade shows with that EBITDA saw an 11x multiple. That’s the difference between selling for $40.5 million and $49.5 million.

And in some cases, Collingwood found that the multiples are even better:

At the high end of the market, there were a flurry of platform deals: Easyfairs (Inflexion and Cobepa); Nineteen Group (Phoenix continuation fund); and Informa’s take-private of Ascential. These deals, all done at multiples of 13x-15x, are approaching the valuations achieved pre-COVID in the Events area.

Being number one in your market and having scale seriously matters when it comes time to do a deal.

So, does this mean that the AMO Summit is going to become a massive trade show? If we were building a business purely in a spreadsheet, then yeah, it’s a no brainer. But fortunately, spreadsheets don’t run businesses.

Losing sight of the audience experience, which based on user feedback is pretty high for the Summit, is exactly how an event dies. If you’re so focused on scaling your event so your margins improve or it’s appealing to a buyer, you’ve taken your eye off the one thing that matters more than anything: the attendee.

We’ve all gone to bad events. The last thing you want is to be known for having a bad event. That greed that comes from trying to eke out a little more margin can be the difference between someone coming again next year or not. Events businesses don’t die overnight, but one day, you may wake up and see your event has a lot of empty chairs.