Events are growing in number, digital tools have exponentially increased reach and a new generation of consumers is championing live experiences – so why are so many agencies closing up shop?
“Generally speaking, the value chain is doing well,” says Oscar Cerezales, chief operating officer, APAC, MCI Group. “Hotels, convention centres, tech companies and so on. PCOs in general are stable, travel management companies as well. But there are a few players facing issues - one of them is event agencies and planners.
“Some international agencies are shrinking while others are succeeding. Very few face no change. Among those that are suffering, the key reasons are often an obsession with turnover and gross margin without taking care of the bottom line – that is, not keeping an eye on costs, profitability and cash flow, which is killing a lot. And local agencies are becoming better and better at competing with international players.”
Ben Taylor, CEO of Project:WorldWide also sees increased competition and cost pressures impacting how agencies operate.
“When we talk about competition, it’s not just the number of event agencies,” he says. “With experiential moving up the food chain there has been a plethora of “we can do that” efforts from many different disciplined agencies from within the marketing mix.”
And competition is not just coming from other agencies adds Cerezales. “Although CMOs have more budget than ever, they are spending it differently. They are using multiple channels such as the web, events, digital, email and so on. It’s all about capturing the budget. It’s not shrinking, it’s growing.
“There’s more investment in exhibitions, but it’s diversified. More sponsorship for conferences but, again, it’s diversified. Clients all want smaller, cohesive events, but overall there are more events not less.”
This combination of declining revenue, increased competition and complexity in capturing expenditure—all while costs are increasing—is causing major shifts. “It’s a perfect storm,” says Cerezales.
Chris Dobson came to Hong Kong in 2009 as Imagination’s managing director for Asia.
“Companies came to Hong Kong when it was both a staging post to get into China, and a very buoyant market in its own right with some very large-scale event and conference work. That’s almost completely evaporated now,” he says. “There’s been an enormous hollowing out of the business so a lot of the really good people that I’ve met and worked with are starting to look at their future being somewhere else.”
Dobson himself has taken his event know-how to another sector. When Imagination began winding up its Hong Kong presence last year, he embarked on a new venture called The Labs, an experience design consultancy that takes experiential ideas and applies them to permanent spaces such as architecture and retail.
“Singapore’s gaining in significance is a factor too, you’ve got a lot of corporates moving to Singapore taking that opportunity with them,” he says. “Then you’ve got Macau’s evolution to becoming an experience hub and its desire to pick up more large-scale events as well. With the mainland becoming more of a mature market, it’s left slim pickings here in Hong Kong.”
Singapore is not necessarily the land of milk and honey however. “There’s a couple of different agencies that are doing well in Singapore, but it’s almost like the Turkish bazaar for events,” explains Darren Kerr, executive producer at Factor168 Creative Event Company. “You have all the big agencies based there, all the Australian agencies that would like to work in Asia start up in Singapore now, all the Americans and the British also have a presence there rather than in Hong Kong, but because there’s so much choice the pitching environment in Singapore is brutal.
“Instead of asking two or three people to pitch, clients will ask 10 – and 10 will pitch. But because there are so many people pitching they tend not to pitch to the same standard as they would elsewhere. Effectively they’re sending out their standard documentation that has been tailored a little at the front end.
“So although Singapore is doing well, they run the risk of creating the problem that Hong Kong now has in that it’s been commoditised so much that it’s all determined by procurement rather than being a strategic or creative decision.”
The increased number of local agencies on the mainland has also seen many of their international counterparts come and go. “It’s grown up really, really quickly,” XXX says. “In 2010 there were talks of envelopes being handed under desks, but by 2013 this was almost gone. The market has matured incredibly quickly: from a production point of view, to how quickly the local talent went from requiring guidance to starting their own agencies and establishing international-level creativity was incredible.”
Digital or die
Of course the other big change in recent years has been the rise of digital. “It’s no longer about the live audience,” says Ben Taylor. “It’s about creating content with that live audience for amplification to much wider audiences through digital channels.”
“Whilst the advent of digital and the fast-moving pace of technology has provided more opportunity than threat it has meant that those creative and logistical event agencies that might have dominated the scene 20 years ago have had to adapt – some of those who haven’t have since died.”
Cerezales predicts some major changes in agency business models in order for many to survive. “Some will become in-house agencies for venues, others will develop spin-off companies that are smaller and more agile, and we will see them embrace the sharing economy as travel management companies have started to do with Expedia and Airbnb,” he says. “However, many will face consolidation or fragmentation.”
But with all this change, one steady trend through recent decades has been the growing importance of content, and agencies who do survive will be set to capitalise.
“Experience is now king, long live content,” says Taylor. “Twenty years ago everyone was beginning to chirp about content – broadcast or shouting messages has since lost ground to dialogue and experience, putting event agencies in the hot seat and most qualified to take on more diversified work where customer or stakeholder experience is now the priority – not just events.”