|By Kathy Bergen, Chicago Tribune
Knight Ridder/Tribune Business News
Oct. 19, 2003 - Chicago is losing the battle to keep a nationwide hardware show anchored here, and not just because rival Las Vegas has become the glitzy "it" spot for trade shows.
By a margin of more than 3 to 1, exhibitors are lining up with the show's owner, Reed Exhibitions, which is moving the National Hardware Show to Vegas in 2004. They are essentially rejecting efforts of the industry's trade association to mount an alternate show at McCormick Place, the show's home base for 28 years.
Mixed with many exhibitors' excitement about a new venue is a healthy dose of discontent with the 103-year-old, Schaumburg-based American Hardware Manufacturers Association, longtime show sponsor until it severed ties with Reed early this year.
Some of those heading to Las Vegas say the trade group, which is run as something of a family affair and pays its top executive far in excess of association norms, had lost touch with its membership. They say it failed to respond promptly to cries for help as the size of Chicago show shrunk by more than half between 2000 and 2003.
"When business is tough, and it has been for a couple of years, they didn't see fit to encourage us to come back. There were extraordinarily high rates for booth space," said Terry Palmer, owner of Aura Lamp & Lighting, a Chicago firm that dropped out of the McCormick Place show after 2001 but will exhibit in Vegas next year.
"Now they've dropped rates 35 to 40 percent," said Palmer, whose firm is a small exhibitor. "It's amazing how they can do that all of a sudden."
If the AHMA fails to turn the tide of traffic flowing toward Las Vegas, Chicago will lose big. The annual show brought an estimated $39 million in direct spending to the city last year--money that feeds the city's hotel, restaurant, taxicab and trade-show services industries, among others.
AHMA rejects the notion that it failed to respond swiftly to two major trends that whacked the show: industry consolidation and economic downturn.
"To the sour grapes who say we did not respond, I disagree," said William P. Farrell, chief executive and president until Jan. 1, when his son, Timothy, will take the reins.
The association and Reed conducted research on how to turn things around, but they parted company early this year when they came to an impasse on choice of location, among other issues.
Still, both parties opted for moving the show from August to spring, viewed as better-timed for holiday-season buying. And both sides slashed exhibit space costs by more than 30 percent and eliminated fees for unloading and hauling displays.
So far, though, Reed is generating more excitement for its Vegas show, which will roll out a hefty lineup of seminars, a New Product World and a Lawn & Garden World.
By this week, Norwalk, Conn.-based Reed had signed up 1,469 exhibitors who planned to use 340,235 square feet of space at its May 10-12 show at the Sands Expo and Convention Center.
It is shooting for a minimum of 1,600 exhibitors using at least 430,000 square feet, just a tad smaller than this year's show.
"If you don't have that, with the size of this industry ... you can look for the show to go away in a year or two," said Rob Cappiello, Reed's point man for the hardware show.
Buyers want to have a deep bench of exhibitors in each category, he said.
In contrast, the AHMA reported it had about 400 exhibitors signed up for 200,000 square feet of space. And it appears that more than 30 percent of those exhibitors also will attend the Vegas show.
Because of inadequate response, the AHMA in the past week put off two recruitment luncheons, one in New York and one in Chicago. The problem stemmed from conflicting industry events, said William and Timothy Farrell, currently executive vice president and chief operating officer. They said the luncheons would be rescheduled.
They declined to state goals for the size of the show, which is scheduled for April 18-20.
"We are going ahead, regardless," said William Farrell, 67, who has been at the helm for 20 years and also serves on the executive committee of the Chicago Convention and Tourism Bureau.
"We are very confident the AHMA show will be successful," said Deborah Sexton, president of the Convention Bureau. "We know Chicago and the Midwest is clearly the strongest market for the hardware industry and we believe this region will support the show."
The outcome could have dramatic implications for the AHMA, which relies on the annual trade show for nearly three-quarters of its yearly revenue. The show brought in $9.6 million of the group's $13.4 million in revenue in 2001, according to its 2001 tax return, the most recent available.
"When you look at how many have signed up for Chicago and how many for Las Vegas, there's a statement being made," said John Shields, North American sales manager for MSA Safety Works. His group plans to exhibit at both shows but may drop from the AHMA show if participation does not improve.
"Little changes could've meant a lot one, two or three years ago," he said.
While most dissatisfaction seems to swirl around handling of the trade show in recent years, some observers are rankled by internal workings of the association.
For some, the family connections raise eyebrows.
"You can't run an organization the size of the AHMA and tell me there is nobody better qualified than you and your children to run it," said Tom Kraeutler, co-host of The Money Pit, a syndicated radio show about home improvement. In the interest of full disclosure, he notes his new co-host does some public relations work for Reed, but said his views are his own.
In addition to the grooming of Timothy Farrell, 33, as the next chief executive, the association funnels much of its legal work to Gardner, Carton & Douglas, where another son, William P. Farrell Jr., is a partner and outside general counsel for the AHMA.
More than $200,000 was paid to the firm in 2001, the most recent year for which figures are publicly disclosed. That sum paid for work by 17 different attorneys at the firm, according to AHMA CEO Farrell.
"And there's no lawyer on this earth that I trust more than William P. Farrell Jr.," he said.
Timothy Farrell worked his way up in the organization, starting in 1994, after stints with Skil Power Tools and Ace Hardware Corp., his father noted.
"He went through the organization just as anyone would who was being groomed, and he passed the test of the executive committee," said William Farrell, who will be elevated to vice chairman of the organization next year.
As president and CEO, William Farrell received a compensation package of $911,439 in 2001, according to the most recent available tax filing. Of that, $424,641 was a distribution in lieu of a pension contribution, he said.
The median compensation package paid to his peer group last year was $242,765, according to a survey by the American Society of Association Executives.
"The money I make, I earn," Farrell said. "I'm not embarrassed for a minute." The package included incentive-based pay for 2000, a very strong year, he noted. It is more than triple the size of the compensation awarded in 2001 to Philip Brandl, president of the International Housewares Association.
The Rosemont-based trade group has a larger membership than the AHMA and runs a larger annual trade show at McCormick Place, without using outside management services, as the AHMA does.
As well, "the housewares industry has done a magnificent job of adapting" to industry pressures, including consolidation and the economic slump, said Gerry Vander Schauw, publisher of Home Improvement Executive, a newsletter.
The housewares association has been effective in recruiting international participation in its show and organization, and has broadened the show's reach by adding or building up complementary categories, such as specialty foods and outdoor furnishings.
Some observers have hinted it might make sense for the groups to merge their spring shows.
"The concept has been put to us more than once, but we have not had conversations nor have they approached us," Farrell said.
The AHMA has plenty of loyalists, among them Joe Ennis, chief executive and president of General Tools Manufacturing Co. in New York.
"We feel, as other manufacturers feel, that the AHMA offers much more than just a show, and for those reasons we will be at the AHMA show in Chicago," said Ennis, who values the organization's industry surveys and political advisories.
Still, his company is weighing whether to also attend the Vegas show, and he, like many others, thinks only one show ultimately will survive.
Given that, AHMA will need to sharpen its focus on membership satisfaction, Ennis said.
"Do they need to make sure costs are in line and that they are providing value? Absolutely," he said. "They need to wake up every day and think of us as customers. I'm sure they'll do a better job today than in the past." Tribune photo by George Thompson
William P. Farrell, chief executive of the American Hardware Manufacturers Association, has led the Schaumburg-based trade group for 20 years. His son, Timothy, will take over in January.Photo for the Tribune by Erik Unger
Terry Palmer, owner of Aura Lamp & Lighting in Chicago, is among business owners who plan to exhibit their wares at the hardware show in Las Vegas rather than at the AMHA show in Chicago.
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(c) 2003, Chicago Tribune. Distributed by Knight Ridder/Tribune Business News.