Today’s must-read
Monday, Jun 13, 2011 - Posted by Rich Miller
* Unions have gotten the blame for the high costs at McCormick Place. But they’ve never been the real problem. It’s mostly about the contractors and the associations. Crain’s explains why…
Average drayage rates at Orlando and Las Vegas convention centers are 42% and 51% lower than McCormick Place, respectively, according to a 2009 Tradeshow Week survey. GES and Freeman say one reason is that labor costs are lower in those cities, but drayage is also 38% cheaper at the Donald E. Stephens Convention Center in Rosemont, which operates under the same labor agreements as McCormick Place.
The Stephens center uses an in-house contractor, Rosemont Exposition Services, to manage its freight.
Show management — the trade associations that stage conventions — also make good on the exhibitors’ nickel. McCormick Place leases floor space to the associations at $1.30 to $1.80 per square foot.
But associations charge exhibitors $20 to $40 per square foot. A show with 300,000 square feet of exhibitor space would pay McCormick Place up to $540,000 but collect $12 million from exhibitors — a better-than-2,000% markup. […]
In its exhibitor kit for the Digestive Disease Week Show in April, Freeman misleadingly implied exhibitors didn’t have a choice. “As the official service contractor, electrical installations must be performed by Freeman union labor,” the document reads.
Neither Freeman nor the critical-care association bothered to tell Ms. Canavan she had a choice. She saved money by choosing ETS but only after McCormick Place called to say she had that option.
There’s more. Much more. Go read the whole thing.
- Excessively Rabid - Monday, Jun 13, 11 @ 10:04 am:
I can’t wait to see how somebody finds a way to blame this on public employees.
- Yellow Dog Democrat - Monday, Jun 13, 11 @ 10:09 am:
=== The law requires twice-a-year audits to ensure that cost savings are passed on to exhibitors. But more than a year after the law’s passage, McPier officials are only now preparing for their first audit, expected this fall. ===
Deeply troubling.
- A Different Belle - Monday, Jun 13, 11 @ 10:13 am:
What makes the Daley Family successful: understanding how to manipulate all news and public information to blame the people that everyone loves to hate.
- wordslinger - Monday, Jun 13, 11 @ 10:19 am:
Great article by Crain’s. The story’s been out there for years, but the phone-it-in-narrative in the media has always been it’s simply a union problem.
Not that there weren’t problems with union feather-bedding. But like most issues, things are never quite that simple.
Freeman and GES are a tough nut to crack. They own the industry and have enormous influence in steering shows to particular venues. Get tough with them in one location, they just move it down the line.
Is there an anti-trust division in the Justice Department anymore?
- Todd - Monday, Jun 13, 11 @ 10:24 am:
Hey YDD word need to put off the beer tonight hes busy this week
Drop me a line tvandermyd@aol.com so we can set up a time and date
- Plutocrat03 - Monday, Jun 13, 11 @ 10:28 am:
Its a case of follow the money. There was a problem with costs, to they chopped on the labor side, but magically the drayage escaped scrutiny and action.
Who makes the big political contribution? Labor or The show management companies? Perhaps King Richard will be nominated to the Board of one of these companies as a thank you for all the money he has allowed them to make.
Fixing this correctly would show that the Chicago’s new management could manage a city owned casino. Find a way to make the show management companies compete and at least match the rates at Rosemont. Business as usual at Mc Pier would expose the magnitude of the disaster the upcoming casino would be.
Failure should not be an option since it is the taxpayers of the State who will be on the hook for paying the McPier bonds if their business model fails
- bored now - Monday, Jun 13, 11 @ 10:36 am:
heh. i read the article before getting over here. and now i see why i had such a different experience from others with mccormick place. the two events that i worked on or managed, as it were, used neither ges or freeman. and while i had a few complaints, it was nothing like what the pols were saying. so now i know. mccormick place was great for us. but i guess that was because we were too small and cheap for the big contractors to get involved…
- Don - Monday, Jun 13, 11 @ 10:44 am:
“GES and Freeman won’t discuss specific arrangements, citing proprietary and competitive reasons. ‘Our agreements are varied, and they’re private,’ says John Patronski, executive vice-president at GES. But, he adds, ‘We offer to sit down with any exhibitor and give them advice for cost savings.’”
Their “advice”? Work with us or else!
“‘If we told them they couldn’t do it, they would leave,’ says Jim Reilly, a former CEO of the Metropolitan Pier and Exposition Authority, or McPier, the agency that oversees McCormick Place.”
Reilly is pathetic. His spinelessness wouldn’t have anything to do with making
$237,000 in consulting fees from August 2004 through 2008 while working with GES & Freeman…would it?!
- Yellow Dog Democrat - Monday, Jun 13, 11 @ 12:27 pm:
Jim Reilly put the “Coin” in “coincidence.”
- Gregor - Monday, Jun 13, 11 @ 12:28 pm:
You know what other outfit has a two thousand percent markup on their services? We should have the US attorney go over these two companies with a microscope.
- Whizbang - Monday, Jun 13, 11 @ 1:10 pm:
What was it I read somewhere…. That the CEO and Wall Street ran the Outfit out of Vegas…. private companies report to no one so it seems like a safe haven. For now.
- Rich Miller - Monday, Jun 13, 11 @ 3:13 pm:
===His spinelessness wouldn’t have anything to do with ===
Do you really think that top policymakers like Daley, Madigan, etc. aren’t aware of this contractor problem? Reilly is right. Unless the Justice Dept. steps in, there’s nothing that anybody can do about those two companies. Mess with them, they send business elsewhere. I wrote when the bill passed that this was little more than a mechanism to increase contractor profits at the expense of union workers. Nobody has since disputed that opinion.
- Plutocrat03 - Monday, Jun 13, 11 @ 3:42 pm:
Perhaps a bit of daylight on the fees they are charging? Chicago can’t be the only one being overcharged.
On the other hand, it could just be the corruption tax that has to be paid.
- Rich Miller - Monday, Jun 13, 11 @ 3:49 pm:
===Chicago can’t be the only one being overcharged. ===
Chicago is where the contractors make their real money. If you weren’t such a “blame Chicago firster” you might understand that.
- The Captain - Monday, Jun 13, 11 @ 3:52 pm:
The year is not yet half over but this is the leading candidate for the best, most thorough and most significant piece of journalism this year. I never thought I’d read a story in Crains that didn’t blame the unions for all the problems of the world and yet not only did that happen but it was part of a well researched piece that took a serious look at an issue that all of the key political players have a stake in. I could not be more impressed with this article.
Go read the whole thing.
- wordslinger - Monday, Jun 13, 11 @ 4:27 pm:
Pluto, there are other ways to make a buck in other cities.
For instance, if you care to give the google a workout,you’ll run across the case that got Chicago Teamsters heavy Bill Hogan kicked out of the union by the federal trustee.
The deal was cooked up among Hogan, a show labor supplier from Chicago (and former Chairman of the Chicago Convention and Tourism Bureau), Freeman and GES. The scam was that Freeman and GES would charge shows for Teamster labor, but the shows would get non-union labor being paid 50% less.
Google Bill Hogan, IRB and Las Vegas and it will get you there.
- CubsFanTeamster - Monday, Jun 13, 11 @ 9:34 pm:
The Donald Stephens Convention Center is an exclusive facility. That means when an organizer leases that facility they have to use Rosemont. Because they can’t bid out or hire a contractor of their choosing, they can’t request discounted services in exchange for higher exhibitor pricing. This arrangement allows Rosemont the ability to charge fair market prices for the services being provided to the organizer and thereby not having to raise exhibitor pricing to subsidize the work being done for the organizer.
Nielsen Expositions, organizes the Kitchen & Bath show that rotates through Chicago. They are a public company, their 2011 Q1 results had operating profits in excess of 40%. GES is also a public company, their profit margin’s were less than 0 in 2010, in 2008 one of GES’ best years in recent history was less than 8%.
The problem is the organizer, if they could bid out their services at the D. Stephens they could drive their costs down and cause the winning contractor to raise the exhibitor prices.
At the end of the day the free market place shall prevail. Organizers that place to much of an expense burden on their exhibitor’s will cause companies to seek shows that have more favorable economic conditions or will demand that the organizer pay a fair share of the costs incurred to produce their events.
- wordslinger - Monday, Jun 13, 11 @ 10:32 pm:
–At the end of the day the free market place shall prevail. –
Dude, everything you wrote says that there is no free market.
Where’s the free market with GES, Freeman and the Teamersters?
- Rich Miller - Monday, Jun 13, 11 @ 11:21 pm:
===At the end of the day the free market place shall prevail.===
LOL
You’re nuts. As long as the associations are getting friendly help from the contractors, nothing will ever change.