Exhibition activity due to coronavirus is waiting for bankruptcy

The exhibition and entertainment industry was on the verge of collapse. «The only thing that saves us now is that Moscow is still holding on no matter what — this region accounts for almost three quarters of the entire business of exhibition developers in the country. Today the tourist exhibition "Intourmarket" opened in the Expocenter, and next week, but already in «Crocus», MIIT starts.  I don't know how they will regulate the number of visitors. Maybe they will just put people with counters at the entrance so that their number does not exceed five thousand people, says Ivan Nikolsky, managing partner of the Exponic exhibition marketing agency. – But in general, the situation is very difficult. Just because of the cancellation of four economic forums, our entire industry has lost over 15 billion rubles».

Recall that a month ago, due to the outbreak of coronavirus, Prime Minister Mikhail Mishustin proposed to postpone the dates of the Russian Investment Forum in Sochi (it was supposed to take place on February 12-14), arguing that «we need to think about the safety and health of our citizens, and participants.» And a few days ago, First Deputy Prime Minister Andrei Belousov, who heads the organizing committee of the St. Petersburg International Economic Forum (SPIEF), said that due to the spread of coronavirus, this event (scheduled for June 3-6) will also not take place. As for the forums in Yalta and Krasnoyarsk, they were canceled by the local authorities themselves on the recommendation of the federal center.

But if regional events have never occupied a leading place on the all-Russian agenda (contracts worth 800 billion rubles were signed there last year), then the forums in Sochi and St. Petersburg, on the contrary, completely determined it. Moreover, for example, the SPIEF has recently become not only the most expensive, but also the most important economic event in the country. Last year alone, 745 contracts and agreements totaling 3.3 trillion rubles were signed at it, and the forum itself was attended by slightly less than 20 thousand people from 145 countries.

Perhaps the main losses from the cancellation of the SPIEF will be incurred by exhibition developers. As Ivan Nikolsky told FederalPress, their volume in this particular case can be tentatively estimated at more than 3 billion rubles. «The calculation here is simple: 45 thousand square meters are allocated for stands at this exhibition, each of which costs at least 70 thousand rubles. Thus, the total amount cannot be less than 3.15 billion rubles,» says Nikolsky. — But we must understand that there are much more expensive stands. For example, VTB wanted to get a stand for 400 square meters during the tender and was ready to spend 65 million rubles." (That is, each square meter would cost the bank 162.5 thousand rubles. - Editor's note) It is already clear that the vast majority of private companies will not be able to return the funds spent. If the government compensates Roscongress for the actual costs incurred, then other structures, including those engaged in the construction of stands and design, are not entitled to such payments by law. «It should be understood that many design works have already been completed. Moreover, in some cases, the stands themselves are almost ready,» says a representative of a marketing agency engaged in exhibition design. «The problem is that customers rule the ball in this market: almost all contracts have a post-payment condition. That is, the money will be transferred after the exhibition, despite the fact that the companies have already spent on the development and purchase of materials. But if there is no exhibition, then there will be no payment,» Nikolsky told us.

Another 2 billion rubles will be lost by the hotel industry of St. Petersburg and more than 1 billion rubles by the catering industry, Mikhail Burmistrov, CEO of the Infoline-Analytics agency, is sure. Such a relatively small amount is explained by the fact that the city will still be able to compensate for some of the losses at the expense of football fans who should come to the European Championship matches in the summer. However, this will happen only if the championship itself is not canceled or will not be held with empty stands (three group matches and one quarterfinal should take place in the city). It is no secret that on the days of the SPIEF, the occupancy rate of all hotels in the city is traditionally close to 100%. Moreover, prices for accommodation at this time often rise by one and a half to two times, which provides hoteliers with up to 20% of annual revenue. But now you can only dream about it. According to some reports, now less than 50% of rooms are booked in prestigious hotels in St. Petersburg for the summer months.

Finally, it will not be possible to avoid tax losses. According to the former head of the St. Petersburg Tourism Development Committee Andrey Mushkarev, the local budget received about 2.5 billion rubles from the SPIEF in the form of taxes and other payments, the receipt of which is now under great doubt. However, the governor of the city, Alexander Beglov, has already hastened to declare that he sees no need to impose the same restrictions on attending mass events as in Moscow, since the preventive measures already taken are adequate and effective. This means that numerous exhibitions at Lenexpo, at least for now, are not in danger.

Thus, the greatest losses from the cancellation and postponement of economic forums will be incurred by the exhibition industry, and above all by stand manufacturers. According to Pavel Muzychenko, the head of the committee of the Moscow regional branch of Delovaya Rossiya, many companies from this sphere will go bankrupt, others will have to merge with each other. "We will definitely have consequences — we will shorten the working week. I am sure others will do the same," Muzychenko says. «In total, about three hundred different companies work in our industry, and at least a third of them will disappear from the market,» Ivan Nikolsky is sure. And then only if the situation normalizes, the spread of the coronavirus will decline and the authorities will not cancel new events.

Another important point is how foreign companies participating in exhibitions in Russia will behave. Many of them, in particular from Lithuania and Germany, have not yet confirmed their intentions to come to Moscow and St. Petersburg. This means that the number of bankruptcies in the exhibition industry can exceed even the wildest forecasts.

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