Buy, hire or lease?
How an exhibition stand project is financed is, like its design, dictated by the individual needs of the exhibitors. Trade fair contractors often offer viable alternatives to purchasing.
For exhibitors whose fate it is to show frequently at different far-flung locations or who choose to implement sophisticated trade fair concepts, alternative finance models offer low-cost solutions for trade fair participation. A budget estimate should be drawn up to assist decision-making. "Checklists for fairs and exhibitions" are offered by Mice Meissner Expo, Hamburg, who provide information and help with that decision in the form of detailed cost comparisons. The checklists can be downloaded free of charge from their Internet pages.
This manufacturer of folding displays and modular exhibition stands initially differentiates between fixed and variable costs, based on one trade fair appearance. The cost of a compatible stand system is distributed across all events as it is the same for all. However, that does not apply to decorations and other similar services that are only required for one particular exhibition. Expenditure for erection and tear-down, transport and storage are variable costs. They are incurred whether the stand is purchased, hired or leased. So these costs have to be omitted from the comparison. The exhibitor has to make other important decisions concerning the method of construction of the stand. Choosing a very variable fair or exhibition system opens up further opportunities for use. A flexible stand system can be used for other purposes between one trade fair appearance and the next. The overall costs incurred solely for building the stand should be looked at in more detail if the stand is used for one event only. Only if an exhibition stand is used without modification at several events can the procurement costs be divided in full by the number of assignments and compared with the hire costs that would otherwise be incurred. System manufacturers offer a qualified design service tailored to stand systems which make individual design concepts calculable.
The advantage of hiring is that the exhibitor does not tie up capital and keeps liquid assets. Modifications can be made to the concept to benefit the next trade fair appearance. Events that take place concurrently do not cause any additional costs. Participation in events abroad does not generate high transport and unknown erection costs. Neither maintenance nor repair costs are incurred (unless hirers erect the stand themselves).
By contrast, if a stand is purchased, all its components can be designed to individual requirements. If needed for several events a year, procurement costs are comparatively low and a uniform appearance in line with the exhibitor's corporate identity is guaranteed.
In hire purchase, the stand becomes the property of the exhibitor on payment of the last instalment. Regular instalments free up liquid assets. There is a fixed price guarantee, possibly including repairs, maintenance, storage and insurance, and if the stand is used several times - even for in-house events - there are cost benefits.
Another solution is a succession of fixed-term hire contracts with an option to purchase (direct leasing from the manufacturer) and financial leasing. The former differs from hire purchase in that a residual purchase price is agreed. In return, the individual leasing instalments are lower. In financial leasing, the financing is neutral and negotiable. The costs are fixed for the duration of the contract and calculable.
Leasing and hire purchase only make sense as alternative forms of financing if the decision to purchase has been completely ruled out. This particularly applies to financial leasing where the exhibition contractor or system manufacturer sells the stand to a leasing company (lessor). Once all the details of the stand have been agreed between the exhibitor and the exhibition contractor, the exhibitor uses the stand components for a fixed period (18 to 36 months) for a fixed monthly leasing instalment. In this case the proprietor is the leasing company.
It is not easy to find leasing companies who will lease mobile assets such as trade fair stands. An exhibition stand consists of numerous individual non-differentiable parts that make it virtually impossible to give a precise definition of the leased object. Moreover, continued use after the leasing period has expired is difficult to calculate. If the monthly leasing instalments are to be kept low it must be possible for other exhibitors to use the stand at any time. These are all considerations that have a considerable impact on leasability. www.mice.de
m+a report Nr.2 / 2006 vom 24.03.2006
m+a report vom 24. März 2006