The $565 Billion Industry You've Never Heard Of

The meetings and events industry covers the gambit from backyard weddings to massive citywide festivals like SXSW, plus conferences, galas, fundraisers, and celebrations. It's a huge industry that does its business anonymously, hidden from view, and often during odd hours. Total yearly economic contribution from the events industry is approximately $565 billion, which is more contribution to GDP than "air transportation, motion picture, sound recording, performing arts, and the spectator sport industries." Powering this industry are both professionals that plan and organize the events, as well as the venues that host and service them. The technology company connecting these two groups, and doing a slew of other interesting things in the space, is Cvent (NYSE: CVT  ) . 

Carving out its own market
Cvent is an event management cloud platform that serves two markets: event planners and venues. Last month, Cvent provided guidance for 2014 that reflects yearly revenue of $138 million, which will represent a 25% increase over 2013. That growth is coming from a company that was started in 1999 and has largely grown organically in its prior 13 years. Its growth and success has come from having out-sized and out-played competitors over the years.

During the dot-com bubble, over $1 billion in venture capital went into the event technology space, and subsequently left once the bust came. This created a dire situation within Cvent that forced the company to lay off 80% of its staff (from 126 to 26), and it was on the verge of closing shop in 2001. Management persevered through this period, and 11 of 12 executives are still with the company today. Now, Cvent dominates the market that it essentially created, without a true pure-play competitor. This affords it an enviable position to make the market its own. 

Supplier network
The supplier network side of the business is steady and growing, accounting for 30% of 2013 revenue. Venues pay Cvent for RFP's that are generated through the platform. In 2013, 5,700 partners paid for this marketing to the tune of $36 million. Notable partners that have been using the RFP service include Marriott International (NASDAQ: MAR  )  and Caesars Entertainment (NASDAQ: CZR  ) , which collectively generated over $10 billion in total revenue in 2013. A large driver of room bookings and predictable average room rates are group bookings generated from events taking place at the venue. These large players view Cvent as indispensable to their sales goals, not only in current years, but in the future. Sometimes, RFPs go out years in advance, as planners put out feelers on where to hold their conferences. 

Conference and meeting planners
In 2013, 60,000 users were on the planner side, producing $77.5 million of 2013 revenue, which was 70% of Cvent's business activity. Clients use the service to control budgets, register attendees, sell tickets, find venues, and arrange RFPs all from one place -- the cloud. Planners have traditionally done everything manually, taking an enormous amount of their time. Cvent makes what could otherwise be a very stressful job simple and organized. The pricing model for planners is a subscription payment based on the number of attendees. Each projected attendee is paid for up front, whether they actually end up registering or not. This way, Cvent gets paid no matter how well-attended the event actually is. Subscriptions represent one of the most reliable streams of revenue, and it's comforting to know that planners amount to 70% of sales. 

Perseverance and a start-up culture of innovation
Reggie Aggarwal, the company's founder and CEO, was awarded the title "CEO of the year" by the Washington Business Journal. "Aggarwal was selected from among the 50 'Most Admired CEOs' list of nominees, which included CEOs from some of the largest and most prominent organizations such as Marriott International, Lockheed Martin, George Washington University, General Dynamics, Inova Health Systems and the Carlyle Group."  Aggarwal has stated that he personally interviewed 80% of the 1,400 employees who work at Cvent. He is passionate about getting A-players and fostering teams that operate at exceptional standards. Clearly, Reggie is a strong leader. 

Looking forward
Seed Labs and TicketMob were acquisitions that have been integrated into the Crowdtorch brand. Crowdtorch develops mobile app solutions that engage attendees at live events, pushing Cvent beyond just corporate meetings. The company is now creating mobile apps for venues, shows, and festivals, which allow fans to engage with artists and other attendees through social media, buy and sell tickets, and receive news. Promoters, entertainers, and venues can use the apps to track engagement, marketing metrics, and consumer behavior data.

There are also ticketing platforms that help eliminate friction points that prevent attendees from making purchases. Cvent competes directly with Live Nation's Ticketmaster by offering a next-gen ticketing platform for artists and venues. Clients can use the platform to create custom tickets and emails, sell on Facebook, offer merchandise, and collect payments. It gives sellers much greater control over the process. Last year, Ticketing revenue (excluding face value) from Ticketmaster was $1.4 billion. The tickets business is clearly no slouch and offers Crowdtorch a big opportunity to take market share.

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Read/Post Comments (4) | Recommend This Article (4)

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  • Report this Comment On March 27, 2014, at 3:48 AM, Interventizio wrote:

    Intersting, even though the mentioned companies are either overvalued or with debatable fundamentals in my opinion.

  • Report this Comment On March 27, 2014, at 12:35 PM, jibbaballwine wrote:

    I plan to follow up in the future with a more detailed analysis of Cvent's fundamentals, and I think that you may be surprised by their present value of 5-10 years out vs. trailing valuations. They are a perennial 20% organic grower, good stewards of capital, have no debt, and plenty of cash from their IPO to make acquisitions. I expect their growth rate to actually pick up steam with acquisitions going forward. If your investment thesis contains a provision that holding periods should be for at least 5 years, then this stock is fairly priced, especially since it is trading down with all the other cloud businesses at the moment.

    Now, all that said I think a very important aspect to Cvent's total package is management, and it is really just stellar. Reggie was a founder, and managed to grow with the company to its current scale. He has scaled with it, yet managed to keep the culture in place.

    Next thing to look at is their lack of direct competition in the market, and the unending need for their service by event planners. It's a steady industry that tends to endure recessions.

    Risks here are managing growth efficiently and profitably. This is always the case with a new IPO, but I think that it is important to note that they have been around for 14+ years already.

    Happy hunting!

  • Report this Comment On May 07, 2014, at 7:03 PM, mwwestiii wrote:

    As someone who was an executive deeply involved in development of such "cloud based" meeting and event technologies since the late 1990s, I'd like to comment that the author of this article has a very shallow understanding of the serious revenue and profitability challenges facing Cvent and it's competitors.

    However, this is understandable because understanding how technology is applied in this "$565 Billion" industry is difficult unless you understand the purchasing dynamics between buyer and seller.

    Cvent is a biased middleman between the buyer of meetings (the planner) and the seller (the venue). They realize earnings, primarily room night transaction fees, which is a form of sales commission, and venue search placement. They also claim to improve the purchasing process by automating the venue RFP process.

    The reality is room night transaction fees increase buyer costs over direct venue contract negotiations. Accepting venue paid search actually biases the market against the buyer as it limits search visibility to potential buyers. This corrupts the Cvent assertion that they are creating a more efficient marketplace when they're actually doing the opposite - adding seller bias and buyer cost.

    Finally, by automating the RFP process ostensibly to improve contracting efficiencies, they have in fact created RFP "spam" - point-and-click RFPs that fill a venue sales manager's inbox - unqualified and requiring further negotiations.

    Good meeting planners target venues using their professional knowledge and relationships to manage the best contract for their client. What they don't do is trust a middleman to negotiate for them.

    As for Cvent's online registration system, it's a commodity and many other companies offer the same technology or build in-house variants to bypass the transaction fees.

    In the end, Cvent is really no different than a real estate agent. They only show you the houses where they make the best commission and fees.

    Knowing about Cvent, and I evaluated the company for my company as well as it's direct competition, and tested it, I would never invest in the company. Not that it's a bad company, it's just never going to live up to the hype like this article portrays.

  • Report this Comment On May 07, 2014, at 7:22 PM, mwwestiii wrote:

    Regarding Cvent "enduring recessions",,,

    Maybe, but one thing always happens to the meeting industry during a recession; people cut back on holding meetings, less hotel rooms are booked, and meeting planners get laid-off.

    Further, fewer companies invest in "cloud-based" platforms like Cvent.

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