A year ago this month, the New York dealer James Cohan packed up his booth at Art Basel with a feeling of accomplishment. He’d shown ambitious new work by such internationally known gallery artists as Folkert de Jong and Yinka Shonibare and sold pieces to the Museum of Modern Art in New York and the Museum Boijmans Van Beuningen, in Amsterdam. He had every reason to believe he would be invited back in 2008 to what is regarded as the most important fair for modern and contemporary art. Earlier this year, however, he received news to the contrary: Art Basel’s six-dealer selection committee had rejected his application. “I prided myself on our display,” says Cohan. “So I must be missing something in the equation.”

The equation is simple: too many dealers, not enough booths. Space constraints dictate how many stands an event can accommodate. Cohan is just one of 700 international dealers who didn’t make Art Basel’s cut this year, which saw a record number of applicants, only 300 of whom were selected. So with contemporary-art dealers proliferating worldwide—at last count there were more than 350 galleries in New York’s Chelsea neighborhood alone, up from 170 in 2001—competition is stiff for the limited number of booths at top fairs like Art Basel and Art Basel Miami Beach (ABMB); the Armory Show, in New York; and Frieze, in London. (The Armory Show has recently secured additional space—a rare boon—and by its 2010 or 2011 edition, will have room for 75 modern- and 20th-century-art dealers, giving it a leg up on other shows, says cofounder Paul Morris.

This supply-demand imbalance is happening at a time when, for many collectors, a stroll down the aisles at fairs has supplanted regular visits to galleries, making event-based business as important as what happens in the storefront—if not more so. In a study conducted last year for the TEFAF fair, in Maastricht, the Dublin-based economist Clare McAndrew surveyed some 5,000 dealers and wrote that 21 percent of those who responded “attributed 75 percent or more of their business to transactions carried out away from their primary place of business, including some respondents for which 100 percent of transactions were conducted elsewhere.”

It is not surprising therefore that emotions can run high among those left out. Having a space at a fair means “a large amount of money coming in at one moment, and if it’s not there, it affects how you plan the rest of your year,” explains Janice Guy, a co-director of the New York gallery Murray Guy. “If you do not get in, it’s a random choice of the selection committee that puts your business in danger,” adds Guy.

Rejection is not merely a financial matter; it can also tarnish a gallery’s reputation. Participation in fairs has become such a stamp of approval that Armory Show director Katelijne de Backer has heard of some rejected dealers telling their peers they hadn’t applied. “If that is the way they want to spin it, that’s fine by me,” de Backer says.

Gallerists claim that artists pay attention, too, having come to expect the built-in audience that their work commands at fairs. “The quarterly sequence of the two Basels, Frieze, and the Armory” has become so important, says Christopher D’Amelio, of New York’s D’Amelio Terras, that some artists will leave their current galleries for one with a better fair profile.

Even small satellite events are highly competitive. Last year there were 370 applicants for the 82 booths at the New Art Dealers Alliance (NADA) fair, in Miami, to which both members and nonmembers are invited. With many of those rejected feeling disgruntled, director Heather Hubbs says NADA is considering a rotation system for members. Liste, which bills itself as “the young art fair in Basel,” also attracts far more hopefuls than can be accommodated. The organizers expanded the exhibition space two years ago but then relaxed their policy that galleries must be less than five years old to participate and can do so for only three to four years—creating an even bigger pool of contenders.