Report Reveals True Economic Value of

Hong Kong’s Exhibition Industry

(Hong Kong, 7 February 2006)  Five of Hong Kong’s major exhibition industry players teamed up recently to commission and fund a groundbreaking report designed to assess the overall contribution of the local exhibition industry to Hong Kong’s economy. Undertaken by professional services firm KPMG Corporate Finance Limited, the Economic Impact Study was commissioned by the Hong Kong Exhibition and Convention Industry Association (HKECIA) and funded by the Hong Kong Convention and Exhibition Centre, the Hong Kong Trade Development Council, the Hong Kong Tourism Board, and the recently-opened AsiaWorld-Expo.

Key Observations

The recently-published report, based on the 2004 calendar year, revealed that the exhibition industry provides Hong Kong with significant economic benefits at a number of different levels:

Expenditure: the study revealed exhibition industry expenditure effects of around HK$19 billion (US$2.4 billion) to Hong Kong’s economy in 2004.

·           of this amount, exactly half (HK$9.5 billion or US$1.2 billion) was made up of direct expenditure, i.e. expenditure specifically by exhibition organisers, exhibitors and visitors;  

·           breaking down direct expenditure further, 70% (HK$6.6. billion or US$846 million) came from spending by visitors, and the other 30% (HK$2.9 billion or US$372 million) from spending by event organisers and exhibitors;

·           international visitors were responsible for most of the HK$6.6 billion (US$846 million) visitor expenditure, spending HK$5.1 billion (US$654 million) between them; domestic visitors made up the balance (HK$1.5 billion or US$192 million);

·           most visitor spending was on food, accommodation and shopping. This means that the biggest beneficiaries of visitor expenditure from exhibitions were the food & beverage, hotel, and retail sectors;

·           besides direct expenditure, the exhibition industry also generates indirect expenditure, when suppliers serving the exhibition industry purchase goods and services from elsewhere. The study estimated that indirect expenditure generated by the exhibition industry in 2004 amounted to HK$5.7 billion (US$731 million);

·           finally, induced expenditure describes spending in the local economy by those employed in and supplying the exhibition industry, and was estimated at HK$3.8 billion (US$487 million) for 2004.

Fiscal impact: the Hong Kong government would have enjoyed a tax take of around HK$710 million (US$91 million) derived from expenditure connected with the exhibition industry in 2004.

·           this tax estimate is based on the HK$19 billion (US$2.4 billion) expenditure figure mentioned above;

·           the figure can be broken down into Profits Tax of HK$365 million (US$47 million), Salaries Tax of HK$200 million (US$26 million), Hotel Tax of HK$100 million (US$13 million), and Airport Tax of HK$43 million (US$5.5 million).

Employment: the exhibition industry’s activities during 2004 were estimated to have provided employment equivalent to 47,000 full-time jobs across a number of related industries.

·           of this number, only the equivalent of 1,600 full-time jobs were directly provided by event organisers and venue providers;

·           the vast bulk of the employment generated by the exhibition industry was in support sectors responsible for providing services to exhibition industry events and visitors. These support sectors included retail, transport, food and beverage, hotel, exhibition stand design and construction, freight forwarding and advertising; the amount of employment thus generated was equivalent to about 45,000 full-time jobs;

·           the sectors benefiting the most were food & beverage (15,000), hotel (11,000) and retail (11,000).

Overseas comparisons: although Hong Kong’s exhibition industry is relatively small, in percentage terms it outperformed those in established major countries.

·           Hong Kong’s exhibition industry is just a fraction of the size, in terms of available exhibition space and the umber of exhibitions held annually, of those in major economies such as the UK and Germany;

·           expressed in percentage terms, the expenditure effects of the Hong Kong exhibition industry as a percent of GDP was equivalent to around 1.5% of GDP, as against 1% in Germany and 0.8% in the UK.

Visitor profile: visitors to Hong Kong exhibitions contributed considerably more to Hong Kong’s economy than the average tourist.

·           exhibition visitors on average stayed 1.2 times longer than overnight tourists, while spending 2.4 times more per trip than the average of overnight tourists;

·           many exhibition visitors are long-haul travellers (i.e. from outside the Asian region), who tend to stay in Hong Kong longer: some 40% of exhibition visitors fall into this category, as compared with just 18.4% of overnight tourists;

·           although accounting for 3.3% of overnight tourist arrivals in Hong Kong in 2004, exhibition visitors were responsible for 7.8% of overnight tourist spending.

Predictions for the future: the economic benefits of the exhibition industry for Hong Kong are expected to continue growing.

·           the report compared 20 recurring trade exhibitions held in the first seven months of 2004, and held again in 2005;

·           these exhibitions showed ongoing increases in visitor numbers averaging 7.1% growth, and a corresponding increase in economic benefits;

·           the trend is being fuelled by a surge in Mainland and regional visitors, with growth rates of 14% and 13.5% respectively.

HKECIA Chairman Mr Stanley Chu says that the new report will surprise many with the true scale of the Hong Kong exhibition industry in terms of its impact on and contribution to the local economy. “The study shows that much of the value of the industry to Hong Kong comes indirectly via spending and employment in support services such as hotels, restaurants, exhibition stand design and construction, freight and logistics, and advertising,” he notes. “It’s a ripple effect that many do not associate with our industry, but which in pure economic terms is extremely significant.”

Much of the expenditure associated with the exhibition industry comes, according to the report, from spending by visitors attending exhibitions—hence the significance of the findings for the hotel and hospitality sectors. “Our exhibition visitors stay 1.2 times longer than overnight tourists,” remarks Mr Chu, “but they spend nearly two and a half times as much. From this it’s not difficult to see that the exhibition industry is contributing a great deal to keeping Hong Kong’s economy moving forward. And let's not forget that the majority of international exhibitors and exhibition attendees are recurrent visitors who come back to Hong Kong trade fairs year after year, thus contributing regularly and repeatedly to the local economy.”

Mr Chu is also quick to emphasise the outstanding economic contribution of Hong Kong’s exhibition industry relative to its scale. "By comparison with other mature economies that have well-developed exhibition industries, such as Germany or the UK, we are doing extremely well,” he remarks. “For example, the study shows that the Hong Kong industry’s contribution to the local economy measured as a percentage of GDP is equivalent to around 1.5%, as against 1% in Germany and 0.8% in the UK."

Another key feature of the study was its analysis of ongoing industry trends. One source of optimism was the recent marked expansion of exhibition space in Hong Kong, which is expected to encourage and attract new events to the city. “The report shows that recent initiatives taken by the Hong Kong exhibition industry are creating a real momentum,” says Mr Chu. “That in turn is leading to continued growth in the number of visitors attending our exhibitions.”

The study shows that this growth in international visitor and exhibitor numbers is also being fostered by Hong Kong’s unparalleled reputation for doing business, and the city’s acknowledged regional edge in such areas as exhibition quality, the rule of law, and the free flow of business. These competitive advantages have helped keep Hong Kong’s attractiveness as a trade fair destination intact, despite increasing investment in the exhibition industry by other regional centres.

According to Mr Chu, the KPMG study is an authoritative report that will be used as a model for planned future studies. “This report gives us a particularly clear and accurate contemporary picture of our industry,” he asserts. “Not only has it strongly reaffirmed the importance of the exhibition industry to Hong Kong’s economic wellbeing, it has also shown us that the industry is currently in excellent health, and that Hong Kong remains the 'Trade Fair Capital' of the Asia Pacific region.”

The analysis carried out by KPMG Corporate Finance Limited is based on data and information provided by HKECIA, Hong Kong Convention and Exhibition Centre, Hong Kong Tourism Board, and individual interviews with HKECIA members. This Study uses the standard methodology used to analyse the performance of exhibition industries in other economies, meaning that all data has been analysed and presented to widely-recognised international standards.

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