MICE industry braces for Shenzhen World

In the days before Alibaba, the MICE business was a major driver of development in the Greater Bay Area. Right from the start of Reform and Opening, face-to-face contacts were necessary to grease the wheels of Socialism with Chinese Characteristics. Buyers would fly in from around the world to meet local suppliers, spending precious foreign exchange at hotels, restaurants, and karaoke lounges, before ordering vast quantities of goods from Chinese factories. The rise of e-commerce has curbed the industry’s growth, but Meetings, Incentives, Conventions, and Exhibitions still generate sales worth billions of dollars every year for the 11 GBA cities, each of which has a Convention and Exhibition Center (or two) sitting proudly in a prominent location.

Shenzhen, the newly anointed Pioneering Zone for Socialism with Chinese Characteristics, is about to open such a center that, its leaders hope, will redefine the industry. It’s called the Shenzhen World Exhibition & Convention Center. 

Shenzhen World is being built in the Baoan district, a short ride north of the city’s airport, in an area that will house not only the world’s largest indoor exhibition space but hectares of supporting industries as well, including hotels, offices, and residential complexes. It is owned and will be operated by subsidiaries of two of the city’s most prominent corporate groups: China Merchants Shekou Industrial Zone Holdings, which made its fortune in the Shekou Port but now owns everything from banks to restaurants; and Overseas Chinese Town Holdings, which began with a single theme park in the Nanshan district and morphed into a leisure and real estate conglomerate. The complex is being managed by SMG, a major international convention venue-management company based in the United States. 

The city is so excited about its new trophy development that it recently hosted the Shenzhen Exhibition Economy Development Forum, at which details of the new project were discussed at length. All the big names were there, including the Party Secretary and the Mayor. Nie Liming, deputy general manager of China Merchants Shekou Industrial Zone Holdings, touted the Shenzhen EC’s main attractions to the media, starting with the fact that it was located in Shenzhen, which will be the “core engine of the Greater Bay area and a global benchmark city in the future”. 

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Nie has much to be proud of. Shenzhen World, which opens in two phases starting next month (November), will boast a convention and exhibition center with a total area of about 1.48 million sqm, including actual exhibition space of about 500,000 sqm. This is about seven times bigger than the city’s “old” Shenzhen Convention and Exhibition Center, located in the Futian district. 

Shenzhen World includes 19 exhibition halls under a roof – and one outdoors. It will eclipse the world’s reigning champ up in Guangzhou, the Canton Fair Complex, and will be five times bigger than Hong Kong’s HKCEC. 

There is a slick video to watch. Here is the tale of the tape:

total space exhibition space
Shenzhen     1,605,000             500,000 
Guangzhou     1,131,000             384,000 
Hong Kong        306,000               91,500 
(sqm) (sqm)

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This mammoth structure will be able to welcome around 400,000 visitors a day. By comparison, the Canton Fair Complex, located in Guangzhou’s Pazhou district, attracted 200,000 visitors for its semi-annual main event.

Shenzhen World will be much more than a convention and exhibition center. It will have a proper 13,000-seat arena for sporting events and pop concerts, plus a large standalone restaurant business that aims to attract daily visitors beyond the usual conventioneers. Its Plenary Hall looks more like a theater that the late Steve Jobs would have felt comfortable in. Ballrooms will be able to host banquets of more than 2,000 guests.

The first thing an experienced fair-attendee would likely think when reading such numbers is: what about mobile-phone coverage? This will be the world’s first exhibition center to have full 5G coverage, courtesy of local network-equipment supplier Huawei Technologies and China Telecom. Not only are fast data transmission speeds guaranteed, but the network can apparently handle 120,000 phone calls at the same time. 

Plans for the surrounding neighborhood, known as Expo Bay, are also impressive. International Grade A office buildings will cover an adjoining 260,000 sqm. International hotel brands, including Hilton and InterContinental, have already signed up in hotel-and-retail development project spread across another 250,000 sqm. High-end apartments will dwarf these, covering around 700,000 sqm. 

At the core of the Baoan district lies the airport. It already has more than enough hotel accommodation to support major fairs: 19 hotels within a 10km radius from the new center have been built, and it is connected by both high-speed Intercity Railway (at the airport) and two of the city’s Metro lines. Shenzhen World is just three stops away from the airport on Line 20.

Hotels map

Transport map

All of which is impressive, but begs two obvious questions: One, can Shenzhen attract enough business to make this gargantuan project commercially viable? And two, will it take business away from exhibition centers in other GBA cities?

Build it and they will come?

The first question is the most pressing, from the viewpoint of the owners and the city, because the project is costing a whopping RMB 24 billion to build. How is it going to recover that investment? According to local media reports, the plan is for Shenzhen World to be generating annual revenues of RMB 15 billion within five years. But the knock-on effect on the economy is expected to be much greater, creating another RMB135 billion of indirect income annually among supporting industries. 

This is going to require a dramatic rise in performance, and the new center will need to attract some events at a scale previously unimaginable. Shenzhen doesn’t have the Canton Fair, like Guangzhou does. Its biggest exhibition at the existing center is the China Hi-Tech Fair, which covered 140,000 sqm of floorspace in 2018. 

The industry only really began to grow in Shenzhen in 2004, with the opening of the Convention and Exhibition Center in Futian. From 72 exhibitions covering 990,000 sqm in total, in ten years (by 2014) it grew to 123 exhibitions and 3.12 million sqm. That might sound impressive, but it has been lagging well behind Guangzhou and the country’s MICE leader, Shanghai. Shenzhen World has a lot of catching up to do.

Exhibition centers (2018)
Exhibitions: Floorspace covered (million sqm)
Shenzhen 146 5.54
Guangzhou 277 13.3
Shanghai 741 26.7

Can it be done? This is a city that has defied naysayers for 40 years, and it certainly seems like the new center’s owners, heavyweights in the local economy, are determined to do it. 

It is not easy at this stage, however, to gauge the nitty-gritty of how it will be achieved. A glance at the new exhibition center’s program lineup shows names of new events that had previously not come to Shenzhen. One that catches the eye is the Greater Bay Area Industrial Expo, scheduled for November 26-29. It’s not a mega-event, but it is expected to cover around 160,000 sqm, which is roughly one-third of the floorspace at Shenzhen World. More examples of upcoming events can be read here.

Behind the optimism stands confidence in the city’s ongoing development, especially as a technology hub. (Techies love events.) One of the highlights of the local events calendar, for instance, is the World Drone Congress, together with the Shenzhen International UAV Expo. It is small, but growing at a fast clip, this year welcoming more than 100 exhibitors across 15,000 sqm of space. As Shenzhen climbs higher on the world stage for its technology expertise, these kinds of events are expected to surge.   

There are reasons for skepticism, of course. Cross-border e-commerce is growing faster than the province’s overall trade, and this will likely continue as Alibaba, fresh from a US$2 billion buyout of its closest rival, seeks to push out globally at a more aggressive pace. The US-China trade war is dampening the outlook for the entire region’s global trade prospects. And the Hong Kong protests are not necessarily going to be Shenzhen’s gain, as visitors to the region stay away in droves.

Time will tell.

What about the rest of us?

Another challenge for Shenzhen Bay will be placating its regional partners in the Greater Bay Area, all of whom have their own cherished MICE industries that they would like to grow. Already, some of them are losing events to Shenzhen World – such as the Greater Bay Area Industrial Expo, which was held in Dongguan last year. 

This is not something that trade-development officials in other GBA cities like to talk about, understandably. Yet it is also nothing new. Regional competition has been fierce since the industry began putting up buildings at progressively larger scale to cater to bigger and bigger events. The biggest usually get more business, but not always. Service counts as well.

Hong Kong, for instance, has managed to retain a solid MICE industry at its two centers, the HKCEC in Wan Chai and the Asiaworld-Expo out at the airport, despite the rise of big centers in Guangzhou, Shenzhen, Dongguan and Macau (at the Venetian Macao). The HKCEC held fewer big exhibitions than Shenzhen did last year, but it still had a relatively high total number of events. The center’s outstanding business performance is reflected in the numerous international awards it has been given in recognition of service quality, community service, and environmental protection.  

HK Convention and Exhibition Center (July 2017 to June 2018)
Total: 1061
Exhibitions: 118
Conferences: 166
Entertainment and special events: 51
Banquets: 355
Other events: 371

Having said that, the HKCEC’s success has been due to many factors. Partly it is because Wanchai has hotels, restaurants and nightlife within easy walking distance of the HKCEC, but it is also undoubtedly because of the Hong Kong International Airport, which has many more connections to overseas destinations than either of the Shenzhen or Guangzhou airports. 

At the time of writing this, a large cloud hung over the MICE industry in Hong Kong, due to the street protests. Its future indeed looks shaky, and this may result in further gains for Shenzhen World. But most events are planned months, if not years, in advance, and so it is difficult to make accurate forecasts at the moment. 

Without the protests, however, infrastructure development is already eroding Hong Kong’s advantage in Shenzhen’s favor. Not only is the Shenzhen International Airport aggressively adding more flights to overseas destinations – 50 alone in the past year – but the buildout of the high-speed railway network is bringing the Hong Kong International Airport closer to Shenzhen World, via the Kowloon West Hi-Speed Railway Station. The railway network is a work in progress, but in the longer term, it is clear that connections to the Guangzhou and Hong Kong airports will make Shenzhen World the center of the MICE industry in the GBA. It will be very hard for Hong Kong to compete for big events.

The Trade Development Council, however, remains cautiously optimistic that it can focus on quality rather than quanity. As the TDC said in a July press statement: 

“The Outline Development Plan for the Guangdong-Hong Kong-Macao Bay Area highlights Hong Kong’s role in developing a high-end convention and exhibition business. To consolidate the city’s competitive edge in this area, the HKTDC will further internationalise its trade fairs by recruiting quality exhibitors, as well as global importers, buyers from department stores and chain stores, and e-tailers, to create new opportunities for Hong Kong businesses. The HKTDC will also enrich the exhibition content and introduce new product zones to further elevate sourcing efficiency and enhance the overall attractiveness and competitiveness of the fairs.”

For its part, Shenzhen World is focused on growing the regional pie, rather than eating anyone else’s. Its leaders envisage a “powerful interactive effect will be created, not only accelerating the upgrade of catering, advertising, tourism industry of Shenzhen but also other cities in the GBA”.

How this will work out is key to understanding how well the GBA itself can integrate. In a few years’ time, all of the 11 cities will be better connected by high-speed trains, which should make it easier for each city to specialize in various commercial niches. That is the theory, anyway. Shenzhen’s pull for super-sized events could translate into increased spending on support services throughout the GBA. Cannibalizing the MICE industry within the GBA won’t be in the region’s best interests, but taking share from Shanghai or San Francisco would be. Time will tell.

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