Expo 2010’s Legacy: What Did Shanghai Gain?

Shanghai’s ambitious World Expo 2010, which ran from May through October, attracted 72 million visitors. But now the show is over. Gone are the crowds of Expo volunteers and tourists clustered on the Bund and on Nanjing East Road. Factories near Shanghai, which had been forced to close during the Expo, fired up their smokestacks on November 1. Soon thereafter, a familiar thick pall descended on the city.

With the pollution came the inevitable critique -- what went well, what didn't go so well, with some bitter-sweet news. By the more conservative estimates, it cost US$45 billion to host the Expo, largely funded through a combination of government bonds and bank loans to set up the dozens of country pavilions, the requisite infrastructure, the closure of shipyards and factories that once occupied the event's site, and the relocation of local residents living the new up-and-coming site. As the pavilions come down, the question arises: What did Shanghai gain?

Broadly speaking, analysts say, the city benefited in three ways: Direct revenue, a bolstered image, and a host of new transportation works and entertainment facilities. In a narrower sense, the city government got hold of a valuable swath of riverfront property, formerly home to rusty shipyards and rundown residential blocks, which it will sell to developers to turn into the swanky retail and commercial property for which the city is now more known.

Record Setting

One of the direct beneficiaries of the Expo were the retail and residential property sectors, says Lina Wong, managing director of east and southwest China at Colliers International, a property consultancy.One visit to the intersection of Huaihai and Huangpi roads provides the evidence of the Expo-related boon. New luxury outlets there sprang up shortly before the Expo, and now the corner sparkles with high-end stores, from Apple to Tiffany to Ermenegildo Zegna. “The effect of the Expo on retail was really noticeable -- 2010 is already a record year for tourist spending in Shanghai, and leasing rents have gone up substantially in the main areas,” says Wong.

The Expo provided a similar boost to residential property leasing, says Wong, vacancy rates for high-end residential property fell sharply during the Expo, from 15% to 8%. Meanwhile, five-star hotel occupancies, which had dipped to below 40% in the spring of 2009, recovered to about 80% during the Expo.

In the serviced apartment segment, vacancy levels during the Expo dropped 11 percentage points between May 1 and October 31. Rents rose too, but not as much as vacancies fell, Wong says.

Nonetheless, the city's serviced apartment companies aren't complaining. “In the … six months [while the event ran], we had the benefit of the Expo, and prior to that, the benefit of pre-Expo preparations,” says Elaine Young, founder and CEO of Shama, which operates 13 serviced apartment buildings in Hong Kong and mainland China. “We have had occupancies in the mid-80% to mid-90% in all four of our buildings in Shanghai. The market has been very strong.”

Frasers Hospitality, which has three serviced apartment operations in Shanghai, also reported strong Expo-related business. “Our properties in China are experiencing occupancies in the 85%-to-92% range,” says Choe Peng Sum, CEO of the firm, which operates 35 serviced apartment properties in Asia, Europe and the Middle East. “Up to six months before the Expo, occupancies [in Shanghai] started to pick up as project groups poured into the city to prepare for the Expo. But across the board, business travel has increased.”

With the Expo over, the serviced apartment chains expect business to slow, but they’re not overly concerned. “We do expect to see a slight drop in occupancies, and in some instances a drop in rates, but by and large our business model, with a sizable long-stay portion, will ensure some stability for the properties,” Choe says.

“Shanghai will be interesting to watch,” adds Young of Shama. “But the advantage of serviced apartments over hotels is that the majority of our leases are for one year, so that eliminates occupancy volatility when markets are correcting.”

Building Works

Among the event's benefits, it's the infrastructure that provides the longest-lasting legacy. Some of the projects were already in already in the works before the Expo and were rushed to completion before the fair's opening in May. Among them was a new section of the Middle Ring Road linking the city to Shanghai Pudong International Airport. Opened in April, it reduces travel time from the city to the airport by 20 minutes.

Likewise opening in time for the Expo was Terminal Two at Shanghai Hongqiao Airport, which handles much of the city’s domestic air traffic. The new terminal increases the airport’s capacity by 60%, adding 55 boarding gates. It also reduced the irksome need for passengers to hop on shuttle buses to take them across the tarmac to get to and from their planes. As part of the Hongqiao Transport Hub, the terminal is linked to the city and surrounding areas by metro lines and elevated highways, and will eventually be connected to the train that serves the international airport.

The infrastructure boom climaxed in April with the unveiling of the Bund renovation project and the inauguration of the giant cruise ship terminal on the Yangtze River north of Shanghai. Located at the junction of the Huangpu and Yangtze rivers, the Wusong International Cruise Ship Terminal can dock the latest generation of enormous passenger cruise ships and the first cruise ship docked there on April 27, four days before Expo began. More berths will be eventually be added to the two berths and a seashell-shaped terminal.

Then there's the Bund's renovation. That included adding broad sidewalks in front of the historic Bund buildings and a spacious riverfront promenade, giving even greater luster to the waterfront. As part of the renovation, a tunnel was built under the boulevard that separates the historic buildings from the Huangpu riverfront, sharply reducing street traffic and adding to the appeal of Shanghai’s most famous tourist attraction.

Work on Shanghai’s subway lines was also accelerated. Several new lines, including Line 13 serving the Expo site, were rushed to completion in the spring. In the last five years, Shanghai has opened 300 kilometers (186.4 miles) of subway lines, with more on the way. Also opened was a new road tunnel linking Pudong in the east to Shanghai proper in the west, which straddled the Huangpu River. The tunnel will be open to regular car and truck service after the site's dismantling complete early next year.

All told, “the World Expo helped position Shanghai as a global city, and the real reason is that government has done an excellent job of building up the infrastructure," says Shaun Rein, managing director of China Market Research Group in Shanghai. "So when visitors come, they always tell us that they are pleasantly shocked by how well run the city is.” Now with more subway lines than New York City, the city is simply building on its positive pre-Expo reputation. Rein notes, “When we interview foreigners and Chinese who visit Shanghai, they always give the city high marks for infrastructure.”

Shanghai also now has two new entertainment venues. The Expo Performance Center, the site of the opening and closing ceremonies, reopened on November 19 as the Mercedes-Benz Arena. The arena’s general manager, Guy Ngata, says the 18,000-seat venue compares favorably to the Staples Center in Los Angeles and O2 Arena in London. Much of the arena’s entertainment will be Asian. First up were five sold-out shows by Chinese singer Faye Wong, with Taiwan's Elva Hsiao and Hong Kong's Jacky Cheung following soon.

The arena also contains 20,000 square feet of retail space, a public ice skating rink, six cinemas with 800 seats, a live-music club seating 650 guests and several restaurants. “The arena is the soul of the building, but there are a lot of other lifestyle elements,” Ngata says. “As a retail-oriented arena all-in-one building, it is not only unique in Shanghai and China, but also globally.”

Next to the Mercedes-Benz Arena sits the red inverted pyramid of the China Pavilion, which will remain as a tourist attraction. Ngata hopes the area near the arena will become a weekend destination for Shanghai residents. “As the waterfront opens around us post-Expo, we are excited about the area along the river. People will be able to enjoy that as a recreational space, and see the arena as an area where there may be a show on in the evening but they can come early to enjoy the other elements.”

Image Polishing

The 200-plus countries that set up pavilions – many of them lavishly designed despite being temporary – did so because they wanted to impress the event's 70 million Chinese visitors and keep Beijing happy. For the most part, they succeeded, says Tom Doctoroff, Shanghai-based director of North Asia for advertising agency JWT and author of the book, Billions: Selling to the New Chinese Consumer. However, no country truly distinguished itself, he adds. “I don't think any country really did anything other than avoid being put on the bad list of the Chinese Communist Party.”

In terms of image, Shanghai had much more at stake. Logistical breakdowns or poor infrastructure would have given Shanghai a black eye, especially if compared with the efficiency of the Olympics that Beijing hosted in 2008. In this respect, Doctoroff says, Shanghai gets the thumbs up. “Expo 2010 was pretty effective for Shanghai, and it was much more effective [inside than outside the country],” says Doctoroff. “The infrastructure reform, particularly the subway, was met with amazement even by the most anti-Shanghai element, which consists of many people in China.”

Most Chinese are not generally fond of Shanghai, says Doctoroff, but the Expo nonetheless left a positive impression. “In terms of what the city was able to achieve, the Chinese were impressed. Shanghai stepped up a level in internationalization.”

However, the show was far less effective in reaching international audiences, Doctoroff says. “Overseas, I don't think it made much of a dent at all. The marketing of the Expo internationally was somewhat of a botch, and the essence of Shanghai, the vibrancy, didn't come through. Everything came through that horrifying creature, that Hai Bao" -- the event's little blue mascot, he calls a "designed-to-offend-no-one symbol. "The Shanghai government was so focused on using it as an internal propaganda tool that they weren’t able to capture the imagination of an international audience at all, and that is unfortunate,” he says.

Because the Expo attracted little international attention, it is unlikely to deliver more overseas tourists. “The Expo will have more of an impact on the business world than the tourism world,” says Rein of China Market Research Group. “The Expo showed that the Shanghai government has good policies, and they didn't overreact and shut down the whole city like Beijing did for the Olympics. Business was still able to operate.”

In the end, Shanghai has emerged as a better city, and a better-known city, as a result of Expo 2010. “The Expo,” Rein says, “showed that Shanghai is ready to be a prime-time modern global city.”


Published : 2010.11.24



 
















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