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An Economic Impact Analysis of the Korean Exhibition Industry

ABSTRACT

This study estimates the multiplier effect of the exhibition industry. In order to calculate the exhibition industry’s total expenditure, consideration is made of three major sources of expenditure including hosts, exhibitors and foreign attendees. According to the summary of the economic impact analysis, the total exhibition receipts of

US$645.7 million produced US$1.2 billion in output; 21 692 full-time equivalent jobs,

US$260 million in personal income for residents, US$577.4 million in value-added, US$54.2 million in indirect tax and US$104.3 million in imports. Copyright ? 2008 John Wiley & Sons, Ltd.

Received 28 September 2006; Revised 4 May 2007; Accepted 28 August 2008

Keywords: exhibition industry; economic impact, expenditure, multiplier. INTRODUCTION

T he exhibition industry is growing rapidly around the globe. For example, in the

USA and Canada, approximately 13 185 exhibitions are held annually. They occupy more than 500 million net square feet of space and produce total gross revenues of US$10.4 billion, including revenue from exhibition space, advertising/promotion and registration fees (Kirkwood, 2002). In 2000, the exhibition industry attracted 44.4 million quali? ed buyers and created a total estimated economic impact of US$120 billion in the USA and Canada. However, studies on the estimated economic impact of the exhibition industry have not been actively conducted.

The aim of this study is to estimate the eco-nomic impact of the exhibition industry in Korea. This study de? nes exhibitions as indus-trial exhibitions with the purpose of carrying out commercial activities, such as: promoting a company or its products, selling products, enhancing the image of a company or its products, and collecting state-of-the-art industrial information, among other things. The exhibition should meet the standards of having more than three foreign countries rep-resented and more than 10 foreign participants. The criteria used in de? ning the exhibition are the same as those de? ned by the Korea Tourism Organization (formerly known as the Korea National Tourism Organization (KNTO)). The speci? c objectives are as follows. First, methods of tracing expenditure sources and separating the association of industries related to the exhibition industry are very complicated and

Copyright ? 2008 John Wiley & Sons, Ltd.

INTERNATIONAL JOURNAL OF TOURISM RESEARCH

Int. J. Tourism Res.11, 311–318 (2009)

Published online 13 October 2008 in Wiley InterScience

(http://www.sodocs.net/doc/cb7af2dd6c175f0e7dd137c6.html) DOI: 10.1002/jtr.691

An Economic Impact Analysis of the Korean Exhibition Industry

Samuel Seongseop Kim1,* and Kaye Chon2

1Hospitality and Tourism Management, Sejong University, Seoul, South Korea

2School of Hotel and Tourism Management, Hong Kong Polytechnic University, Hong Kong, China

*Correspondence to: S. S. Kim, Sejong University, Hospi-

tality and Tourism Management, Seoul, South Korea.

E-mail: sskim@sejong.ac.kr

Research Note

312

S. S. Kim and K. Chon

An Economic Impact Analysis of the Korean Exhibition Industry

An Economic Impact Analysis of the Korean Exhibition Industry

Copyright ? 2008 John Wiley & Sons, Ltd. Int. J. Tourism Res. 11, 311–318 (2009)

DOI : 10.1002/jtr

comprehensive; this study, therefore, clearly conceptualises the economic impact of the exhibition industry. Second, the study collects data on the three expenditure sources within the exhibition industry and integrates them. Third, the study estimates the multiplier effect of the exhibition industry based on the col-lected data and conceptualisation.METHOD

Conceptualisation of this study is shown in Figure 1. This study was carried out in four stages. First, it identified expenditure incurred by exhibition hosts. Second, it assessed expen-diture spent by exhibitors. Third, it investigated expenditure consumed by exhibition attendees. Fourth, it multiplied the total of the amount produced by the three expenditure sources by multipliers in each sector. Here, there is a need for an input–output (I–O) model in order to extract the multipliers. The key principle of the I–O model is to understand the multiplier effect concept. There are three types of economic impact. Direct impact is the ? rst-round effect of visitor spending and the impact of this injec-tion of new money spent by non-residents causes a ripple effect that has an indirect impact and an induced impact (Vanhove, 2005).

It is important to perform a review of the budget plan sheets at the initial stage in order to identify expenditure by exhibitors. The number of exhibitions that met the standards of having more than 3 foreign countries and more than 10 foreign participants was 147 exhibitions. However, as budget documents were con? dential, exhibition-organising com-panies were reluctant to show these docu-ments. It was possible, after multiple requests, to procure budget plans from nine exhibi-tions — three large, three medium and three small — from the Convention and Exhibition Center (COEX), an exhibition-organising company with the highest revenue in Korea.The nine exhibitions included three with an individual budget greater than US$0.5 million, three with an individual budget of US$0.3–0.5 million and three with an individual budget of less than US$0.3 million. The average budget was US$404 000. This amount was almost the same as that demonstrated in Hwang’s (2001) study , estimated at US$400 000. Thus, the total expenditure spent by exhibition hosts in 2004 was US$59 388 000, calculated by multiplying US$404 000 by 147 (number of exhibitions). Table 1 reports the results. Based on a detailed review of the budget plans of the nine exhibi-tions, the expenditure categories for the exhibi-tions were numerous and are presented in this study as percentages (Table 1). The expendi-ture of exhibitors varies according to the characteristics of exhibitions and exhibitors. Researchers conducted on-site surveys between 15 June and 24 October 2005 at 16 exhibitions held in COEX. A one-page questionnaire of items, indicating expenditure categories, amount of expenditure, company name, size of company , frequency of participation in exhibitions and type of booth, was given to em-ployees working in the exhibition booths to complete. Random distribution of 18–20 ques-tionnaires at the 16 exhibitions resulted in the collection of 270 of 300 distributed question-naires, showing a response rate of 90%. However,

Economic impacts - output

- employment - income - value-added - tax - import

Figure 1. Conceptualisation of the economic impact of the exhibition industry.

Economic Impact Analysis

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DOI : 10.1002/jtr

T a b l e 1. T h e a m o u n t s o f e x p e n d i t u r e b y t h e t h r e e e x p e n d i t u r e s o u r c e s (u n i t : U S $)

E x p e n d i t u r e c a t e g o r y

E x h i b i t i o n h o s t s

E x h i b i t o r s

F o r e i g n a t t e n d e e s

T o t a l

B o o t h i n s t a l l a t i o n b u s i n e s s 10 625 000 (17.9%)45 131 000 (31.1%)—55 756 000 (8.1%)P r i n t i n g /p u b l i s h i n g 2 762 000 (4.7%)31 491 000 (21.7%)—34 252 000 (5.0%)A u d i o /v i s u a l s e r v i c e s 131 000 (0.2%)——131 000 (0.0%)

C o m p u t e r a n d m a c h i n e e q u i p m e n t 1 972 000 (3.3%)10 667 000 (7.4%)—12 638 000 (1.9%)R e t a i l s t o r e s (s h o p p i n g )267 000 (0.5%)—64 011 000 (13.3%)64 924 000 (9.4%)R e s t a u r a n t s 1 960 000 (3.3%)7 357 000 (5.1%)68 102 000 (14.2%)78 054 000 (11.3%)H o t e l s 439 000 (0.7%)3 251 000 (2.2%)174 937 000 (41.9%)206 787 000 (29.9%)T r a n s p o r t a t i o n 1 229 000 (2.1%)4 847 000 (3.3%)23 102 000 (4.8%)145 831 000 (4.3%)F r e i g h t /s h i p p i n g /s t o r a g e 18 000 (0.0%)6 632 000 (4.6%)—6 650 000 (1.0%)T r a v e l /t o u r i s m 42 000 (0.1%)—50 547 000 (10.5%)51 213 000 (7.4%)C o m m u n i c a t i o n a n d b r o a d c a s t i n g 1 259 000 (2.1%)——1 259 000 (0.2%)I n s u r a n c e a n d c l e a n i n g 5 280 000 (40.0%)——5 280 000 (0.8%)S p a c e r e n t a l (r e a l e s t a t e )23 762 000 (11.2%)——23 762 000 (3.5%)A d v e r t i s i n g 6 658 000 (3.6%)32 448 000 (22.4%)—39 105 000 (5.7%)H u m a n r e s o u r c e s p r o v i s i o n b u s i n e s s 2 120 000 (3.6%)3 294 000 (2.3%)—5 414 000 (0.8%)E n t e r t a i n m e n t 618 000 (1.0%)—41 475 000 (8.6%)42 523 000 (6.2%)B u s i n e s s c o n s u m p t i o n /u n c l a s s i ? e d 249 000 (0.4%)—31 765 000 (6.6%)122 440 000 (4.7%)T o t a l

59 388 000145 111 050480 180 000684 679 050

N o t e : T h i s s t u d y a s s u m e d t h a t 1000 K o r e a n w o n i s e q u i v a l e n t t o U S $1.

314

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Copyright ? 2008 John Wiley & Sons, Ltd. Int. J. Tourism Res. 11, 311–318 (2009)

DOI : 10.1002/jtr

only 243 questionnaires were used because 27 questionnaires had either missing values or discrepancies between the total amount and the amounts totalled in each category .

The average exhibitors’ expenditure was US$10 581, including the booth rental fee of approximately US$4000. However, the total expenditure by exhibitors excludes the booth rental fee, as this fee transfers directly to exhi-bition hosts and applies to the hosting of the exhibitions. The amount is an expenditure cat-egory for the exhibition hosts. The total expen-diture by exhibitors calculates to US$145 111 050 by multiplying US$6581 by 22 050. (The number of exhibitions held in 2004 was 147. The number of exhibitors per exhibition was 150. Therefore, the source of the 22 050 came from multiplying 147 by 150.) The expenditure items are reported in Table 1.

Regarding the computing expenditure by exhibition attendees, this study only included expenditure by foreign attendees and excluded domestic attendees. The use of foreign attendee expenditure for computations follows the concept that economic impact analysis applies to the injection of new money into an exhibi-tion host country by foreign delegates. There-fore, this study used the expenditure of foreign convention participants indicated in a Report of 2004 Convention Attendees published by the KNTO (2005). The category of registration fees was omitted from the attendees’ expenditure categories, as registration fees are sent directly to exhibition hosts, and then spent by the hosts. In addition, it cannot match with the I–O table items because it is not an industrial sector.Expenditure by attendees consisted of shop-ping (13.3%), restaurants (14.2%), hotels (41.9%), transportation (4.8%), travel/tourism (10.5%), entertainment (8.6%) and business consump-tion/unclassi? ed (6.6%). Expenditure per person was US$1995, and the total expenditure by attendees was calculated as US$480 180 725 by multiplying US$1955 by 245 616 (the number of foreign delegates listed in the Report of 2004 Convention Attendees published by the KNTO (2005)). The three sources of expenditure were independent of each other (see Table 1). The I–O model used in this study was based on the Korean national I–O transaction tables devel-oped by the Bank of Korea (2004). The 402 × 402 sectors from the transaction tables aggregated

into a 40 × 40 sector matrix. As the exhibition industry has 17 separate expenditure categories in the I–O transactions tables, this study included 17 aggregated industrial sectors as exhibition spending.RESULTS

Tables 2 and 3 report on the multipliers and ranks. Table 2 presents the output, value-added, income and employment multipliers of general and exhibition industry-related sectors. The output multiplier measures the effect of an extra unit of expenditure source spending on economic activity in a local area or a country (Crompton et al., 2001). The output multipliers of advertising (2.643), business consumption/unclassi? ed categories (2.546) and printing/publishing (2.267) were exceptionally high, ranking ? rst, second and fourth among general and exhibition industry-related sectors. The high levels of output multipliers of the three industries show a strong linkage with other industrial sectors.

The value-added used in this study mea-sures wages and salaries, operating surplus, depreciation of ? xed capital and indirect tax, less subsidies (Lee and Taylor, 2005). For example, the value-added multiplier of 0.903 in the hotel sector means that every dollar spent by the hotel sector generates approxi-mately 90 cents of value for this sector. In par-ticular, the value-added multipliers of space rental (real estate; 0.952), insurance/cleaning (0.945), human resource provision business (0.939), travel (0.930), shopping (0.923) and hotels (0.903) ranked ? rst, second, fourth, ? fth and sixth among all sectors. Therefore, the sectors show a relatively high propensity for generating value among exhibition industry-related sectors.

The income multiplier measures the effect of an extra unit of exhibition spending on the changes that result in the level of household income in the exhibition-hosting region or country (Howard and Crompton, 1995). The sectors such as insurance/cleaning (0.506), travel (0.478), entertainment (0.444) and hotels (0.421) ranked second, fourth, ? fth and sixth respectively in terms of the magnitude of income multipliers, indicating a high-income multiplier effect on residents.

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An Economic Impact Analysis of the Korean Exhibition Industry

Copyright ? 2008 John Wiley & Sons, Ltd. Int. J. Tourism Res. 11, 311–318 (2009)

DOI : 10.1002/jtr

Table 2. The output, value-added, income and employment multipliers and their ranks

Note: Only important industrial sectors are included in the table. Multiplier indicates sum of the direct and indirect effect. Average for all sectors is the value when the original 40 sectors were considered.

An employment multiplier reports the effect of an extra unit of exhibition spending on employment at the local or country level (Crompton et al., 2001). According to the results of an employment multiplier measurement, res-taurants (0.051), shopping (0.046) and hotels

(0.038) showed very high employment multipli-ers, and rank second, fourth and sixth respec-tively . These results are similar to those of other studies on the economic impact of tourism (Lee and Kwon, 1995; Kim et al., 2003; Lee and Taylor, 2005). As an example of interpretation, every

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S. S. Kim and K. Chon

An Economic Impact Analysis of the Korean Exhibition Industry

Copyright ? 2008 John Wiley & Sons, Ltd. Int. J. Tourism Res. 11, 311–318 (2009)

DOI : 10.1002/jtr

Table 3. The tax and import multipliers and the two coef? cients and their ranks

Note: Only important industrial sectors are included in the table. Multiplier indicates sum of the direct and indirect effect. Average for all sectors is the value when the original 40 sectors were considered.

billion won spent produces approximately 51 and 46 full-time equivalent jobs in the restau-rant and shopping sectors respectively . These results are unsurprising as they are labour-intensive industries that need more employees in comparison to other industries.

However, the multiplier effect is less reliable because it assumes full utilisation of

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DOI : 10.1002/jtr

all existing employees and that an increase in the creation of external new expenditure will inevitably lead to an increase in the level of employment (Frechtling and Horvath, 1999; Crompton et al., 2001; Vanhove, 2005). In lieu of recruiting new employees to accommodate the demands of increasing numbers of attend-ees or exhibitors, management approaches such as making existing staff work overtime, adjusting work shifts, or hiring part-time con-tract employees or volunteers are likely to be actively adopted (Crompton and McKay, 1994). Thus, the full-time equivalent jobs that the employment multiplier effect is expected to produce are expected to be minimal.

Table 3 shows the multipliers for tax and imports and their ranks, index of the power dispersion and index of the sensitivity disper-sion. Indirect tax indicates mainly commodity and excise taxes, excluding customs duty and taxes on imported goods. Among exhibition industry-related sectors, the largest indirect tax multipliers were space rental (real estate; 0.242) and insurance/cleaning (0.172), which indicates that every dollar spent by the three exhibition expenditure sources generated about 24 cents and 17 cents of government revenue for the two sectors respectively.

The import multiplier measures the value of imported goods and services associated with each additional unit of tourist expenditure (Vanhove, 2005). The largest import multi-pliers among the exhibition-related sectors were located in audio/visual equipment (0.449) and freight/shipping/storage (0.422). The results indicate that every dollar spent by the three expenditure sources produces about 45 cents and 42 cents of imports respectively.

The index of the power dispersion indicates the magnitude of the backward linkage effect, de? ned as the effect of all industries affected by the change of one unit in the ? nal demand from a certain industry. In Table 3, the indices of advertising (1.456), business consumption/unclassi? ed categories (1.402) and printing/publishing (1.248) ranked ? rst, second and fourth respectively among the general and exhibition industry-related sectors. This means that the development of the three sectors has a great effect on all industries.

The index of sensitivity dispersion demon-strates the magnitude of the forward linkage

effect, de? ned as the effect of a certain industry affected by the change of one unit in the ? nal demand from each of the industries. The indices of communication/broadcast-ing (1.447), space rental (real estate; 1.367), business consumption/unclassi? ed categories (1.346), restaurants (1.171), insurance/cleaning (1.049), printing/publishing (1.039) and booth installation business (1.019) were greater than 1.0. The results indicate that as the seven sectors reveal a high level of power in the forward linkage effect, other industries will greatly in? uence them.

The economic impact of the exhibition indus-try can be estimated by multiplying the total exhibition receipts (in Table 1) by the corre-sponding exhibition industry-related sectors’ multipliers in terms of output, employment, income, value-added, indirect tax and import (in Tables 2 and 3). Table 4 presents the summarised results of the economic impact estimates of the Korean exhibition industry in 2005.

CONCLUSION AND DISCUSSION

As Table 4 shows, expenditure by foreign attendees was the highest, approximately US$480.2 million, followed by that of exhibi-tors (US$145.1 million) and then hosts (US$59.4 million). The percentages of contribution to the total expenditure by these three sources were 70.1%, 8.7% and 21.2% respectively. The total amount of approximately US$684.7 million constituted 0.0953% of the Korean gross domestic product in 2004. Results of the amount of total expenditure by the three expenditure sources are slightly higher than those in both Kim’s (1997) study (US$414.7 million) and Hwang’s (2001) study (US$443.8 million). However, a slightly higher amount is understandable as the assumption is that the exhibition industry has been developing. The size of multipliers obtained in this study was similar to those that were reported in Kim et al.’s (2003) study.

Total exhibition receipts of US$684.7 million produced a US$1.2 billion output, 21 692 full-time equivalent jobs, US$260 million in per-sonal income for residents, US$577.4 million in value-added, US$54.2 million in indirect tax and US$104.3 million in imports. This study

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DOI : 10.1002/jtr

Table 4. The economic impact of the exhibition industry (unit: US$)Category Total effect (1 + 2)Direct effect (1)Indirect effect (2)Output

1 244 745 000944 316 000300 429 000(100.0%)(75.9%)(24.1%)Employment (person)21 69218 51

2

3 180(100.0%)(85.3%)(14.7%)Income 260 129 000217 880 00042 249 000(100.0%)(83.8%)(16.2%)Value-added 577 357 000457 098 000120 260 000(100.0%)(79.2%)(20.8%)Tax 5

4 196 00040 247 00013 949 000(100.0%)(74.3%)(25.7%)Import

104 293 00027 884 00076 408 000(100.0%)

(26.7%)

(73.3%)

Note: The numbers in parentheses show the percentages of the total, direct and indirect effects.

has some limitations that require improvements for future research. As this study only considers the positive economic impact of the exhibition industry, it does not regard social–cultural impacts or the concept of opportunity cost indicative of increased effects incurred when public funds are invested in other industries. As regional I–O models were not developed in Korea, consideration was also not made of interregional leakage effects or different multiplier effects across exhibition-hosting regions.REFERENCES

Bank of Korea. 2004. 2001 Input–Output Tables . Bank of Korea: Seoul.

Crompton JL, McKay SL. 1994. Measuring the economic impacts of festivals and events: some myths, misapplications and ethical dilemmas. Festival Management & Event Tourism 2: 33–43.

Crompton JL, Lee S, Shuster TJ. 2001. A guide for undertaking economic impact studies: the Springfest example. Journal of Travel Resear h 40(1): 79–87.

Frechtling DC, Horvath E. 1999. Estimating the multiplier effects of tourism expenditures on a local economy through a regional input–output model. Journal of Travel Research 37: 324–332.

Howard DR, Crompton JL. 1995. Financ ing Sport . Fitness Information Technology: Morgantown, WV .

Hwang H. 2001. A study of Korean exhibition industry’s economic outcome. International Trade Study 7(2): 3–32. (in Korean)

Kim SS, Chon K, Chung, KY. 2003. Convention industry in South Korea: an economic impact analysis. Tourism Management 24: 533–541.

Kim, W-G. 1997. Korean convention overview and its economic impact. Journal of Hotel and Tourism Management 12: 79–110. (in Korean)

Kirkwood H. 2002. Exhibition industry resource guide. EXPO March, 26–31.

KNTO. 2005. A Report of 2004 Convention Attendees . Korea National Tourism Organization: Seoul.Lee C-K, Kwon K. 1995. Importance of secondary impact of foreign tourism receipts on the South Korean economy. Journal of Travel Research 34(2): 50–54.

Lee C-K, Taylor T. 2005. Critical re? ections on the economic impact assessment of a mega-event: the case of 2002 FIFA World Cup. Tourism Management 26: 595–603.Vanhove N. 2005. The E c onomi c s of Tourism Destinations . Elsevier Butterworth Heinemann: Burlington, MA.

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