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The Impact of Implementation of Individual Visit Scheme on the Price of Street Level Retail Shops PhD Candidate: Liu Yan, Ivy Supervisor: Prof. K. W. Chau.

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Presentation on theme: "The Impact of Implementation of Individual Visit Scheme on the Price of Street Level Retail Shops PhD Candidate: Liu Yan, Ivy Supervisor: Prof. K. W. Chau."— Presentation transcript:

1 The Impact of Implementation of Individual Visit Scheme on the Price of Street Level Retail Shops PhD Candidate: Liu Yan, Ivy Supervisor: Prof. K. W. Chau 3rd, July, 2013

2 Definition of Keywords Individual Visit Scheme (IVS) Individual Visit Scheme (IVS) – began on July 28, 2003, allowed travelers from Mainland China to visit HK and Macau on an individual basis Street Level Retail Shops Street Level Retail Shops – ground floor shops within tenant-mixed buildings with a street-faced frontage and are commonly found in the older parts of the urban area 2

3 Figure 1 Street level retail shops

4 1 Background 2 Research Questions & Objectives 3 Literature Review & Hypotheses 4 Research Design 5 Data and Sources OutlineOutline 6 Expected Outcome

5 Tourism Industry Tourism Industry – in 2009, it contributed to 3.3% of GDP, employed over 193,200 persons (5.5% employment) – visitor arrivals in 2011 reached 41.9 million Mainland China Visitors Mainland China Visitors – In 2011, largest source market with 28.1 million - 67% – increases 19.43% annually from 1991 to 2011 – spend 73% expenditures on shopping on average 1 Background 5

6 Figure 2 Visitor Arrivals by Country/Territory of Residence ( )

7 Figure 3 Receipts from Visitors ( )

8 Figure 4 Consumption Expenditure of all Visitors ($million) ( )

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10 Retail Industry in HK Retail Industry in HK – total retail sales: $325 billion (2010) – HK$64 billion, or 20%, was directly attributed to shopping spending of Mainland Chinese tourists Retail Property Retail Property – over 97% is in the private sector – a large amount of very small retail business types and a rather small scale of huge retailers – shopping malls, street-level retail shops, open air bazaars, markets and cooked food stalls 10

11 2.1 Research Question 2.1 Research Question – Shoppers can be classified into local-shoppers and tourist-shoppers – This study examines whether there is any relationship between changes on shopper mix and the implicit prices of street level retail shops attributes – Makes use of the implementation of IVS in Hong Kong, which changed the shopper mix to undertake empirical tests 2 Research Questions & Objectives 11

12 2.2 Research Objectives 2.2 Research Objectives – Examine the differences in shopping behaviors between local & tourist shoppers – Identify factors that affect street level retail shops price in urban areas – Identify attributes of street level retail shops which are likely to be affected by changes in local & tourist shopper mix – Formulate and test hypotheses on the impact of IVS on the implicit prices of street level retail shops attributes 12

13 3.1 Tourism Shopping 3.1 Tourism Shopping – local-shoppers and tourist-shoppers have different shopping behaviors (Christiansen & Snepenger, 2002) – Heung and Qu (1998), tourism shopping: expenditure on goods purchased in HK, by international visitors, either for consumption in HK or for export but not including expenditure on food, drink or grocery items – Law and Au (2000): visitors total expenditures on non- F&B items could have been consumed locally, or could have been taken abroad 3 Literature Review 13

14 3.2 Retail Property 3.2 Retail Property Macro view – Eppli and Benjamin (1994) : central place theory, retail agglomeration economics, positive effects of large anchor-tenants and valuation of shopping centers – Others: Sirmans and Guidry (1993), Benjamin, Boyle, and Sirmans (1990), O'Roarty, McGreal, and Adair (1997), etc 14

15 Micro view – Craig, Ghosh, and McLafferty (1984): area or market, potential shops, optimal, physical features – Sirmans and Guidry (1993) summarized four kinds of main factors: market condition, customer drawing power, building design and location – Others: Yuo, Crosby, Lizieri, and McCann (2003), Gatzlaff, Sirmans, and Diskin (2001), etc. Teller (2008) 15

16 Hong Kong case – Richard S. Tay, Clement K. Lau, and Marie S. Leung (1999) – Chau, Pretorius, and Yu (2000) studied street level retail shops in Mong Kok – Ning (2011) conducted a further research 16

17 3.3 Property Price Determinants 3.3 Property Price Determinants – Many studies have been done to study various factors that affect property prices or rentals, say Archer, Gatzlaff, and Ling (1996), Gibbons and Machin (2008), Tsun (2010), etc Building Age – Hottest variables: Knight and Sirmans (1996), Lee, Chung, and Kim (2005), Rehm, Filippova, and Stone (2006), etc – Depreciation & negative effect v.s. positive influence 17

18 Neighborhood Attributes – Rodriguez and Sirmans (1994), Wolverton (1997), Yiu, Chau, and Wong (2008), Kestens, Theriault, and Rosiers (2004), Hui, Chau, Pun, and Law (2007) etc – Parks, hospitals, banks or supermarkets, sea view, mountain view – For retail properties, the most important issue is the power of generating potential customers (R.S. Tay, C.K. Lau, & M.S. Leung, 1999) 18

19 Transportation – bus, railway, MTR availability, distance to certain stations or CBD – positive effect: Chalermpong (2007), Shin, Washington, and Choi (2007), Tse (2002), Choy, Mak, and Ho (2007) – negative effect: Poon (1978) and Forrest, Glen, and Ward (1996), Nelson(2008), Chau and Ng (1998) – little has been done with reference to retail property: Damm, Lerman, Lerner-Lam, and Young (1980) 19

20 3.4 Research Gap 3.4 Research Gap – Previous research objectives focused mainly on shopping malls or shopping centers, nearly no studies on street-level retail shops – There is no empirical study on the relationship of shopper mix and implicit prices of retail shops attributes 20

21 3.5 Hypotheses 3.5 Hypotheses – H1: Implementation of the Individual Visit Scheme will increase the positive impact of building age on prices of street level retail shops, other things being equal Rationale – Older street level shops occupy premier locations first as the urban area develops – AGE is a proxy for how well-known these locations are 21

22 – H2: Implementation of the Individual Visit Scheme will increase the positive impact of upper level retail use on the prices of street-level retail shops, other things being equal Rationale – Upper-level properties always carried out for other use; – Different property type has different pedestrian drawing powers 22

23 – H3: Implementation of the Individual Visit Scheme will increase the positive impact of proximity of the shops to tourist accommodation facilities, other things being equal Rationale – Proximity to accommodation facilities is of value to tourists but not local shoppers. 23

24 – H4: Implementation of the Individual Visit Scheme will increase positive impact of proximity of the shops to MTR stations, other things being equal. Rationale – Proximity to MTR is a measure of accessibility of shops – Accessibility of shops is more important to tourist than local shopper 24

25 Hedonic Price Model ln(RP) =a 0 +a 1 AGE+a 2 AGE 2 +a 3 SIZE+a 4 SIZE 2 +a 5 FRON +a 6 FRON 2 +a 7 COR+a 8 MTR+a 9 MTR 2 +a 10 AC +a 11 AC 2 +a 12 IVS+a 13 IVS*AGE+a 14 IVS*FRON +a 15 IVS*AC+a 16 IVS*MTR+ε – ln(RP) -natural log of the real price per saleable floor area – a i - coefficients – ε - error term 4 Research Design 25

26 Variables Description VariablesDescriptionUnit RP Real price per saleable area $/M 2 AGE Age of the shop Year SIZE Saleable area of the shop M2M2 FRON Length of the frontage facing the street (equal zero if the shop is located inside a building Meter COR Shops located at the junction of 2 roads Dummy MTR The distance to the nearest MTR station Meter AC Numbers of hotels or guesthouse within 250m radius Number IVS equals 1 after implementation of the Individual visit scheme Dummy IVS*AGE Interaction between IVS and AGE -- IVS*FRONInteraction between IVS and FORN -- IVS*AC Interaction between IVS and AC -- IVS*MTR Interaction between IVS and MTR -- 26

27 5 Data and Sources VariablesDescriptionData sources RP Deflated transaction price per saleable area EPRC INDEXRetail price indexRating and Valuation Department MTRDistance to the nearest MTR station Survey and Mapping Office/ Google map AC Numbers of hotels or guesthouse within 250m radius Licensing Authority and Google map CORLocated in cornerSite visit AGEBuilding ageEPRC SIZEShop sizeEPRC FRONLength of frontageSite Measurement IVSIndividual visit schemeHong Kong Tourism Board 27

28 6 Expected Outcome VariablesExpected signRemark AGE+veControl AGE 2 ?Control SIZE+veControl SIZE 2 ?Control FRON+veControl FRON 2 ?Control COR+veControl MTR-veControl MTR 2 ?Control ACInsignificantControl AC 2 InsignificantControl IVS+veControl IVS*AGE+veH1 IVS*FRON+veH2 IVS*AC+veH3 IVS*MTR-veH4 28

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30 THANK YOU


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