My city’s better than yours

June 6, 2011

“The leading cities of the world – the global cities – are the very nodal hubs that knit the global economy together. Without these global cities, there would be no global economy.”
Dr. Yuwa Hedrick-Wong, global economic advisor, MasterCard

Why MasterCard’s recently released “Worldwide Index of Global Destination Cities” should pique the interest of meeting planners, dealmakers, investors and governments the world over.

Billed as a new approach to understanding the global economy in terms of connectivity, the study has some huge implications. And to better explain them, I met with its Canadian author, Dr. Yuwa Hedrick-Wong.

Knowing that international travel is a canny indicator of cities’ economic growth, Hedrick-Wong built an Index that involved number-crunching international travel and cross-border expenditures using data not readily available in the past, for and between 132 cities (45 from Asia-Pacific; 33 from Europe; 21 Middle East & Africa; 19 from Latina America; and 14 from North America).

No data MasterCard volumes or transactional data was used and Hedrick-Wong is not a staffer.

For each of the 132 cities, his researchers took the sum of the total of visitor arrivals from the rest of the world (from OAG airline data and national tourism organisations) and their total cross-border expenditures (per-capita, cross-border FOREX transactions from Bank of International Settlement data).

They then netted out the number of each city’s returnees and used regression analysis to reduce numbers from country to city. Algorithms were applied to deal with discrepancies, i.e. Dubai, as an airhub, was found to have inflated arrivals of 35 percent which had to be factored in.

London calling
“London has yet again proved it is the epicentre of global trade and the best world city to do business with.”

This was London Mayor Boris Johnson’s reaction when he learned that his city topped the Index overall by visitor numbers and cross-border spending, with 20.1 million inbound passengers expected in 2011 and US$25.6 billion, respectively.

I wondered if London’s victory was partly down to its position at the centre of the business day; Hedrick-Wong points instead to its diversity.

“The top 40 origin cities for London account for only 60 percent of its arrivals (and less for cross-border expenditure); for New York, this figure is 80-85 percent. That tells you how strong London is, in terms of the network effect.”

Second in the Index ranking came Paris with 18.1 million/US$14.6 billion; New York ranked 12th in arrivals, with 7.6 million arrivals, and second in expenditure, at US$20.3 billion.

This didn’t surprise Hedrick-Wong. But heads were turned by the fact that Barcelona topped the global list in terms of global arrivals (24.3 percent growth), with Kuala Lumpur second at 21.8 percent and, at 20.4 percent, Istanbul third. This carried through to cross-border expenditure, with Istanbul leading at 30.1 percent growth, Barcelona at 28.2 percent and Dubai third at 24 percent.

“Western and European cities are still top as the base is high, but in terms of growth rates; Barcelona is the only city in North America or Western Europe combined that has an over-20 percent growth rate,” Hedrick-Wong explained.

The real winners
So what gives cities like Barcelona their centre-of-the-matrix status? Hedrick-Wong has yet to do a deep dive into what makes each of these destinations tick, but he has a few theories.

“In the last 10 years, Barcelona has leveraged its strong position as a tourist destination, and its cultural heritage, and topped this with initiatives like creating a convention hub focused on creative, high-tech industries. These sectors obviously find resonance with Barcelona’s quirky cultural heritage. It’s very difficult for other cities to replicate this. A Dubai or a Singapore, no matter how proactive or aggressive, cannot hope to compete.”

Like Barcelona, London’s future also lies in exploiting its creative industries and services, thinks Hedrick-Wong. “London is no longer the financial capital of the world; it should be leading the vanguard of the next wave, whatever that is. Let other cities have the banks.”

Istanbul shares Barcelona’s organic, chaotic evolution. This city has capitalised on its strategic geographical location; it can now market itself to Asia and the Middle-East as gateway to Europe, and vice-versa. My interviewee points out that, “in the MICE business, the city has rocketed. Want to have a business conference themed around connecting the Middle-East to Europe? Istanbul is the obvious choice.”

Emblematic of the way the world is changing, cities in Asia-Pacific account for eight of the top 20 destinations, with Bangkok ranked third and projected to have 11.5 million visitors this year, followed by Singapore with 11.4 million and Hong Kong with 10.9 million.

With the highest growth occurring in emerging markets, Hedrick-Wong hopes his report will contribute to development in places like Sub-Saharan Africa, where a supply-side constraint means that to go from Johannesburg to Accra in Ghana, travellers must go via Paris unless they want to sit through several long layovers.

Will studies like this actually steer companies into sending their staff for deal-making trips? Yes, thinks Hedrick-Wong. When companies ascertain which specific cities are becoming more important, and which city destinations are the important gateways to a region.

As for Dr. Hedrick-Wong, he’s heading back to the airport to spend what he has spent a large part of the last decade doing – travelling between the world’s city hubs.

To download a PDF of the MasterCard Index, click here

Caption: Office workers are seen in the London Place business district near Tower Bridge in central London February 9, 2011. REUTERS/Toby Melville

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