Hong Kong Immigration: In most cities, subways operate at a loss, but Hong Kong is an exception. Since 1996, the Hong Kong subway has remained profitable, with a profit of HKD 11.6 billion last year. Why is the Hong Kong subway able to make money?
The on-time rate exceeds 99.9%, with an average of 1.7 million kilometers traveled before a delay of more than 5 minutes occurs.
"The positioning of market-oriented operations is the foundation of the Hong Kong subway's profitability," said Qian Guofeng, Non-Executive Chairman of the MTR Corporation.
Profit pressure has prompted MTR to think more creatively in its operations. Increasing ticket revenue is a key focus. According to Hong Kong law, MTR adjusts ticket prices slightly each year based on a mechanism that incorporates the Consumer Price Index and the transportation industry wage index. However, current ticket prices are not considered expensive, ranking in the middle globally, with a fare of about HKD 10 for a 30-minute journey.
"To increase ticket revenue, the key is to enhance service and attract more people to choose the subway for travel," said Yi Min, Chief Executive Officer of MTR Corporation's China Business. "Our greatest advantage is safety; MTR places great emphasis on proactively eliminating safety hazards. For example, a light bulb with a two-year lifespan may be replaced after six months to ensure safe operation. Secondly, punctuality is crucial, with the Hong Kong subway achieving an on-time rate exceeding 99.9%, averaging 1.7 million kilometers traveled before a delay of more than 5 minutes occurs. Additionally, convenience is important, such as optimizing subway signage. Of course, we also strive for comfort, such as improving ventilation and adjusting air conditioning temperatures. To enhance service quality, MTR spends approximately HKD 6 billion annually on routine maintenance, not including vehicle upgrades."
The improvement in service quality has led to an average of about 5.46 million passengers using the subway daily, and the dense passenger flow has increased advertising and rental income for shops within subway stations. In addition, MTR has also explored diversified operations and management output, such as operating the Ngong Ping 360 cable car in Hong Kong. Furthermore, MTR has participated in subway or railway operations in the United Kingdom, Sweden, and Australia, and has provided consulting services to several countries, including Singapore, the Netherlands, and Dubai. "We have also participated in the construction investment or operation and maintenance of five subway lines in mainland China, and we will invest more in the future," Yi Min said.
"What is most important for MTR to maintain profitability? I believe it is the brand. The reputation accumulated over 30 years can be ruined by a single mistake. Therefore, we are very cautious with every step we take," Qian Guofeng concluded.
Rail Transit + Property Model, Filling the Funding Gap for Subway Construction
Of course, relying solely on rail operation revenue cannot fully cover the costs of subway construction, let alone the corporate financing costs. The Hong Kong Special Administrative Region Government has been able to improve subway transportation without spending a penny and receive dividends, thanks to a unique business model—Rail Transit + Property.
Yao Zhan, Head of Urban Planning at MTR Corporation, explained that simply put, "Rail Transit + Property" means that the subway company is responsible for funding the construction, operation, and maintenance of the subway. To fill its funding gap, the government allocates certain plots of land along the subway line to the subway company. After the subway company pays the government the land price at market value, it introduces developers through a bidding process to build shopping malls, office buildings, and residential properties on the allocated land, and then profits from selling or leasing the properties. From an economic perspective, this creates a virtuous cycle: the subway increases the value of surrounding properties, filling the funding gap for subway construction, while the surrounding properties attract more people to use the subway, increasing subway operating revenue.
"Rail Transit + Property" is the secret to MTR's profitability, but the benefits go beyond economic gains; the greatest advantage is that it truly realizes public transportation-led urban planning. In Hong Kong, it is common to exit a subway station and find a shopping mall; sometimes the mall has elevators directly connecting to office buildings or residences. Many office workers choose to take the subway instead of driving, and many residents dine and shop at the subway station near their homes, effectively alleviating surface traffic pressure.