Today's SCMP devotes a page to the "problem" of scalpers coming to Hong Kong in the wake of the Rugby Sevens (full article below the fold). Scalpers aren't a problem; they are a solution.

Scalpers can only work when demand for tickets exceeds the supply. Ticket prices are fixed so there is no mechanism for supply and demand to balance. So scalpers correct a case of market failure. They invest time and money in the expectation that excess demand will exist after supply is exhausted. No one forces the buyers of scalped tickets to pay the higher prices. Buyers make a rational decision that the value of those tickets to them is X, and that's what they will pay up to. It doesn't matter who supplies the ticket. And it's still a win-win.

What about the poor promoter? They've set the prices of the original tickets. They cannot complain if they price them too low. There are plenty of ways to solve the competing needs of maximising revenue but still providing tickets to the fans. But try this from the HKRFU:

"It [scalping] prevents tickets from getting into the hands of the people that we think they should be going to at the price we want people to pay for them."

For an excellent piece on the economics of events pricing and potential solutions, read David Webb's Hong Kong's Own Goal. Well worth the time.

There is an easy way to stop scalping. It's mentioned in the breakout box in the SCMP article. Simply charge a high price for the event. You might not sell all the seats, but that's another matter.

Removing the scalp

In Britain they are called "touts". In Australia and North America they are "scalpers", but whichever the country, and no matter what you call them, there is no question as to what they are - parasites - and it looks as though Hong Kong is going to be seeing a lot more of them.
Almost anywhere in the world, if demand for tickets for a major sporting or entertainment event seems likely to outstrip supply, scalpers are there - offering them on the street at double, treble, quadruple or perhaps 10 times the face value. With more and more events on that scale taking place in Hong Kong, people involved in the international pre-owned ticket business are looking at the city with new interest.

Of course there will always be amateurs keen to make a fast buck by selling on tickets for more than they paid for them - often via the internet, the impersonality of which has made the process easier for those who prefer to keep their hands clean of grubby person-to-person sales on the street.

Many scalpers, however, are professionals who travel extensively as part of the job. Quite a few are from Britain, and they run a close second to the country's football hooligans as its least loved exports.

Even on the mainland, train tickets during the Lunar New Year are an especially big industry for touts, and police patrol stations vigorously to crack down on those selling tickets at grossly inflated prices to travellers trying to get home for the Lunar New Year holiday.

In Hong Kong, event organisers in particular loathe them. Just ask Robbie McRobbie, community rugby manager of the Hong Kong Rugby Football Union (HKRFU) who had to contend with the problem at last month's Rugby World Cup Sevens.

"You want to ensure that all genuine rugby fans and members of the Hong Kong community get access to tickets at the prices they're supposed to be sold at," he says. "When you get these people coming in from overseas - mainly Britain - basically doing this as a living, it's ripping off our own friends in the community, which does upset us quite honestly."

For many years when the Hong Kong Sevens was held in smaller venues, ticket scalping was an annually recurrent nuisance. But in 1994, when the event moved to the Hong Kong Stadium with its 40,000 seating capacity, supply began to outstrip demand and the problem all but disappeared.

This year it came back with a vengeance: in the run-up to the Sevens, tickets which cost $1,000 for the three days were being offered on internet sites for five times that sum - and finding takers.

By Thursday and Friday of the week of the match, they were changing hands at similarly inflated prices in popular Sevens watering holes such as the Dickens Bar at The Excelsior hotel in Causeway Bay. Then, over the weekend itself, business took to the streets.

According to Mr McRobbie, the scalpers were not much in evidence around the stadium itself - although a number of fans who attended dispute that - but they were certainly lining the approach route from Causeway Bay.

According to one fan, anybody dressed like a rugby supporter stood as much chance of getting to the games without being approached by a scalper as a tourist would of walking along Nathan Road without being pestered to buy a suit or a copy-watch.

"We tried to take a few measures to reduce the incidence of ticket scalping, one of which was the creation of the Sevens Village, next door to the stadium, with a massive screen to provide an alternative venue for those without tickets, that still had a bit of the atmosphere of inside the stadium," Mr McRobbie says.

"Also, the way in which we distributed the tickets this year, with most of them going through our own rugby clubs, enabled us to track them much more effectively and consequently we are confident that there were far fewer tickets getting into the hands of professional scalpers than in previous years."

Be that as it may, according to computer company executive and long-time Sevens fan Ron Gould, enough of them did. Mr Gould has attended the Sevens almost every year since 1990, even during periods of residence outside Hong Kong, and traditionally organises tickets for a group of friends who travel from the US and Britain to the SAR annually for that weekend.

Usually this is fairly straightforward to arrange, but this year was a Rugby World Cup Sevens event, and ticket availability to members of the general public who do not belong to rugby clubs was restricted. Mr Gould could not get as many as he needed.

"I thought, `let's see what else we can get', and started combing the internet. There seemed to be lots of tickets for sale around the world, but at rather phenomenal prices. You could visit at least two or three websites where tickets were offered for sale at prices of up to £350 [$5,137]. It seemed that there was no shortage of tickets for anybody who was prepared to pay over the odds for them - two or three times the price - and the closer we got to the Friday of the games, the higher the price," Mr Gould recalls.

As it turned out, he was able to obtain all the tickets he needed by legitimate means - although he had to advise his friends to fly to Hong Kong more expensively than they might otherwise have done on Cathay Pacific Sevens packages. Before the matches he met up with a few of them at the Dickens Bar.

The scalpers were there too.

"In the Dickens Bar I would have been able to get extra tickets for $4,500. For a Sunday ticket alone they were asking $1,700, but lesser amounts for the Friday and the Saturday. Outside the ground there were innumerable people asking if you wanted to buy tickets. I went to the ground every day and I got approached every day," he says.

It is surprising, in light of this, that over the entire weekend only one ticket scalper was arrested - albeit, according to sources, a well-known international professional tout.

According to the Police Public Relations Branch (PPRB), a 43-year-old Caucasian male with a British passport was observed by police to be "engaging in activities not compatible with his status as a tourist". Instead of being charged with ticket scalping - an offence under Section 6 of the Places of Public Entertainment Ordinance, for which offenders are liable on summary conviction to pay a fine of $2,000 - he was handed over to the Immigration Department and released on $2,000 bail pending further action.

Mr McRobbie - formerly an officer of the force - is full of praise for the policing of the Sevens, but it is difficult to avoid the conclusion that scalping is an offence which neither police nor the public take sufficiently seriously.

Explaining what looks a lot like inaction on the police's part in this matter, the PPRB says: "Police will consider the relevance and application of various laws in our enforcement actions. Regarding police work during the recent Rugby Sevens tournament, police have deployed adequate manpower to regulate the traffic, perform crowd management duties and to deter and detect any illegal activities."

It says that no records have been kept of past action taken against offenders. In other words, it's no big deal.

Some fans even argue that the touts are supplying a service. John, a British rugby supporter and Hong Kong resident, went on the Sunday without tickets, expecting to buy them from a tout on the way in. He paid just over double the face value for just one day, but less than the $1,000 he would have had to shell out for all three - the only ticket option the HKRFU offered this year.

"It's a classic example of the free market economy in action, and it's very efficient," he says. "If the demand wasn't there the touts wouldn't be.

"Mind you, two things surprised me. One of the tickets - the tout was asking $1,700 for two, but I got them for $1,200 - was a sponsor's ticket. Very naughty, and also quite traceable. The other was that the guy I bought them from had a South African accent. I was expecting a British wide-boy."

Mr McRobbie is less inclined to take a casual view of profiteering on tickets, whether in cyberspace or on the street. The HKRFU took steps to discourage sales through Hong Kong registered websites in the run-up to the game, and the one arrest that was made affords him some satisfaction.

"It prevents tickets from getting into the hands of the people that we think they should be going to at the price we want people to pay for them," he says. "Secondly, this additional money which is being charged on the ticket price is not coming to us, who would be putting it back into the development of the game, but is going into the hands of criminals. The public is losing out and we're losing out. The only people who win in these situations are the professional scalpers."

Internationally, the Sevens is the highest profile Hong Kong event to attract scalpers, but the problem is not confined to it. Tickets were also changing hands at sums considerably above face value for the visits by Manchester United and Real Madrid, and the touts flew in for the games. The more of these events we have, the more such visits we can expect.