Paris and Milan are eagerly anticipating the return of Chinese tourists as they prepare for the Year of the Dragon in 2024. However, luxury brands should not expect an immediate surge in Chinese tourist spending. Before the Covid-19 pandemic, around 170 million Chinese shoppers traveled abroad for leisure, with France and Italy being popular destinations. More than half of their luxury spending occurred outside of China. Despite travel restrictions being eased, the revival of Chinese travel to Europe may not happen until late 2024 or even 2025.
To gain a better understanding of consumer preferences, LookLook, an insights company, conducted research with a panel of 100 high-spending Chinese women between the ages of 24 and 42, known as “LuxuryVerse.” The panel revealed that, after experiencing lockdowns, freedom has become the most valued aspect for Chinese consumers. Interestingly, the desire for new handbags has significantly decreased, while the eagerness to invest in travel has increased. Europe is the top destination, although some Chinese consumers remain apprehensive about traveling to the US. However, Chinese tourists face various obstacles in realizing their travel aspirations, including visa issues and increased accommodation costs.
Furthermore, the willingness of middle-class Chinese consumers to travel internationally has diminished. With economic uncertainty looming, consumers now prefer to save rather than spend on overseas vacations. Additionally, the availability of appealing options in China itself reduces the desire for international travel. In response, Western companies have implemented communication programs on WeChat to improve service for VIP customers, narrowed the price differential between China and other countries, and increased their offerings in the Chinese market.
Luxury brands have also made significant investments in stores in Chinese cities, including Shanghai, Beijing, and Chengdu, to provide an exceptional retail experience. Hainan, a popular travel destination, is expected to witness a surge in domestic luxury spending if it becomes fully duty-free in 2025, as planned. However, this could result in Chinese luxury spending abroad remaining at a lower percentage of their total expenditure.
Safety concerns and recent events, such as the attack on tourists in Paris, may deter Chinese consumers from traveling to Europe. Consequently, luxury groups are focusing their efforts on regions such as Hong Kong, Macau, Japan, South Korea, Singapore, and Thailand, which may experience increased Chinese tourism. HSBC analysts anticipate that luxury sales in Japan and Asia will experience the most growth in the coming year.
Given the forecast for Chinese leisure travel to Europe, luxury brands must ensure that their stores and services in China are of the highest quality. It is crucial to cater to the needs of super-wealthy Chinese consumers and provide personalized experiences. Communicating with VIPs through WeChat and maintaining an ample stock of in-demand products will be pivotal. Brands need to understand the evolving tastes of Chinese consumers, which are shifting towards versatility and understated luxury rather than flashy and logo-heavy designs.
With the expectation that it will take at least six months to a year for Chinese tourism to Europe to resume on a large scale, luxury brands have time to refine their offerings. This presents them with the best opportunity to capitalize on Chinese tourist spending during the Year of the Dragon.
Useful links:
1. Best luxury boutiques in Paris
2. The best luxury shops in Milan
