Shops offering high-end European merchandise continue to adjust to a decreased visitor count from China.
In the decade preceding the Covid-19 pandemic, Chinese tourists were the biggest spenders on luxury goods worldwide, accounting for one-third or €93 billion of global sales. However, a significant decrease in spending by Chinese tourists on luxury goods in Europe is now being observed, primarily due to a shift in travel and spending patterns, weakened Chinese consumer confidence, price inflation, and a general global economic slowdown.
Shift in Preferred Destinations and Spending Habits
High-spending Chinese tourists are favoring destinations closer to home such as Hong Kong, Seoul, Bangkok, and Tokyo, reflecting smarter, faster travel habits and a preference for luxury experiences integrated with travel itself, rather than just shopping.
Chinese Consumer Confidence and Local Economic Issues
Chinese consumer confidence remains at record lows due to declines in local asset values following the pandemic, reducing their appetite for luxury spending abroad, particularly in Europe.
Price Inflation and Value Sensitivity
Many luxury brands pushed significant price increases above inflation during years of strong demand. Now, consumers, including Chinese tourists, are more sensitive to value rather than aspirational brand spending, making them less eager to shop luxury goods in expensive European markets.
Currency and Economic Environment
The weakening of the US dollar and changes in currency values (like recovering yen in Japan) affect tourist spending power in luxury destinations, although this has a mixed impact depending on the region.
Implications for the Luxury Industry
Analysts forecast about a 2% decline in global luxury revenues in 2025, reflecting subdued demand from key markets like China and the U.S. Luxury brands must reconsider their pricing strategies and better understand evolving consumer preferences, particularly the growing middle classes in China and changing profiles of luxury travelers. Brands that adapt to the shift toward ‘luxury as experience’ and regional hubs in Asia may fare better.
The luxury sector may pivot toward markets with rising local demand and innovate in offering luxury integrated with travel experiences rather than purely retail, responding to the new Chinese luxury tourist behavior. Chinese buyers are not expected to regain their high street presence in 2025; they will likely shop in China instead. However, Chinese luxury spend is expected to reach pre-Covid levels by 2025.
Despite these challenges, high-end French and Italian fashion houses have seen strong post-pandemic demand for designer labels, with shoppers eager to spend confinement savings despite turbulent stock markets and rising prices. Investors are watching for signs of a possible decline in appetite for designer brands, as well as plans by goods companies to implement further price hikes aimed at protecting margins. European brands are also investing heavily in the US market, as it has overtaken Europe as the largest luxury market.
In summary, the decline in luxury spending by Chinese tourists is a complex issue stemming from economic, behavioral, and pricing factors combined with a geographic shift in luxury tourism, pushing the luxury industry to rethink growth strategies in Asia and beyond.
- Chinese tourists are favoring destinations closer to home, such as Hong Kong, Seoul, Bangkok, and Tokyo, due to smarter, faster travel habits and a preference for luxury experiences integrated with travel.
- Chinese consumer confidence remains at record lows due to declines in local asset values following the pandemic, reducing their appetite for luxury spending abroad.
3.Many luxury brands pushed significant price increases above inflation during years of strong demand, but now consumers are more sensitive to value and less eager to shop luxury goods in expensive European markets.
- The weakening of the US dollar and changes in currency values affect tourist spending power in luxury destinations, with a mixed impact depending on the region.
- Analysts forecast a 2% decline in global luxury revenues in 2025, reflecting subdued demand from key markets like China and the U.S. Luxury brands must reconsider their pricing strategies and better understand evolving consumer preferences.
- European brands are also investing heavily in the US market, as it has overtaken Europe as the largest luxury market, indicating a possible geographic shift in the luxury industry beyond Asia.
