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Chinese customers spending more on outbound travel and less on luxury brand goods

Chinese customers spending more on outbound travel and less on luxury brand goods

Dear reader,

Good news for the global tourism industry: China’s wealthy top 5% of the society is starting to reallocate budgets from buying luxury goods back to spending on outbound trips.

China's luxury market experienced a strong rebound in 2023, but this trend seems to be over now. Economic uncertainty and new government policies in China has brought about a phenomenon called "luxury shame". With many Chinese citizens experiencing financial problems and the middle class seeing their roads to riches blocked, many HNWIs have become hesitant to flaunt their wealth with luxury goods. The fact that many luxury goods companies, misreading the market trend, have recently raised prices but not justified these hikes with sufficient innovation, upset Chinese consumers.

During the times of Reform and Opening, Deng Xiaoping supported that “some people get rich first”. Showing off your wealth in the form of conspicuous consumption helped you gain status and prestige before the pandemic. Under the leadership of Xi Jinping and especially since the pandemic and the increasingly visible structural difficulties of the Chinese economy this has changed dramatically. Instead of ostentatious displays of wealth, frugality is back in fashion.

An example are the online influencers, who flaunted until recently their luxury goods to millions of followers. More and more of them, though, disappeared from China’s social media channels, when accounts were suspended by China’s internet regulators. One of them, nicknamed the “Kim Kardashian of China”, used to brag that he would never leave the house without clothes, jewellery and accessories worth less than 10 million RMB. Last month he was among the social media celebrities taken off from China’s top social-media platforms.

Luxury brands have reacted to the changes: Many have lowered prices to get rid of unsold inventory ahead of the new season, hoping that discounts will lure newly frugal customers back. Instead of relying on online influencers, they open new boutiques or even cafés in China’s first-tier cities.

However, the fact that multinational banks say they are increasing their wealth-management services for Chinese clients underlines the new development of more and more HNWIs leaving China altogether. After 10,800 in 2022 and 13,500 in 2023, the forecast for 2024 sees no less than 15,200 Chinese millionaires (and their families) running away, finding different, not necessarily legal, ways to take most of their wealth with them. Their colleagues from Hong Kong are joining them, pushing up real estate prices in Singapore and London even further.

Companies catering for the Chinese luxury travel market will therefore deal with customers with Chinese behaviour, but without using a Mainland Chinese airport as their starting point and being equipped with a “golden” passport from Malta, Portugal or one of the Caribbean island states.

As always, all best wishes from Prof. Dr. Wolfgang Georg Arlt and the entire COTRI INTELLIGENCE team!