Chinese tourists, carry a Chinese flag as they visit the Eiffel Tower in Paris Thursday Sept.2, 2004 (AP Photo/Michel Euler)
Several hundred years ago, young British aristocrats started taking the Grand Tour after they finished at Oxbridge, in search of art, culture and other hedonistic pleasures at ruins, museums and bordellos on the continent.
Now, nouveau riche from emerging markets are following the footsteps of English nobility in reach of new luxury experiences, such as visiting the ruins of great empires.
A wealthy Chinese businessman recently paid $US1.5 million ($1.7 million) to a British luxury travel website for a tour package that will take him to nearly 1000 UNESCO World Heritage sites during the next two years. Meanwhile, his son bought his second Piaget watch (a Piaget Emperador retails for $23,000) and also signed up to dive with hammerhead sharks, according to a 2013 Luxury Society newsletter.
The story of this Chinese businessman’s family is part of broader seismic shift in the global luxury goods industry. Worldwide, luxury is shifting rapidly from ‘having’ to ‘being’ – that is, consumers are moving from owning a luxury product to experiencing a luxury, according to Boston Consulting Group’s report Shock of the new chic: dealing with new complexity in the business of luxury.
The business of luxury experiences such as dining at Michelin restaurants or African Safari hunting trips is growing faster than the traditional luxury business of selling branded clothes, watches, cosmetics and jewellery. Spending on luxury experiences accounts for more than half of the estimated $1.8 trillion revenue in the industry.
Sarah Willersdorf, a principal at the BCG’s New York office, told Business Spectator that changing demographics was one of the key factors behind the shift in the luxury industry.
“It is basically the ageing consumers,” Willersdorf says. “Baby boomers who really drove that first wave are now in their sixties, so they already have all the watches and bags they need and they are spending more and more on vacations, meals and experiences. Chinese consumers are not that far behind.”
BCG’s 2013 Global Consumer Sentiment Survey reveals that nearly 30 per cent of Chinese consumers prefer enriching experiences over products. In comparison, more than half of American consumers value experiences over goods.
This reflects a natural progression in buying habits. Newly affluent consumers like to buy branded goods to show off their status. Once they have bought all these tangible goods they want to have unique experiences.
Australian tourism operators and promotion agencies should be prepared to take advantage of this shifting trend in the global luxury industry. This country has a unique natural beauty and gastronomic culture that should be on the radar of global luxury travellers.
Melbourne and Sydney have emerged as two top global luxury shopping cities thanks to burgeoning local wealth and the ever-increasing number of Chinese tourists who typically spend 40 per cent of their travel budget on shopping.
China is about to become the world’s largest exporter of tourists and they are already the world’s largest group of tax-free shoppers. By the end of this decade, Chinese tourists will constitute 30 per cent of all tourists in Sydney, Melbourne and Japan; 10 per cent in the US; and 50 per cent in South Korea.
As the former executive of Tourism Australia, Andrew McEvoy, said: “China is our fastest growing and highest yielding market. So the idea of cheap and cheerful Chinese is wrong. China will be a one million person and $10 billion market for Australia by 2020.”
Willersdorf says it is important for Australian businesses to undertake more marketing activities in China to raise their brand awareness, as the majority of Chinese shoppers decide what they are going to buy before they leave their home country.
“They could benefit from really trying to build a brand and market more to the Chinese consumers in their own country before they even get on the plane,” she says.
As we are looking for new drivers to boost our slowing economy after the end of mining boom, it is imperative the government and businesses take advantage of this shifting trend in the global luxury travel industry.