As the holiday season approaches luxury vacations and planning is speeding up. The need to engage luxury consumers during vacation travel is a new luxury brand destination. More luxury brands are starting to target tourist who are big spenders on their vacations. Right now is an excellent time for luxury brands to engage tourist who are big spenders through social media outlets.
Aspirational spending by tourists from the emerging markets is creating a strong demand base for luxury goods globally, according to Swiss & Global’s sector specialist Scilla Huang Sun.
The Zurich-based manager said an increasing number of travellers – particularly from China – are spending large sums of money in order to bring back noteworthy purchases from their vacations.
‘If you talk about luxury you need to talk about tourists, as 30% of them are now buying luxury products’ said Huang Sun, who co-manages the Julius Baer EF Luxury Brand fund with Andrea Gerst.
‘There has been a dramatic rise in Chinese people travelling abroad, which is taking the place of Japanese travellers, whose numbers are not as high in recent years.’
These emerging market travellers, Huang Sun said, are creating huge demand for products such as Louis Vuitton bags, which are taken home and given to their family and friends. This, she said, will benefit traditional European luxury brands as demand and tourism grows.
‘Ninety per cent of Chinese people travelling abroad stay in Asia, going to either Hong Kong or Macau, but others are going further afield. What we are seeing in Europe is only a small part of the Chinese tourist story.’
‘Wherever they go they want to buy the best product and, for them, they also need to go to where the product is made. So they are spending a lot of money in places like London.’
Huang Sun said, according to industry research compiled by luxury product specialist London Luxury, the average Chinese tourist spends £600 (€746) per shop visit when they go to Bond Street in central London.
The Julius Baer EF Luxury Brand fund has returned 53.8% in US dollar terms over the past three years. Its Citywire benchmark, the FTSE World TR USD, rose 25.1% over the same timeframe.
The Julius Baer EF Luxury Brand fund currently has a developed world focus, with the US (26%), France (22.2%) and Switzerland (16%) being the three largest country allocations at present.
On a stock-by-stock basis, Swatch, LVMH Moet Hennessy and Richemont make up the three largest holdings. At present, each accounts for more than 6% of the €169 million fund on their own.