Four years since my last visit to Kiev, this August, I was pleasantly surprised by many infrastructure investments such as the brand new international airport (still with no parking and most tax free retail still vacant), the Football Stadium which hosted last year’s Euro Cup, the re-construction of the city’s commercial dock for cruise ships on the Dniper river which connect Kiev to Odessa at the Black Sea.
A flurry of new hotel openings, most of them five star, such as the Fairmont, Park Inn by Radisson and 11 Mirrors Hotel (Design Hotels), motivated by last year’s Euro Cup, added to the already established InterContinental, Hyatt Regency, Opera and Premier Palace. However, due to very high rates, the majority of five star hotels did not succeed in attracting football fans which preferred lower category hotels or very short stays, flying back to Poland (co-host country of Euro 2012). Despite encouraging recent reports, just when Kiev’s luxury hospitality market was about to enter a stabilization phase, there is a major risk of an over-supply and therefore a drop in rates, due to the imminent openings of Renaissance (Marriott) and Hilton, while the Sofitel is in advanced stages of construction.
In an exclusive interview to CPP-LUXURY.COM, Ingo Peters, Regional Vice-President, Fairmont Hotels & Resorts said: ‘This year the competitive 4+5 star hotels performed cumbersome i.e. an occupancy around 50-55 % ( some 3 to 4 points down over 2012) and an ADR around EURO 180 (down by some 40E in 2012 = EURO 2012). The end of the year – Sep to Dec – should be relative good with various Conferences, a.o. Economic Forum, OESC, Tiger Conference and Sportive/Cultural events.’
On the challenges of doing business in Ukraine, Mr Ingo Peters mentioned: Ensuring that the level of tourist/guest services in Kyiv corresponds to international standards; building Ukraine’s brand and marketing it regionally, nationally and internationally; reating a favorable organizational, legal and economic environment; cultivating a skilled, educated and motivated workforce with good knowledge of English; still challenges with regular food and beverage supply from the country, as well as challenges with importations.’
FASHION / ACCESSORIES
As for luxury fashion, in spite of the arrival of several new mono-brand stores in the past two years (Prada – directly operated, Dolce & Gabbana – franchised or most recently Michael Kors – franchised), wealthy Ukrainian consumers still prefer the already 10 year old Sanahunt, one of the finest luxury department stores in Europe.
Some of the very wealthy ladies I have encountered told me that they ‘felt sad’ to see many brands leave Sanahunt and open mono-brands, as they have and always will appreciate Sanahunt’s carefully perfected and personalized customer service and buying, the team, knowing each and every customer to the smallest details. Although, it lost the distribution of brands such as Dior, Saint Laurent, Prada or Dolce & Gabbana, Sanahunt, today, feature some of the world’s most sought after brands Azzedine Alaia, Balenciaga, Marchesa, Kiton, Jimmy Choo etc. One such wealthy lady told me: ‘In the mono-brand stores we can find the same collections as in any other store abroad. They don’t understand the market and they do not understand the local consumer’
To understand the downfall of the luxury fashion, accessories and jewelry market sectors in Ukraine, which we estimate at 30% in terms of sales and 50% in terms of lost consumers, neither Helen Marlen Group (franchisee of Gucci, Ferragamo, DSquared etc), nor the franchisees of Max Mara (the capital city in the world with 6 Max Mara shops, unfortunately, most featuring an old retail concept which made them look make-shift), Crystal Group and Noblesse replied to our repeated requests to comment on the current situation of the market. In an effort to make up for losses at mono-brand stores, it came to me as no surprise that Helen Marlen Group is expanding with a new downtown multi-brand store, possibly outlet or a mix of unsold goods from the stores.
The luxury fashion and accessories sectors in Ukraine have been registering declining sales due to other important factors such as: higher prices than abroad, limited availability of collections – retailers cut their buying stocks and the growing trend of mix & match promoted by bloggers and magazines – creating awareness especially among the younger generation that wearing a Zara Tshirt with an Hermes handbag can be as cool as wearing a whole branded attire.
The best represented luxury fashion and accessories brands in Ukraine, with mono-brand stores are: Prada, Louis Vuitton, Dolce & Gabbana, Ermenegildo Zegna. Among the worst represented luxury fashion brands are: Chanel, Dior and Burberry. We have considered as criteria: location, proximities, overall appearance of store, merchandising and store concept. Yet, despite no official reports, relying on specialized media and HNWI consumers, Chanel and Vuitton rank as the best selling brands in Ukraine. According to the same sources, Ralph Lauren has recently signed a franchising agreement to open a mono-brand store next year and Hermes has postponed at least for another year its opening in Kiev. Newly opened Michael Kors (Ocean Plaza Mall), could be joined by Chloe and Coach within the planned luxury wing of the Ocean Plaza Mall.
It remains to be seen whether the TSUM Department Store, downtown Kiev, owned by the holding company of Rinat Ahmetov, will bring a new department store concept with corners/shop in shops or will further destabilize the market seeking to attract mostly mono-brand boutiques. The Tsum Department store in Kiev is a former shopping centre, which is now undergoing extensive renovations, opening estimated for end of 2014.
The most stable luxury fashion sector in Ukraine remains men’s fashion, with all major brands having a long established presence, hence, Western standard service and tailoring – Zegna, Corneliani, Canali, Isaia are among the mono-brand boutiques in Kiev.
Regarding the watches market, the two major retailers, Crystal Group and Noblesse continue to expand their businesses, a Hublot mono-brand store being planned for opening next month. Best selling luxury watch brands in Ukraine (estimates) remain Rolex, Hublot and Ulysse Nardin. The reason Ukrainians still buy watches locally is after service but also sometimes a more competitive price than in Dubai or Milan.
Both groups sell generic jewelry or jewelry under their own brands, which could make up to 70% of the fine jewelry market, the current economic and political context (partially predictable) not justifying the opening in mono-brand of Bulgari or Chopard. Both Crystal Group and Noblesse are also expanding in second tier cities, especially Odessa and Dnipropetrovsk.
Cars, yachts and other leisure equipment remain among the most affected luxury sectors in Ukraine, especially due to a much more restrained access to leasing and crediting, but also by the very high taxation. BMW, Audi and Mercedes Benz ranked among the top selling brands in Ukraine in 2012.
According to a research by CPP Luxury Industry Management Consultants Ltd, which has been actively covering Ukraine since 2005, Ukraine’s luxury market which was evaluated at 540 million euros (excluding fragrances and hotels) in 2012 will drop by at least 30% in 2013.
Major opportunities lie in the following sectors: fine dining / patisserie, gourmet / organic and Spas. Presently, there is no luxury branded and/or operated luxury Spa in Kiev.
Oliver Petcu in Kiev
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