According to data released Monday by the New West End Company, there is a growing gap between the number of international tourists visiting the British capital and their propensity to spend, a major cause for concern for businesses grappling with high inflation and the cost-of-living crisis.
London has been feeling the heat as duty-free shopping for international travelers was removed in 2021 as the U.K. left the European Union. In September, the first month after the Chinese government’s restrictions on group travel were lifted, arrivals from China were just 2 percent shy of 2019 figures but the spending was down by 58 percent.
The average gap between international visitor travel and travelers’ willingness to spend compared to 2019 levels was down 31 percent in the third quarter of 2023, according to New West End Company, which represents some 600 retail, restaurant, hotel and property owners around Bond, Oxford and Regent Streets.
Dee Corsi, chief executive officer of the New West End Company, reiterated that “the absence of tax-free shopping is hindering growth and impacting consumer spending. While tourists cut back in the U.K., Continental Europe reaps the benefits, with spending in France and Spain more than doubling in recent months.”
Corsi is among many business leaders who are actively campaigning for the return of tax-free shopping. “We continue to call upon the Treasury to conduct an independent review of the policy’s effects. A reversal of the ‘tourist tax’ is a simple measure that would have a significant impact and help to restore London’s competitive edge,” Corsi added.
Chinese e-commerce players have embraced a quieter Singles’ Day holiday by offering steeper discounts. According to third-party data agency Syntun, sales on Friday and Saturday came in at 277.6 billion renminbi, or $38.5 billion, registering a year-on-year decline of 9.8 percent. The event generated 1.021 billion parcels, a decrease of around 16.7 percent compared to last year.
Overall spending recovery in October remained soft. A recent HSBC report noted that Chinese spending on luxury was around 81 percent of what it was in October 2019. While spending in the Asia Pacific region reached 109 percent of October 2019 levels, luxury spending in Continental Europe by Chinese tourists hit 52 percent of the pre-pandemic levels.
On Friday, Richemont chairman Johann Rupert noted that many middle-class Chinese families are opting to stay at home and save their money. Rupert said that many middle-class Chinese remain “scarred” by the experience of lockdown. He noted that many of these are only children and young couples are choosing to save their money and spend wisely in a bid to preserve the wealth of their families and extended families.
“We look at data, we speak to people who are on the ground. Unlike in the West, those [middle class] clients — and potential clients — are not overstretched,” Rupert said. As a result, luxury players have been shifting their attention from China’s middle class to the ultra-rich.
According to Morgan Stanley’s estimate, around 1 percent of customers will account for as much as 40 percent of sales in some key luxury malls in China. To scale up clientelling services, mega brands such as Louis Vuitton, Dior, and Chanel have quietly opened VIP salons in key China markets.
Major government-led events such as the China International Import Expo in Shanghai have also become a window for luxury houses to demonstrate their commitment to the Chinese market amid the country’s slower-than-expected economic recovery, dented by deflation woes, slow retail sales growth, a rising youth unemployment rate, and fragile consumer sentiment.
LVMH Moët Hennessy Louis Vuitton sent an entire team of senior executives to the fair to meet with Wang Wentao, China’s commerce minister, and hosted a series of talks focused on topics including strengthening ties with China and retaining local talent.
Cartier ‘Le Voyage Recommencé’ show in Beijing
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