The year 2023 is anticipated to present a series of challenges for the luxury goods industry, including a high inflation environment, deglobalisation trends, ongoing wars in Ukraine and Israel-Gaza, and a slowdown in the Chinese economy.
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In the face of obstacles that could impact consumer confidence, agility will be crucial for businesses, according to new research by Euromonitor International.
To navigate these challenges, companies and brands should prioritise an adaptive mindset that encourages exploration of new regions, products, and offerings for pockets of growth. By diversifying operations, luxury brands can mitigate risks and seize opportunities for sustained growth.
“This comes at a time where marked increased spending on experiences and the ‘experiential’ luxury category has been noted, with travel and hospitality being of note as more brands move towards the ‘lifestyle’ sector,” says Fflur Roberts, head of luxury at Euromonitor International.
Below, key findings presented in Euromonitor’s research.
Luxury foodservice is the fastest luxury sector to bounce back in Asia Pacific, post-pandemic
The luxury market continues to bounce back with overall sales set to grow by 4 percent in 2023 reaching USD1.2 trillion. In APAC, the foodservice sector, in particular, saw 51.1 percent year-on-year growth, up to USD70 million in 2022, and is forecast to hit USD106 million in 2023.
Japan showed a rapid growth rate for luxury foodservice, with a year-on-year growth rate of 52 percent from 2021 to 2022. Hong Kong saw a 45.6 percent growth rate in the same period.
The foodservice sector as defined in the report includes luxury chain cafés and bars, and full-service restaurants. Chained foodservice outlets are considered ‘luxury’ only if they are owned by international luxury and fashion houses.
“Global dining revenue from luxury and fashion brands is set to grow by 19 percent by the end of 2023 with an additional 19 percent sales growth set for the next five years. This growth will mainly be driven by consumers looking for novel experiences, with good examples coming from Tiffany & Co.’s café, Prada’s dining ventures, and Kitsuné’s Café Kitsuné,” says Euromonitor’s Fflur Roberts.
In comparison, luxury foodservice in North America and Western Europe saw year-on-year growth rates of 3.2 percent and 14.7 percent respectively from 2021 to 2022. The US showed a year-on-year growth rate of 3.2 percent from 2021 to 2022, while France saw a year-on-year growth of 11.2 percent in the same period.
Luxury experiences and lifestyle categories offer untapped growth opportunities
Consumers have undergone a shift in priorities, recognising the significance of their living, working, and leisure environments.
Experiential luxury, encompassing luxury travel and hospitality, has witnessed remarkable growth, surpassing expectations by the end of 2022. Sales in this category are projected to increase by a substantial 17 percent by the close of 2023, surpassing all other luxury sectors.
The outlook for luxury hospitality remains positive, with a full recovery to pre-pandemic levels anticipated by 2025. Over the next five years, a remarkable growth rate of 29 percent is expected, reflecting the enduring appeal of luxurious travel experiences.
A notable trend has also emerged as luxury and fashion brands diversify their offerings into lifestyle segments such as homeware, soft furnishings, and home fragrances.
Hong Kong reclaims status as the luxury market with the highest per capita expenditure; Hong Kong, Singapore experience comparable growth in experiential luxury
After enduring a challenging period during the pandemic and conceding its top ranking in per capita luxury spending to Switzerland and the UAE, Hong Kong has regained its position as the leader in per capita spending on luxury goods this year, signalling a promising recovery for the city’s luxury market.
Of particular interest is the remarkable performance of experiential luxury in Hong Kong and Singapore, where both cities are witnessing impressive year-on-year growth. Hong Kong’s experiential luxury sector has surged by 42.6 percent, closely followed by Singapore at 46.6 percent. These figures indicate a strong appetite among consumers for immersive luxury experiences. As the industry continues to regain its footing, these robust growth rates demonstrate the resilience of luxury goods and services in Asia-Pacific.
The luxury hotel sector in Japan set to grow 77.2 percent in 2023, seeing the highest demand in APAC
In the domain of hotels, luxury brands are poised to outpace their non-luxury counterparts, with a projected growth rate of 29 percent between 2023 and 2028, compared to 25 percent for non-luxury hotels. This indicates a preference for opulent accommodations and a willingness to invest in premium experiences.
Luxury hotels – including luxury and upper upscale hotels rated at five-star with the exception of some ‘4.5-star’ outlets with the relevant positioning – are growing in the Asia Pacific region as a whole, with a 33.4 percent growth rate from 2021 to 2022, and a further 17 percent growth from 2022 to 2023. Japan is expected to see the highest demand in 2023, with a forecast of 77.2 percent.
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Overall, the landscape of luxury is evolving, driven by consumers’ desire for meaningful and comfortable spaces, indulgent travel experiences, and an expanded range of lifestyle products and services.