The luxury goods market is going to be worth more than $450 billion by 2025 and many of its trends are relevant to travel as well. Younger consumers see brands in a different way than previous generations — and for them consistency is key.
When it comes to luxury commerce and international tourism, recent studies show the discussion still revolves around two market segments — millennials and the Chinese consumer. In many cases (in fact, in millions of cases), the two overlap.
According to the Bain Luxury Goods Worldwide Market Study for Spring 2018, the Chinese consumer and the millennial generation remain the keys to the growth of an industry that could reach $459 billion (€390 billion) globally in sales by 2025. While the report focuses mostly on luxury retail, some of the findings are pertinent to travel.
After a 2016 stagnation in luxury spending, 2017 experienced a “healthier new normal,” which is continuing into 2018. This new normal means “younger consumers dictating the rules” as a “millennial state of mind, with a new set of values, is disrupting the luxury paradigm.”
This cohort exists, according to the report, in “a post-aspirational era of luxury,” where luxury is not just about a logo or a status symbol, but about how brands allow consumers to express themselves. Because of that, the report says luxury brands should create “episodic narration of a brand’s creative standpoint versus seasonal statements.” In simpler words, luxury companies, in telling the story of their brands, need to weave a consistent tale that extends beyond one season or one marketing campaign.
In terms of spending trends, Bain finds China continues to drive the growth of the luxury market. While luxury spending across all regions is likely to be six to eight percent higher this year than last (reaching $325-$331 billion), China is expected to account for the lion’s share of the growth in 2018. Bain forecasts the market will grow by 20 to 22 percent this year.
Japan is another strong market, with a 6 to 8 percent growth rate.
“Purchases by tourists boosted spending in Japan, especially Tokyo and Osaka, though it was partially redirected towards experiences (as opposed to the purchase of luxury goods).”
The Millennial Mindset
Millennials: The Generation Reshaping Travel and Shopping Habits. was the next report we examined. Global Blue, a leader in the Tax Free Shopping and Roland Berger, a global consultancy with German roots, conducted the study.
Millennials are impacting the overall destination mix, according to Sébastien Manceau, principal at Roland Berger with specialties in retail and tourism. “They have helped revive city trips as most of their expectations towards holidays find an answer in a city environment,” said Manceau. The winners of market share, he notes, are the cities that “have cleverly adapted their marketing and offers to this target group.”
The other key takeaway from the report is that millennials are highly sensitized to security threats, which “impacts their travel destinations and habits.” The report cites a Carlson Wagonlit study that shows 29 percent of millennial business travelers have canceled a trip for security reasons, compared with only 12 percent of baby boomers.
(After looking at that business travel-focused report in greater detail, it is interesting to note that it found “58 percent of millennials travel with others — 43 percent with colleagues, and 15 percent with friends or family. In stark contrast, nearly three-quarters [71 percent] of baby boomers travel alone. Generation X travelers are somewhere in the middle, with 58 percent traveling alone.”)
To comfort worried younger travelers, the Global Blue/Roland Berger study gives examples of brands offering tech-enabled reassurance. For example, Facebook has its “Crisis Response” function that allows users to activate a “safety check” to reassure family and friends when abroad. The report also discusses, GeoSure, “a personalized security app indicating the security level for a location based on information from Interpol and the UN, as well as local users.”
Our take: Should Generation Z prove as squeamish as its predecessor, don’t be surprised if security promotion starts playing a bigger and bigger role in travel technology and destination marketing.
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Photo Credit: The Chinese consumer and the millennial generation are key to the luxury goods industry. XIESHOUTIANYA / Pixabay