The high-end market will exceed the pre-pandemic level this year with up to 320,000 million euros in sales worldwide and Spain as the European engine of this tourism
The rich also cry, but much less. He shows in his business and in his leisure. The luxury products and services industry had a turnover of 281,000 million euros in 2019, its all-time high. In 2020 their sales fell by 26%, accusing the almost impossibility of traveling to other countries –one of the main engines in the spending of this social class–, and this year they will revive laurels achieving another record.
But, who are we talking about? Well, the figure varies according to the measurement. The latest report by the real estate consultant Knight Frank on global wealth placed Spain in eleventh place on that list with 11,685 large resident fortunes at the end of 2021. And the investment manager Capgemini raises them to 246,500 people, counting everyone who has more than one million dollars (954,000 euros), which would place that figure at 22.5 million individuals worldwide.
They are often viewed with suspicion, more so in times of crisis. In Spain, the wealthiest 10% of the population has almost 58% of the total assets. However, they are the engine of a powerful industry with a growing weight in the national economy.
In high-end tourism, Spain is the European country where it contributes the most to the Gross Domestic Product (GDP), 2% compared to 0.9% on average, according to the specialized consultancy firm Bain & Company, which quantifies this contribution at 25,000 million euros per year, 26% of the total income of the national tourism industry (22% in the EU): between 70,000 and 95,000 million euros according to the scale.
Throughout Europe, these luxury travelers move between 130,000 and 170,000 million euros, which represents 72% of this excellence worldwide and has validated the consideration of high-end ‘Silicon Valley’. And it is in this sea of profits that Spain could fish even more. According to the president of Círculo Fortuny –the main national association in this sector–, Xandra Falcó, “it has all the ingredients to lead tourism excellence not only in Europe, but also worldwide”.
Much of the data from that study by Bain supports his estimate. Thus, while the traditional tourist spends 39% of their budget on purchases (‘shopping’), the high-end tourist allocates 50% for the same purpose, 26% for accommodation – Spain is the third European country with the most weight of hotels of five stars, 4% of the sector – and 20% to restoration. Precisely 54% of travelers bet on gastronomic experiences of excellence -228 Spanish restaurants have a Michelin star-, compared to 8% who are more inclined towards the sun and beach proposal, the most famous at a general level. Likewise, in terms of sports, nature and ‘spa’, it is the fifth country in the world with the most visitors seeking ‘wellness’.
The weak part is the added value generated by this type of tourism, which is much greater than the traditional one. While the European average multiplies it by eight, in Spain it is ‘only’ four times more than what is spent, considering that the daily expenditure of a traveler of this type is 860 euros in Spain, compared to 1,000 in Germany, 2,000 in France and 6,000 euros in Italy.
Regarding the luxury personal goods market (jewelry, automobiles, fashion, perfumery and cosmetics), its bad pandemic dream has been left behind. In 2021, its turnover grew by 15.5% in Spain (19% globally) despite still showing the low influx of travelers from China, South Korea, Japan, the US and Latin America due to covid, according to an EAE study Business School.
In 2022 the recovery has continued to rise despite “a very turbulent environment” with the war in Ukraine, the global threat of a possible recession and soaring inflation, says Claudia D’Arpizio, a partner at Bain. She, although she warns as a positive value “the great pricing power that these companies have.”
That is why this consultancy manages three scenarios, all on the rise, in the global luxury business in 2022. The most optimistic would suppose an annual growth of 15% up to a maximum of 330,000 million euros in revenue; the most conservative, only a 5% improvement to 305,000 million and the average would raise that figure to 320,000 million, 10% more.
The calculations already take into account the sharp drop in high-end Russian consumption, punished by the EU sanctions after the invasion, together with the sluggishness of Chinese. due to pandemic restrictions (still in 2021 it accounted for 21% of this market). And that is accused by the large firms in the sector on the Stock Exchange: the S&P Global Luxury index fell 19% in the last year.
The most exclusive industries are also signing up for the new virtual world to boost their business
The luxury sector is one of the biggest converts in the digital world. If two decades ago he was almost out of obligation, without being clear about the portion of his business that e-commerce would entail, today he is one of the most enthusiastic about the metaverse, the new virtual world that Mark Zuckerberg intends to lead.
According to the Morgan Stanley bank, the virtual luxury goods market could reach 10% of its sales in 2030 and grow by 300,000 million dollars. Several world-class brands have made the virtual leap, especially in fashion.
Last year, Internet users acquired products of this type worth 50,000 million to ‘customize’ their avatars in the usual video games in which they participate. And in 2022 it is expected to triple that sum. For example, Balenciaga launched a collection of digital garments (they call them ‘skins’) for the popular ‘Fortnite’. The success led him to create his own video game, ‘Afterworld’, where he presented his fall 2021 collection.
Its owner is the French emporium Kering, which intends to expand other famous brands of its own, such as Gucci, Saint Laurent and Bottega Veneta, through the metaverse. At the opposite extreme, the LVMH group (Louis Vuitton) is still skeptical, although it has created a ‘blockchain’ program (Aura) together with Cartier and Prada to combat the counterfeiting of its articles in the digital universe.
NFTs, exclusive and non-exchangeable digital assets, have already given juicy returns to Maison Henessy and its collectible cognac, Lamborghini or beauty firms such as Guerlain or Clinique. Luxury mansions have also come to this world: in the four main metaverses, real estate will be sold for 1,000 million in 2022.