The luxury market in Hong Kong is approaching a value of 5 billion euros

All it took was an action by Lvmh to reignite Hong Kong’s fashion scene. The city has always been in a state of turmoil, but Louis Vuitton’s pre-fall 2024 menswear collection on the Avenue of stars, the second collection designed by Pharrell Williams, was the first to bring attention back to the city. Following that, Dior announced that it will present its men’s pre-fall 2024 collection by Kim Jones in Hong Kong early next year. One of the primary hubs in the Far East, this city was once a vibrant center for the fashion and luxury industries. However, in recent years it seemed to have lost its status. The Covid-19 pandemic led many to believe that this market would never recover, as other Asian locations like Seoul or Hainan Island overshadowed the former British colony.

However, analysts predict a positive shift. «Despite the challenges posed by the global pandemic and border closures in China over the past two years, we estimate that in 2023, the luxury market in Hong Kong will experience double-digit growth, despite the complex geopolitical and macroeconomic landscape», Federica Levato, senior partner and the emea leader of fashion and luxury at Bain & company, explained to MFF. «The luxury personal goods market in Hong Kong is currently valued at 3 to 5 billion euros, which is significantly lower than the peak of around 8 billion in the mid-2010s. However, the location has regained its position as the market with the highest per capita spending on luxury goods. It has established itself as an area with a high concentration of High-Net-Worth Individuals (HNWIs) and is a popular destination for tourist flows from China, who have higher purchasing power».

2023 marked the start of a major recovery in the tourism industry, although the projected number of visitors is only about one-third of the pre-pandemic peak. The consultant’s expert noted that the reopening of mainland China definitely led to a boost in luxury tourism spending after a year dominated by local consumption and closures. «Despite being compared to the pre-crisis period, the market has experienced structural changes and still falls short of the level of tourism spending achieved in the past», Federica Levato added. «The rise of new luxurious destinations in Asia, which appeal greatly to both China and Chinese consumers, is redirecting a portion of tourist flows away from urban areas, possibly jeopardizing their status as central hubs for international and high-spending domestic tourists».

Undoubtedly, the strategic location, strong economy, and lack of customs duties and sales taxes continue to make Hong Kong an appealing destination for luxury brands. In addition, the city appears committed to restoring its former prestige through partnerships with western companies. Adrian Cheng, founder of the K11 group and a third-generation member of one of Hong Kong’s most prominent business families, has made significant moves recently. He acquired a majority stake in designer Matthew Williams’ 1017 Alyx 9SM brand, who previously served as the creative director for Lvmh’s Givenchy label. In addition, last November 30, he invited the Louis Vuitton fashion house to showcase its products in Victoria Dockside cultural district.

«Hong Kong has been through a lot recently. We are proud to support a city that has always been a great partner to us in business», Louis Vuitton’s president and ceo, Pietro Beccari, during an interview with MFF at the sidelines of the event. «We are seeing fantastic growth in the city beyond 2019 and believe many other brands are experiencing the same revival due to improved business conditions. Macau is currently being incentivized by the Chinese Government to diversify their sources of entertainment-related revenue beyond gaming, resulting in billions of dollars of investments. Many people from Hong Kong visit Macau for the weekend. There is a new connection between the two cities», the Manager concluded. Various market sources have reported that the government authorities are inviting Western companies to organize special events and initiatives with the aim of enhancing the city.

«The pandemic crisis and geopolitical and macroeconomic uncertainties have had a profound impact on the luxury market in Hong Kong», Levato added. «Even before the pandemic, Hong Kong experienced a steady decline in in-store traffic, as Chinese tourism shifted from intra-regional (between Hong Kong and Japan) to extra-regional, notably to Europe. Due to the pandemic, luxury store openings have come to a sudden halt, and there has been an increase in online sales. As a result, brands have shifted their focus and investments to other markets, such as mainland China. The narrowing of price differences between China and other markets has further hastened this trend. However, the reopening of borders in China has resulted in a clear restoration of tourist flows to the city».

Amidst recent difficulties, the Hong Kong market shows a robust recovery, showcasing its resilience and vigor, and reinforcing its key role in the global and Chinese luxury industry. However, given the macroeconomic uncertainty and its effect on consumer confidence, a cautious approach is advisable for both upcoming months and the entirety of 2024. «The shift towards luxury experiences at the cost of personal goods may boost consumer spending, particularly among Chinese travelers, and introduce new challenges for Hong Kong to enhance its offerings to cater to high-spending consumers from China and the entire Asian continent», Levato concluded. «The reopening of borders and implemented plans by Government bodies to attract tourists and support international activities are bringing a positive outlook for the medium term. In addition, major luxury brands announcing events and fashion shows signal renewed interest in the city as a central hub for personal luxury goods».

Finally, Mario Boselli, president of the Iccf-Italy China council foundation, believes in Hong Kong’s recovery. «I just returned from a trip to China and the recovery appears to be random. However, Hong Kong is performing above the national average and is benefiting from the new Greater Bay Area project (a megacity comprising of nine cities, including two special administrative regions in southern China, Hong Kong and Macau, ed.). It is again becoming the hub it had been for some time. There is a significant amount of investment taking place and a renewed sense of energy», he concluded.

The hottest fashion destinations in the Far East

What are the top Asian locations for the fashion industry, aside from Hong Kong? «There are many emerging luxury centers», Federica Levato, senior partner and the emea leader of fashion and luxury at Bain & company, explained. «The recent announcement of 15 new Tier 1 cities in Mainland China, located near the metropolis, has attracted significant investments from Western brands». Outside of the mainland, Hainan Island has experienced remarkable growth in recent years with expectations of continued high rates in the future. «The Government’s aim to transform Hainan into a fully duty-free hub by 2025 has piqued the interest of fashion brands», the expert remarked. In 2022, Asia’s fashion hotspots expanded to include the Korean capital Seoul. It is worth noting that Thailand remains one of the latest luxury market hotspots. «The Southeast Asian country consistently performs well, with strong growth in local consumption and numerous locations emerging as fashionable tourist destinations for Chinese, European, and Asian consumers, in addition to Bangkok», Levato concluded. (All rights reserved)