Affluent Chinese don’t just want to shop til they drop, though they will still continue to do just that. What they want are VIP tickets to a Lakers game and to meet Prince Albert II of Monaco at a dinner party on the sidelines of a yacht sales event. For the uber-rich of China, traditional luxury has now gone post-luxury.
“You’ve got a Chinese demographic with a lot of money now. That’s not entirely new. They’ve had money for a while. But their tastes are changing,”says Christine Lu, founder of Affinity China, a travel consultancy that puts companies and Chinese tourists together for unique experiences.
“We’re used to seeing a bunch of Chinese leaving a tour bus and sweeping into stores on Fifth Avenue. That’s still going to happen, but less so,” she says. “You’ll have more individual travel. On the higher end, the luxury traveler is going to shop as part of their vacation, but they don’t want to be surrounded by other Chinese tourists anymore. You’ll see free and independent travel. And what we find is that many of them want exclusive experiences.”
The luxury China traveler is trying to get away from other luxury Chinese travelers. A dinner party hosted by a Prince might cost them $30,000, hotel and airfare included. But beside the glam of living like Jay Gatsby, many affluent Chinese are traveling abroad in search of investment opportunities. Whether it’s a home in Laguna Beach or a college education at Boston University, the new and numerous big spender is looking beyond the Guccis, and in increasing numbers.
They’ll take the Neverfulls, and put 30% down on a house in Laguna.
Companies will have to learn how to find these individuals, and for the post-luxury tourist, offer everything from private fashion shows at Bergdorf Goodman to planning a Malibu dream wedding for Shanghai newlyweds.
When it comes to China luxury, the Neverfulls is never the full story.
China’s New Luxury Market
Around 60% of all luxury goods bought by the Chinese are bought overseas. Luxury brand companies that have a presence in China already, the Pradas and Louis Vuittons of the world, know their customers well and cater to them when they arrive during the heavy travel seasons of October and February. Many of those brands are learning to live with and love China.
Last year, boutique hotel Zadig & Voltaire (named of the luxury French clothing retailer) learned a lesson when it said it would “not be open to Chinese tourists”. It created a firestorm in China’s social media. It had to apologize quickly. They probably don’t need Chinese tourists, but talk like that will have Paris loving Chinese taking their euros elsewhere.
Big spending Chinese travelers are no joke. By definition, a relatively few people constitute the Chinese luxury market. In China, Boston Consulting Group (BCG) estimates that there are around 700,000 households with assets greater than $1 million. They make up China’s 0.2 percenters. And they control 48% of China’s wealth.
And guess what?
They are not getting poorer.
“These are the consumers for whom money is no object and they spend on every kind of luxury goods and service,” says BCGs Michael Silverstein.
New companies are popping up to cater to this demographic. Some states have even opened travel bureaus in China to lure them in.
New York based Bomoda is less than a year old and was founded because of this market. Bomoda curates content about luxury goods and lifestyle…in Mandarin Chinese.
“The Europeans have already figured out that if you don’t staff your hotels and stores with Mandarin speakers, you are going to have a hard time serving them,” says Bomoda CEO Brian Buchwald. “Your competition is already looking to cater to them. The U.S. is slightly behind the curve on this, but they are catching up. What we are seeing now is that Chinese tourists are coming here on their own, not by the busload per se, because they want to see the flagship stores on Fifth Avenue or experience something new, like a walk through Macy’s.”
Bomoda recently started a luxury fashion consumer newsletter, the first of its kind in China. Circulation was around 100,000 in February when Buchwald and I spoke. He had returned from Shanghai three months prior to our discussion. “I fell in love with the energy there. I haven’t felt a city vibe like that since San Francisco in the dot-com days,” he says of the 1990s. “Shanghai is infectious”
If it’s a virus, it’s the kind you want. It’s coming your way to a Hamptons mansion in your neighborhood, or an Orange County shopping mall, and seated right beside you in the box seats of an LA Lakers game, only served up with a meet-n-greet with “Magic” Johnson on the side.
China’s expenditure on travel abroad reached $102 billion in 2012, making it the first tourism source market in the world in terms of spending, the U.N. World Tourism Organization said this month.
Over the past decade China has become the fastest-growing tourism source market in the world. Thanks to rapid urbanization, rising disposable incomes and relaxation of restrictions on foreign travel, the volume of international trips by Chinese travelers has grown from 10 million in 2000 to 83 million in 2012. Expenditure by Chinese tourists abroad has also increased almost eight-fold since 2000.
Boosted by an appreciating Chinese currency, Chinese travelers spent 40% more last year than they did in 2011. On the low end of the spectrum, that’s more Chinese meeting Mickey Mouse in Orlando and playing black jack in Las Vegas casinos.
On the high end, it’s more houses sold, more Coach bags bought, and more tours of colleges and universities.
“We believe the Chinese consumer, not just the luxury spender, but the entire Chinese consumer market is a secular growth trend that is really unstoppable,” says Jaime Kramer, head of thematic investing at J.P. Morgan Private Bank.
When I spoke with Lu over the phone in her Los Angeles home this week, I told her about a summer day-trip I took with a visitor from Brazil. I showed him the two Vanderbilt mansions of Newport, Rhode Island — both The Breakers and The Marble House. Back in the mid-90s when I was a tour guide there, guests were all white Americans and a few Europeans. But by last summer, the tour guides have all been replaced by self-guided headsets. In the room where you get those headsets were dozens of Chinese tourists. I had never seen so many in my summer at the mansions. They were the dominant nationality on display oohing and wowing at the view from the upper loggia of the Breakers. Alva Vanderbilt’s Chinese Tea House, original site of some of the first women’s suffragette meetings, was also a curiosity on the Marble house lawn overlooking First Beach.
Meanwhile, Lu is helping wealthy Chinese to go post-luxury. She got one man a rental manor in the Hamptons. He shipped in 20 friends for the weekend and they pretended to be American robber barons. She’s now working with the Hawaiian International Film Festival to bring in some Chinese tourists in October, maybe get a VIP experience with some Chinese actors. The Chinese have yet to discover our 50th state, Lu says.
California is currently the Chinese luxury travelers favorite destination in the U.S., followed by New York. The South Coast Plaza in Costa Mesa is so used to seeing foreign Chinese it now has a Chinese speaking concierge. Napa and Sonoma Valleys have become new hot spots for Chinese tourists escaping their 0.2 percenter peers crowding French wineries.
At a time when most Americans are still struggling to make ends meet, foreign millionaires parading around in $1,000 shoes carrying pink poodles might be humbling. For Lu, she sees it as a blessing in disguise.
“What we try to do is work with the charity organizations attached to famous people,” she says. “So we are working with former Mexican president Vicente Fox’s foundation (Centro Fox) to see if we can organize a private dinner with him for Chinese clients that are interested. The money goes to the foundation. It’s our social side. It gives the wealthy Chinese the access they are looking for, and if it helps build a new hospital, all the better.”