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The Luxury Evolution:
Develop Tourism Offerings Focusing on the Luxury Experience not Ownership

Experiential Luxury Now Makes up Almost 55% of Total Luxury Spending Worldwide

By Abdul Basit, Khaleej Times, Dubai, United Arab EmiratesMcClatchy-Tribune Regional News

July 27, 2012--DUBAI -- The global luxury market is witnessing a shift from owning a luxury to experiencing it, and many providers of high-end goods such as watches and handbags may soon miss out on a huge growth opportunity if they don--t get smart about their customers-- new inclinations, according to the latest report by the Boston Consulting Group, or BCG.

While experiential luxury gains momentum around the world, traditional branding will also remain strong in the Gulf countries owing to its unique socio-economic standing and the type of inbound tourism it attracts.

"For instance, the region draws a large number of Russian and Chinese tourists who are typically much more inclined towards product luxury than some of the more mature markets," said Aldous Mitchell, principal at BCG Middle East.

In addition, conspicuous consumption is much more acceptable in the GCC, as compared to Europe and the US, where economic troubles have attached a certain degree of stigma to extravagance, Mitchell added. BCG on Thursday unveiled key findings of the report "Luxe Redux: Raising the Bar for Selling of Luxuries". The research behind the report shows that experiential luxury now makes up almost 55 per cent of total luxury spending worldwide and, year on year, has grown 50 per cent faster than sales of luxury goods. Even in brand-obsessed China, where personal luxury goods serve as a strong badge of status and success -- with sales surging 22 per cent annually -- experiential luxury dominates, growing at 28 per cent each year.

"More and more luxury shoppers tell us they love experiences that make them feel pampered," said Dr Klaus Kessler, senior partner and managing director at BCG's offices in the Middle East.

"But if luxury goods players are to capitalise on the 'experience' trend, they have to move quickly and forcefully. To date, very few have been successful in adding experiential elements to their offerings, Web sites, or in-store execution. While the lack of such elements may not yet be hurting the providers' financials, it is a missed opportunity to boost performance."

In a survey of approximately 1,000 affluent people in eight developed markets and the four emerging Bric countries, BCG, working with Ipsos, a research specialist, and the International Luxury Business Association, found that aggregate annual spending on what those consumers described as luxuries now tops $1.4 trillion. This includes more than $770 billion on luxury experiences, close to $350 billion on luxury cars, and the rest on personal luxury goods such as watches, handbags, and shoes.

The business of luxury experiences is by no means limited to exclusive art, safaris, and spas. Some hospitals offer deluxe accommodations -- with butlers, specialty chefs, and marble baths -- while some airlines are starting to offer private suites, and some luxury high-rise apartment buildings are featuring movie-screening rooms and virtual-golf facilities.

From cars to wrist watches, customisation is a significant trend in the GCC region and one that is likely to continue in the future. Service providers, such as luxury concierge providers, have not yet met the demand from local GCC travellers for premium services when they head out to locations such as London, Paris and the south of France, especially during the summer months. This is an untapped segment.

According to BCG, the GCC is yet to realise its full potential as a luxury tourist hub. Dr Kessler said: "The ever increasing importance of experiential luxury puts the GCC countries in a very good position, especially in terms of their actively developing tourism offerings. Leveraging the uniqueness of recent five-star-plus hotel developments, luxury spas, luxury malls and upcoming cultural heritage assets will allow the GCC countries to compete successfully in these market segments. Therefore, the global trend towards experiential luxury is of significant relevance to GCC service providers."

In addition, local units of international luxury brands can expect continuing growth in sales of physical luxury goods to inbound luxury travellers, Dr Kessler said, adding: "Dubai's luxury tourist flow from Russia, China and Western Europe during the winter months is a strong example of this influx."


(c)2012 the Khaleej Times (Dubai, United Arab Emirates)

Visit the Khaleej Times (Dubai, United Arab Emirates) at

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