American consumers have benefited from a £1.9 trillion economic stimulus bill. That has no real counterpart in Europe: its Next Generation EU recovery fund will feed through to benefit consumers on a more mid to long-term trajectory. “The EU recovery plan will indirectly improve the growth profile of a country, facilitate the recovery and therefore bring a return to optimism,” says Francesca Di Pasquantonio, head of luxury goods, equity research at Deutsche Bank. “There will be a boost to spending and to confidence but it will be indirect, as opposed to the US, where they have put cash in consumers’ pockets.”
Data from the Vogue Business Index shows that the willingness of European consumers, excluding British nationals, to spend on luxury fashion in the next six months remains below the global average.
While international travel bans remain in place, European luxury is once again relying on its own European shoppers. International travellers usually make up 40 to 50 per cent of luxury spending on the European continent, compared to only 20 to 25 per cent of luxury spending in the US. The categories of goods favoured also vary from region to region, says Frédéric Chevalier, chief operating officer for Europe of Lagardere Travel Retail. While Asian shoppers in Europe invest in fashion apparel and handbags, Europeans prefer perfumes and makeup. “Luxury goods are suffering and will continue to suffer during the summer,” he says.
An uncertain European summer
Safety is uppermost in the minds of travellers. “If we are really talking about recovery back to pre-pandemic levels, there has to be a coming back of international tourists and this will really be a matter of when people will feel safe to travel,” says Ling Xie, equity research luxury goods at Credit Suisse.
Individuals considering travel are less prone to throw caution to the wind after the experience of returning waves of the virus. “Last summer people thought that it was the end of the pandemic, but this summer people could be more cautious in terms of long-distance travelling,” says Xie.
European governments are certainly more cautious this summer. Constraints to inter-European movement remain in place, with most countries still requiring proof of PCR tests on arrival. From 1 July, the EU is introducing a digital Covid certificate to ease free movement: it applies to fully vaccinated individuals, those with a Covid-19 negative test and who have recovered from the virus. UK tourists who were more or less free to travel in Europe last summer, currently have easy access to only 11 “green list” destinations. According to data from ForwardKeys, which analyses air ticket bookings, travellers from Europe are currently at 29 per cent of 2019 levels.
Originally Appeared On: https://www.voguebusiness.com/consumers/european-luxury-market-recovery-2022