What: Tourism spending in Europe is nearing pre-pandemic levels, potentially offsetting local luxury market stagnation.

Why it is important: This resurgence is crucial for the European luxury sector, as international tourists historically account for a significant portion of its revenue. Given the decline in local consumer spending, the increased influx of tourists, particularly from the US and the Middle East, provides a necessary boost to sustain the luxury market's vitality.

Luxury spending by tourists in Europe is showing signs of recovery, which could be pivotal for the luxury retail sector amid declining local consumer interest. This recovery is highlighted by the increased tax refunds to tourists, suggesting a rise in spending. Before the pandemic, international tourists constituted 40-50% of the European luxury market's revenue, drawn by lower prices and the allure of buying in prestigious locations.

The report details that while US and Middle Eastern tourists have substantially increased their spending, the return of Chinese tourists—previously the most significant spenders—remains slow. This slow return is partly due to fewer available flights and ongoing economic strains within China, which temper the potential for a swift recovery in Chinese outbound tourism.

Despite these challenges, the slight improvement in Chinese tourist spending in early 2024 brings hope. Moreover, the luxury sector may need to adapt its strategies, focusing more on high-value client interactions and less on broad market transactions to cater effectively to this changing demographic. This strategic shift could ensure sustained growth and stability in the European luxury market amidst global economic and geopolitical uncertainties.

Can tourism save European luxury?