Growing Demand for Luxury Travel in Asia Pacific

Strong demand for luxury goods and services is predicted from the glittering silver market, with triple digit growth expected from the older premium consumers (top one-third by net household assets of those +60 years of age) in markets in Asia Pacific (Australia, Japan, Korea, China, Taiwan, Hong Kong, Singapore, Thailand, Malaysia, Indonesia, Philippines, Vietnam, India) over the next decade, according to the latest MasterCard Worldwide Insights report from MasterCard.

The company’s latest research focuses on the most important drivers of demand for luxury: the young premium (young singles under 35 and the young married under 35, with no children who belong to the top one-third of the income bracket) consumers and the older premium consumers. These two segments will account for approximately 83% of the US$258.7 billion spent on luxury goods and services by 2016.

With the exception of China and India, growth in demand for luxury goods and services from older premium consumers in markets across Asia Pacific will outpace growth from the young premium consumers. The greatest growth in demand for luxury goods and services from the older premium segment will come from Malaysia, which is expected to increase 350% from 2006 to 2016, followed by Indonesia with a 200% expected increase and Korea with a 176.5% expected increase. In terms of dollar volume, the older premium market in Japan (US$27 billion in 2006 to US$67.8 billion in 2016) and China (US8.6 billion in 2006 to US$18 billion in 2016) will continue to drive the largest demand for luxury goods and services.

By contrast, in China and India, demand for luxury goods and services by young premium consumers will increase more quickly than that of the older premium consumers. In China, this is attributed to the fact that the young premium segment comprises those with the highest education levels and highest incomes. Born after the periods of the Cultural Revolution and post Mao, China's young premium consumers have known only rising affluence, while the older premium consumers demand for luxury is influenced by the decades of social and economic change they have experienced. India’s population is much younger than China’s, and this is reflected in the much higher level of demand for luxury from the young premium segment compared with the older premium segment. In both markets, the luxury market will be marked by purchases of luxury products, rather than the acquisition of luxury experiences.

"While the demand for luxury from the older premium consumers is expected to experience great growth, businesses need to understand the needs of these consumers to succeed. The older premium consumers have distinctively different demand characteristics, and their definition of luxury is likely to be different from the usual consumption of luxury brands. Instead of looking for “things” to buy, they seek enjoyable “experiences”. This explains their huge expenditure on luxury travel and leisure, which makes up the largest percentage of their total spending on luxury goods," said Dr. Yuwa Hedrick Wong, economic advisor, Asia Pacific, MasterCard Worldwide.

The young premium consumers across Asia Pacific have a strong appetite for luxury goods and services because of their lifestyles and spending power. Their lifestyles – focused on defining who they are and highly attuned to fashion trends – mean that a relatively higher proportion of their discretionary spending goes toward spending on clothing and personal accessories (34.8% in 2006 to 33.2% in 2016). This is expected to remain the biggest expenditure item, followed by travel and leisure (26.4% in 2006 to 28% in 2016).

In contrast, the older premium consumers of the baby boomer generation, will spend the most on luxury travel and leisure (27.5% in 2006 to 28.3% in 2016), followed by fine dining and entertaining (25.8% in 2006 to 23% in 2016).

MasterCard presented these insights and the report “The Demand for Luxuries in Asia Pacific” to the premium industry and customer financial institutions at the MasterCard Worldwide Asia Pacific Luxury Conference 2007.

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