Global Blue forecasts a gradual recovery for global tax free shopper spending by H2 2021, driven by intra-regional travel trends.
Tax free shopping specialist, Global Blue has revealed a set of cautiously optimistic phased recovery forecasts that predict intra-regional travel in Asia then Europe, will drive a gradual return to pre-Covid luxury tax refund transactions volume by H2 2021.
In its latest Observatory webinar, held on 19 November, in association with flight traffic analyst ForwardKeys, Global Blue said the overall volume of transactions remains low in Q4 2020 globally, despite encouraging signs of recovery from Asia and Europe.
By Q1 2021, Global Blue said it expected a gradual recovery, mainly supported by the opening of multiple travel bubbles – especially in Asia for example between Hong Kong and Singapore – and supported by the primary source market of Greater China.
It said the gradual recovery would gather pace by H2 2021 thanks to the potential massive release of multiple global approved vaccines that will encourage both regional and international travel to resume by the end of the year.
While international travel is not possible for the majority of travellers, regional travel in Europe and Asia has been slowly recovering over the past 6 months, the company said.
In Europe, over the past 3 months the percentage of issued tax refunds was 14-15% vs the same period last year. In Asia, the figure was 6% over the past 3 months (see infographic).
In the 4 months to October 2020, regional travellers (short and mid-haul flight bookings) have been playing a strategic role in Europe’s regional recovery, with Global Blue highlighting the share spend of nationalities such as Greece, Turkey, Germany, Poland and Italy. For example, the percentage of tax free spend captured by Turkish travellers (in the region) has gone from 47% share in 2019, to 95% in 2020 for the same period (see infographic).
During the webinar, Global Blue revealed the findings of its latest globe shopper travel attitudes survey, in which two-thirds of shoppers quizzed (from a pool of 16,000 shoppers across five countries), expressed a strong appetite to travel again in the next few months. This figure rises to 72% of elite or frequent travellers (up 5% compared to the company’s summer survey) with the Middle East (up 27%) and Russia (up 13%) showing the greatest rise in propensity to travel again soon (see infographic).
With 75% of Chinese and 99% of Russian affluent and frequent travellers considering travelling internationally as soon as possible, Global Blue said it’s important to consider key seasonal promotions that target these nationalities.
In line with the overarching trend that intra-regional travel will spur recovery growth as global shoppers return to spending, Global Blue also highlighted the huge spike in retail sales at China’s Southern resort island of Hainan. Here, retail sales have jumped since the summer’s new duty-free policy that saw an increase of import quota to RMB 100K (€13,000) per person per year. According to the latest figures from the Hainan Tourism Bureau of Statistics, 146,000 tourists visited Hainan duty free stores during Golden Week (1-7 October) and spent on average €900 per capita.
While Hainan is a convenient and increasingly attractive leisure and shopping destination, for Chinese travellers who are currently still unable to travel overseas, it does not yet deliver on luxury shopping expectations, according to Global Blue’s shopper survey findings. Close to a third of travellers (29%) say they visit Hainan to shop for the product range, while almost a quarter (24%) cite price as a reason for visiting, however both these factors do not manifest themselves strongly in reality, says Global Blue. A quick price index comparison shows an example luxury brand handbag is on sale in Hainan as 10% more expensive than in Europe (inc. tax free saving) vs in Mainland China, where it is 20% more expensive than in Europe (inc. tax free saving). This suggests that the travel expense and “intense” crowds in Hainan, combined with long queues for tax refunds at the airport, do not match the retail experience expectations of shoppers.
A key point emphasised by Global Blue was the acceleration of omnichannel shopping in China (also called O2O), which is now an expectation of Chinese shoppers who look for brands that provide a seamless offline to online path to purchase.
ForwardKeys flight traffic trends
During the webinar ForwardKeys provided an overview of global flight data trends for Europe and Asia. While travel data for Q3 show inbound flight bookings in Europe have been marginally the least affected with a drop of 74.7% year-on-year, Asia is showing less resilience, with global inbound flights down 94.5% year-on-year for the same period.
However, ForwardKeys also showcased flight data that indicate domestic travel is the strongest recovery driver, especially for China, Russia and Brazil. Meanwhile the firm highlighted that some travel bubbles can act as a mechanism to boost recovery.
ForwardKey’s VP Insights Oliver Ponti said domestic travel within China has successfully recovered with flights back to the same level as 2019 (see chart below).
A key driver for China’s domestic recovery has been the steady growth of travel to Hainan, which Ponti highlighted as the top performing destination province for the Golden Week Holiday period of 29 September to 11 October, when travel was up 25.1% year-on-year.
He also noted that duty-free sales for Golden Week in Hainan were up by 56.6% in October, with the highest spenders contributing to the biggest spike in average transaction value – sales over €2500 during Golden Week were up 181% year-on-year. This figure is likely to have been driven by the watches & jewellery category and the first time the Watches & Wonder Baselworld luxury product showcase took place in Sanya in collaboration with online luxury marketplace Net-a-Porter.
Ponti went on to talk about the effect of travel air bubbles development news on forward flight bookings. For example, when the Singapore Transport Minister expressed hope to begin talks with Hong Kong for a possible travel bubble, searches for flights rose 60% followed by a 30% increase in actual bookings when the air bubble plans were confirmed.
An overarching travel trend that Ponti highlighted was domestic market recovery. This has been seen in China already, but also growing through consistent flight bookings in Brazil, Russia and also in the US as Thanksgiving Holiday bookings have grown in recent weeks, according to a separate report, also citing ForwardKeys data.
The presentation is available to request via Global Blue here