Despite growth in China, international luxury industry could be affected by turmoil in North Africa and Middle East
Despite the steady growth of the Chinese luxury market, the international luxury industry could be negatively impacted by the ongoing turmoil and volatility in North Africa and Middle East, which might have indirect effects on major US and European investments in these regions. It is not only the luxury hospitality sector in all these countries but also retail, most wealthy consumers having already fled their countries for Paris, London and Istanbul, the three preferred destinations. It is unclear what the overall negative effects will be, this depending also on the prolongation of the political crisis.
While the country has a moderately developped luxury market, it has direct and indirect investments abroad, especially luxury hospitality. One such major company is Corinthia Hotels chain with several key international luxury hotels, including Tripoli, St Petersburg, Budapest, Prague, Lisbon and the upcoming property in London.
The biggest effect of instability could be on its luxury tourism, focused on the resort town of Marrakech, with major existing players such as Sofitel, La Mamounia and the upcoming ultra luxury resorts of Four Seasons and Mandarin Oriental. Luxury retail is still in its early development stages in Morocco, with just a handful of brands present: Vuitton, Gucci, Fendi, Yves Saint Laurent, Canali and Dior.
The most affected luxury sector is undoubtedly tourism, especially the deluxe hotels in Cairo which rely on both leisure and business travellers. Retail is still in its early stages of development, with two major multibrand stores in Cairo and few franchised luxury brands such as Ferragamo, Hugo Boss, Burberry and Zegna. Several projects such as a luxury department store and a luxury shopping gallery within one of the 6 malls currently in construction in Cairo, have been put on hold indefinitely. Most of the wealthy Egyptians have already fled to Dubai and Istanbul. Most affected luxury hotel chains in Egypt: Sofitel (Luxor, Cairo), Four Seasons (2 Cairo, Sharm El Sheikh, Alexandria), Hyatt and Kempinski. Occupancy at Cairo properties has already dropped by 40% compared to same period last year, while occpancy in resort destinations dropped by 30% compared to same period last year.
The most affected luxury sector is retail, which concentrates mostly on malls (major players such as Saks Fifth Avenue, a franchised operation) and several mono brand luxury stores within other galleries and hotels. The luxury hotels in Manama have had mostly business travel, which can return to previous levels more easily, once the crisis is appeased. Most wealthy have left the country for Dubai and Doha. Major luxury hotels in Manama expect 30 to 40% drop in occupancy for February and March. Traffic in the main malls has also dropped by 50% since the debut of the crisis.
YEMEN and TUNISIA have had the least developed luxury markets, the only developed sector being luxury cars, which will be affected indefinitely. The relatively small number of wealthy Tunisians and Yemenis have left the country for various cities in the Middle East.