Update on crisis effects – luxury markets in Central and Eastern Europe

CPP Management Consultants Ltd, sole Central and Eastern European consultancy has conducted a research during June 2009 to highlight the effects of the world crisis on the luxury markets in the region. While Hungary, Bulgaria and Ukraine continue to suffer, with an overall drop in sales in all industry segments of 10 to 15%, Romania, Czech Republic and Serbia have seen a much lower decrease in sales, of up to 5%. The figures refer to February – May 2009.
The most affected industry segments in all countries are: auto, jewelry, watches and travel.
Less affected luxury industry segments are: fashion, accessories, SPA and hospitality, yet there are important differences even in these sectors country by country. For instance, in Romania, the most affected segments of the fashion sector have been womens and multibrand retail. Men have proved to be more resilient and loyal during crisis. In contrast, in Bulgaria, the womens fashion market has been performing better than the mens. The difference between the 2 countries might be that top brands such as Zegna have a better partner and larger location (implicitly turnover) in Romania than the one in Sofia, Bulgaria.
Jewelry is another luxury industry segment deeply affected in the region, especially in those countries where top international brands have pushed for monobrand stand alone boutiques. This is the case especially in Sofia, Bulgaria and Kiev, Ukraine. Romania and Serbia are less exposed, most of top brands still being present in multibrand or shop in shop (corner) concept. The overall average drop in jewelry sales is at 15-20%.
Hospitality has been slowing down as far as developments except for Romania and Ukraine, both strong corporate traffic markets for luxury hospitality. InterContinental recently opened in Kiev, while Radisson Sas opened recently a five star property in Bucharest. Close to completion are several deluxe properties: Romania (Grand Hotel Continental, Grand Hotel du Boulevard – Luxury Collection, Sheraton Cluj) Ukraine (Le Meridien, Hyatt – both Kiev).
The Prague luxury hospitality market has been slowing down due to the many recent openings which coincided with the crisis, the most important new comers being Rocco Forte, Kempinski and Sheraton.
As far as occupancy rates at luxury properties, the lowest average occupancy rates have been registered in Bucharest, Budapest and Sofia.
Fine wine & spirits is one of the few luxury industry segments with a good performance, to have grown by 5-10% in all markets, except Hungary and Czech Republic (due to drop in foreign tourists). Pernod Ricard remains leader in the entire region.
SPA / well being is the only segment to register considerable growth, especially in Romania, Czech Republic and Serbia. For instance, Swedish SPA and healthclub operator WORLDCLASS has doubled its business this year in Romania only, opening 4 new locations. The most recent investments include 2 health clubs and SPAs in Belgrade, Serbia.