Experiential Luxury in Japan

2020 IMPACT

Pandemic has strong negative impact on experiential luxury

Experiential luxury in Japan was heavily impacted by store closures under the state of emergency in April and May as well as long-term border closures. In April and May, consumers were requested to avoid unnecessary outings with consumer footfall almost disappearing entirely in both luxury foodservice outlets that are usually located in busy shopping districts and luxury hotels.

Implementation of safety and strict hygiene controls marketed to provide reassurance and boost footfall

The luxury hotels category remains under-developed in Japan in relation to the standards of major developed markets. At the end of the review period, Japan had fewer than 40 five-star hotels, while Italy was home to nearly 200 and the US to almost 800.

Luxury hotels set to outperform non-luxury

Experiential luxury could outperform non-luxury foodservice and hotels over the forecast period. Although COVID-19 has created severe economic difficulties around the world, affluent consumers are less likely to be impacted by these, with further polarisation likely between the wealthy and the rest of society.

RECOVERY AND OPPORTUNITIES

Anticipated category rebound dependent on further waves of the virus and vaccines

Although experiential luxury is expected to rebound strongly in 2021, the overall size of the category is not likely to return to pre-pandemic levels until 2023. Moreover, any anticipated rebound in 2021 will largely depend on further outbreaks, with the virus still raging in other countries around the world in early 2021, as well as the successful roll out of vaccines.

Longer-term shifts in consumer habits as consumers become more home centric

Due to ongoing uncertainty created by the pandemic, all industry players in experiential luxury will require to maintain high standards of cleanliness and impose social distancing measures in order to attract customers and to keep them safe. As many Japanese consumers will invest more in their home environments in order to be enable them to more comfortably work from and stay at home for long periods, consumer traffic to luxury hotels and luxury foodservice is likely to naturally decrease.

Positive longer-term outlook once pandemic recedes

Once the pandemic recedes and vaccines have been administered on a global scale, Japan’s popularity is expected to grow and remain one of the top tourism destinations in Asia for its unique culture and relatively safe environment. The Japanese government will be keen to encourage more inbound tourists when it is safe to do so.