Ayie Aligada, a former airline training manager from Manila, gained from the Philippine peso’s 4 percent jump against the euro in as many weeks when she snapped up a Chloe bag for 1,475 euros ($1,857) on a month-long jaunt through Europe.
She had plenty of company on her May tour of Paris, Barcelona and Rome, where Asian shoppers are lining up outside luxury goods stores. Elaine Chua, 32, a Singaporean homemaker, went to Paris for four days in April and saved about 1,500 Singapore dollars ($1,178) on a Chanel bag, the price of a return airfare. Pongsak Luangaram, 41, a lecturer from Bangkok, dropped a plan to visit Japan and went to Italy in May, buying a Ferrari jacket.
Europe is becoming a more attractive destination for Asians after the peso surged 19 percent against the euro in the past year and China’s yuan climbed 17 percent. Bookings rose 30 percent in Manila in the first quarter and 12 percent more Chinese are forecast to visit France in 2012. Their spending is supporting hotels, stores and restaurants as the debt crisis batters local demand. Ermenegildo Zegna SpA is stocking more styles favored by the visitors and Prada SpA may raise prices.
“With the slowing economy and lingering debt crisis, the euro will continue to weaken against Asian currencies,” said Akira Takei, the Tokyo-based head of the international fixed-income department at Mizuho Asset Management Co., which oversees about $41 billion and is part of Japan’s third-biggest publicly traded bank. “Exchange rates are favorable for Asian shoppers and tourism businesses in Europe, but the pickup in visitors won’t be enough to reverse the slump.”
The International Monetary Fund predicts a 7.3 percent expansion for Asia’s developing economies this year and a 0.3 percent contraction in the 17-nation euro area. Italy, Greece and Portugal are all in recessions, Spain’s economy contracted 0.4 percent from a year earlier in the first quarter, the Netherlands shrank 0.8 percent and French growth of 0.3 percent was the slowest since 2009.
The peso touched 52.32 per euro today, its strongest level since October 2002. The Singapore dollar strengthened 12 percent in the past year and touched a decade-high S$1.5862 today. The average rise for Asia’s 11 most-used currencies was 11 percent.
“We had a windfall on the exchange rate,” said Aligada, 53, who traveled with her husband, a telephone company executive.
Ermenegildo Zegna, a closely held Italian luxury-goods maker, is spending “aggressively” on marketing, including working with tour operators to make sure tourists know where to find its European outlets, Chief Executive Officer Ermenegildo Zegna said in a June 23 interview in Milan. The company, which may see 10 percent sales growth in 2012, has adjusted the sizes and products and added more multilingual staff, he said.
Prada, the Italian fashion house, is benefiting from wealthy Chinese tourists, Chief Executive Officer Patrizio Bertelli said in an interview in May. A further drop in the euro may prompt the company to increase prices by as much as 10 percent in Europe, he said.
In the first quarter, tourist arrivals in Italy from Asia increased 22 percent from a year earlier to 354,000. Their spending climbed 24 percent to 462 million euros, Bank of Italy data show.
Gucci, Louis Vuitton
Gucci’s sales in Europe were boosted by tourist demand, according to Jean-Marc Duplaix, chief financial officer of Paris-based PPR SA, the French owner of the luxury brand.
“Local demand was still good in Europe, but it’s true that the tourist flow contributed significantly to the growth,” he said on an April 25 conference call, reporting a 15 percent increase in first-quarter sales.
China imposes import duties and taxes of about 30 percent on luxury bags and more than 50 percent for cosmetics. At Paris-based LVMH Moet Hennessy Louis Vuitton SA, the yuan’s gain against the euro widened the gap between its prices in China and those in France to as much as 47 percent in the first quarter, Finance Director Jean-Jacques Guiony said at a briefing in April.
Travel and tourism’s total contribution to the European Union’s gross domestic product was 7.9 percent in 2011, according to the London-based World Travel & Tourism Council.
The number of Chinese visitors to France is likely to rise 12 percent this year to 494,900, while those to Germany may climb 13 percent to 276,600, according to London-based Euromonitor International. Travelers from Taiwan to Europe in the first five months increased 8.2 percent from a year earlier to 101,372, the island’s tourism bureau said.
Rajah Travel Corp., the biggest tour agency in Manila, saw a 30 percent jump in Europe bookings in the first quarter from a year earlier thanks to the strength of the peso, according to President Aileen Clemente. The number of South Koreans heading to Europe through Hana Tour Services Inc., the nation’s biggest travel agency, rose more than 6 percent so far in 2012.
Tourists, mainly from Asia, account for between 35 percent and 60 percent of luxury sales in Europe, according to Antoine Belge, an analyst at HSBC Holdings Plc in Paris. Tax-free spending by Chinese tourists in Europe climbed 69 percent in the first quarter from a year earlier, while that by Malaysian visitors jumped 54 percent and Thais by 52 percent, according to tourist shopping specialist Global Blue in Nyon, Switzerland.
The number of individuals in the Asia-Pacific region with at least $1 million of investable assets increased 1.6 percent last year to 3.37 million, according to a June 20 report by Capgemini SA and RBC Wealth Management. That exceeded the total in North America, which fell 1.1 percent to 3.35 million.
China, which has a per capita income of $2,425, will almost triple its millionaires to 1.4 million in three years from 502,000 in 2010, Julius Baer Group Ltd. and CLSA Asia-Pacific Markets predicted in a report last year. In the Philippines, where per capita income increased 32 percent in the last decade to $1,383, they will climb to 38,000 in 2015 from an estimated 16,000 in 2010, the report showed.
The baht’s 12 percent advance versus the euro in the past year encouraged Pongsak to buy a Louis Vuitton bag for himself and a Furla one for his wife.
“We made the decision in February for our trip in May,” said Pongsak. “Given the escalating debt crisis in the euro zone, I didn’t expect the euro to strengthen anytime soon.”
The baht and the Singapore dollar may each climb by another 3.8 percent per euro in 12 months, while the Philippine peso may steady, according to the median exchange-rate forecasts in Bloomberg surveys of analysts.
“I see no reason to not take advantage of the exchange rate to buy brand names at much cheaper prices,” said Chua, who bought her gold Chanel Classic bag on the Avenue Montaigne. “The euro may be even cheaper next year. I’m considering going back to Paris again.”
Tony Lo, a 26-year-old teacher from Hong Kong, plans to visit France this month and buy Bottega Veneta leather goods.
“I’m worried I’ll lose control when I shop because the euro is really cheap now,” Lo said. “It’s like everything is 10 percent off.”