A rendering of LVMH-owned, Hong Kong-based travel retailer DFS's planned Siem Reap location. (Courtesy Image)
With a combination of riots, political instability, and multiple air disasters, many Southeast Asian countries had a hard time attracting China’s expanding number of outbound tourists in 2014. One notable exception, however, is Cambodia, which is quickly attracting the attention of luxury retailers as its Chinese visitor boom remains strong.
Cambodia’s luxury shopping scene saw the start of what is set to be a rapid transformation when China Duty Free Group (CDFG) opened its first location there on December 30, 2014, just in time for the upcoming Chinese New Year travel rush. Located in Siem Reap, the 4,500-square-foot location features over 200 brands including Dior, Laneige, SK-II, Shiseido, Lancôme, Estée Lauder, Clinique, Burberry, Hugo Boss, Bally, Michael Kors, Longines, Tissot, and Rado. As tariffs on imported luxury goods remain high in most of mainland China, duty-free travel retail has become an important source of growth for brands as Chinese consumers search for lower prices abroad. The Cambodia opening marks CDFG's first opening outside China, and a second location is slated to open in Phnom Penh in October 2015.
Following close behind these two landmark openings will be LVMH-owned, Hong Kong-based luxury travel retailer DFS’s newly announced 8,000-square-meter T Galleria location that will open its doors in 2016. Attached to the city’s Angkor National Museum in Siem Reap, the shopping center will sell a selection of its 700-plus luxury label portfolio including Chanel, Dolce & Gabbana, Louis Vuitton, and Bottega Veneta.
These retailers are moving in based on predictions that a recent surge in leisure-focused Chinese visitors will maintain momentum in the coming years. For the first 10 months of 2014, China was the source of Cambodia’s second-largest group of tourists after Vietnam with a 21 percent year-on-year growth rate, taking up 12.7 percent of all international tourist arrivals in the country. Although the total number is still likely to have fallen short of 1 million for the end of the year with 455,465 total Chinese visitors through October, the vast majority of these travelers cite their prime reason for visiting to be holiday travel (405,552), making their double-digit growth rate even more attractive for retailers.
In addition to retailers, luxury hoteliers are also planning to follow Chinese tourists to Cambodia. In June 2014, Starwood’s CEO noted that the company is looking to expand in countries with significant Chinese traveler growth, stating that “Cambodia’s opportunities are expanding.”
Cambodia remains a bright spot after a difficult recent year for Southeast Asian countries when it came to Chinese tourist growth. Malaysia’s multiple airline disasters, Vietnam’s anti-China riots, and Thailand’s political strife all led to slumping Chinese visitor numbers for 2014. Even countries not associated with these crises suffered—Singapore also lost out on Chinese tourist revenue as travelers canceled multi-country tours that often combined visits to Singapore and Malaysia.
These developments demonstrate how important it is for expanding luxury brands to closely follow Chinese tourists’ rapidly changing preferences. Although Asian destinations receive the vast majority of outbound Chinese tourists, regional issues can lead to dramatic changes from year to year regarding where this important and high-spending group of travelers decides to visit. This can be a challenge for brands and hoteliers looking to make a significant investment in a new location, making it vitally important to evaluate the long-term growth outlook for any country attracting large numbers of Chinese visitors.