More than a trend, experiential luxury is an attractive investment strategy with comfortable margins.
Luxury is not limited only to absolute luxury and the big iconic brands that dominate the market and which, little by little, absorb the small niches. In fact, experiential luxury, a booming segment before the pandemic, is making a notable “comeback”. Indeed, although it came to a sudden halt with the emergence of Covid-19, consumers, particularly younger generations, have since demonstrated a growing enthusiasm on a global scale for unique experiences and luxury consumption which leans more on the intangible and the exclusive. The strong comeback of luxury tourism represents an encouraging sign for the sector.
What is experiential luxury?
Today, the close link between luxury and emotion is no longer in doubt. Tailor-made trips, private events and personalized services respond to a consumer desire for exclusivity and offer a deep and lasting emotional connection with the brand, much stronger than that resulting from a simple physical purchase. Experiential luxury does not only benefit brands operating directly in this universe: it also constitutes a strategic opportunity for collaboration for others. For example, let us cite the LVMH flagship store in London, where works by 25 artists transform the space into an immersive gallery, or the Blue Box Café by Tiffany which invites its visitors to a unique culinary experience.
Experiential luxury stands out for its high margins and recurring consumption, which is more stable than the purchase of material goods such as bags or shoes.
Who consumes this luxury?
Luxury consumption is multi-generational, but it remains very influenced by the expectations of new consumers. Generations Y (Millenials) and Z favor unique and memorable experiences, rather than purely material purchases. Digitalization as a whole is a catalyst and plays a key role in making luxury more accessible, particularly beyond major metropolises. Social networks, real showcases, allow brands to connect directly with these young consumers. This dynamic is therefore not limited to developed countries. For example, in India, the rapid growth of the luxury market is driven by rising incomes and increased interest in premium goods and experiences.
Who are these listed players?
Experiential luxury stands out for its high margins and recurring consumption, which is more stable than the purchase of material goods such as bags or shoes. In times of economic uncertainty, high-end consumers often prioritize these unique experiences. This segment is dominated by companies in the luxury travel and hospitality sector. For example, Royal Caribbean (+81% this year), owner of Silversea and specialized in cruises, is experiencing strong demand. In the luxury hotel industry, groups like Marriott (owner of The Ritz-Carlton, W Hotels and St. Regis brands, +27% this year) and Hilton (Waldorf Astoria, Conrad, +40% this year) are showing strong performances solid. Closer to us, the Swiss company Jungfraubahn, which operates an emblematic railway linking the Jungfraujoch at an altitude of 3,434 m, in the heart of the UNESCO World Heritage Site of the Swiss Alps, confirms its nature as a real gem (+ 6%). Belmond, owned by LVMH, also embodies the elegance of high-end experiences with its prestigious hotels, river cruises and iconic trains like the Venice Simplon-Orient-Express. Finally, eco-responsible offers, focused on sustainability, are experiencing strong growth, responding to a growing demand for luxury experiences aligned with environmental values.
Experiential luxury, in line with the expectations of new generations, stands out for its high margins and its ability to offer memorable experiences. In full expansion, it benefits from the growth of high-net-worth individuals, whose fortune reached $86.8 billion in 2023. It continues to attract investors and consumers and positions itself as a key vector of growth.
