The close of summer’s high tourist season has seen Tax Free Shopping (TFS) improve in Europe with sales performance less in decline at -3% for August, vs -20% in July year-on-year (YoY)
EU Infographic Regional shift
This significant improvement in the region is due to shifting tourism trends towards central and southern Europe, as globe shoppers (especially Chinese) move away from traditional itineraries including Germany, France, Italy and Switzerland towards destinations such as the Czech Republic, Spain and Nordic cruises, all perceived as ‘safer’.
The region’s transactions are flat at 0% (vs -16% in July), with average spend down just -3% (vs -5% for July) – average spend has been boosted by non-eurozone countries performing well due to favourable FX and limited exposure to the threat of terrorist attacks.
France continues to suffer from tourists’ persistent perception of insecurity and risk of terror attacks, which is leading globe shoppers to shift away from Global Blue’s top destination, although France still accounts for almost one fifth of global TFS spend. For August France posted -20% sales (vs -24% for July) YoY.
After a difficult four to six months, Italy and Germany’s TFS sales performances are back to either single-digit or low double-digit decline, with Italy posting a drop of -7% and Germany of -11% (vs -18% and -33% for July) YoY.
Brexit bling
The UK is benefiting from rocketing TFS sales, up +37% in August (vs +7% in July) after the Brexit referendum. The softer pound continues to attract key spending nationalities, including Chinese, Middle Eastern and American globe shoppers, who comprise the UK’s top three spending nationalities. Watch and jewellery sales in the UK were up nearly +13% in August and +18% in July, fueling ‘Brexit bling’ spending, according to Reuters. Switzerland, the only pocket of growth in central Europe, posted +14% sales performance for August, probably due to its robust luxury shopping destination status, and limited threat of terror.
Spanish star performance
Spain is a star European performer this month. The country’s TFS sales performance of +16% for August (vs -4% in July) YoY, is growing due to an increased number of transactions across all nationalities, driven by new flight connections and targeted local marketing activities.
Look ahead: Golden Week
According to Global Blue’s Chinese tour operator partners, Golden Week is shaping up to remain a key travel period for Chinese globe shoppers. However, forward bookings for October travel to Europe are currently between 30% and 50% down on last year and we expect a dip YoY.
Germany, France, Italy and Switzerland are the main representative itineraries for western Europe, confirms one of Beijing’s leading Chinese tour operators. ‘The number of customers for this upcoming Golden Week is definitely more than normal times; however bookings are down by 30% this year compared to last year. The main reasons are threat of terrorism attacks and the low growth of China’s domestic economy. As the classic itinerary, western Europe still has market recognition; therefore the downturn should be temporary, as long as it is not affected too much by reduced value-priced tours and the increasing FIT [Free Independent Travellers] market,’ says the tour operator spokesperson.
Another Shanghai-based tour group operator concurs over slow forward bookings for Golden Week – down 50% for western European destinations. ‘And the market is very competitive in terms of price. Airlines have opened new routes or connecting flights, so the supply of transport capacity exceeds demand. The customer’s spending power is lower and their disposable income is not as much as before,’ says the tour operator.
Global Blue takeouts:
• In line with Chinese globe shoppers changing their regional destination focus, Europe’s TFS landscape is shifting from traditional western Europe destinations to central or southern countries where shopping is considered safer.
• After a difficult four to six months, Italy and Germany’s TFS sales performance is now in single-digit or low double-digit decline.
• Spain is a significant pocket of growth in Europe, due to its diverse globe shopper mix.
• The Brexit referendum effect continues to drive positive sales growth in the UK.
• Forward bookings for Chinese visiting Europe are down 30% to 50% for Golden Week this October, according to Global Blue’s main tour operator partners.
• The changing ‘value-seeker’ profile of Chinese globe shoppers is a major headwind for TFS spending, mainly due to increased numbers of FITs looking for experiential travel and less affluent travellers from second-tier and third-tier cities who are becoming the new normal in Europe.
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