Luxury goods and tourism among industries affected by coronavirus

The luxury goods and travel industries are feeling the effects of the coronavirus

Hi there, I’m JR, the producer of Plain English, and I want to welcome you to episode 238. Now, here’s Jeff for the rest of the episode.

Thanks, JR. Coming up today, the most exclusive stores in the world’s best shopping destinations are eerily quiet, the result of travel restrictions and fears of the coronavirus. In the second part of the episode, we’ll talk about the English phrase “silver lining,” and we have a language-related quote of the week. The video lesson for this episode will teach you how to use the phrase “not to mention” as a way to emphasize a point that you’re making. As always, that’s on the episode web page at PlainEnglish.com/238.

Luxury goods, tourism among industries affected by coronavirus

The coronavirus has taken a significant human toll, with tens of thousands infected and about 2,500 dead around the world. But in addition to the human toll, the world economy is starting to feel the negative effects of the virus.

China is often called the “world’s factory” because it makes so much of the world’s manufactured goods. Shipments of technology products are expected to take a huge hit in the first quarter of this year. According to one estimate, TV shipments are expected to be five percent lower, video games and smartphones ten percent lower, computers and smart speakers 12 percent lower, and smart watches 16 percent lower than the quarter before. Many factories have not re-opened after closing for China’s traditional Lunar New Year.

This manufacturing slowdown has knock-on effects with the technology companies that sell these products. Already Apple has told investors that it will be making less money in this quarter due to disruptions in the global supply chain. But that’s not all. So many of Apple’s customers are Chinese, and the affluent Chinese consumers who normally buy upscale products are staying home and not spending money.

The effect of lower spending by affluent Chinese consumers will be felt across the world. Jeffries, an investment bank, estimates that Chinese consumers generate 40 percent of global spending on luxury goods. Burberry, the British luxury fashion brand, has had to close about a third of its stores in China and said that foot traffic in its remaining Chinese stores was down 80 percent.

High-street luxury retailers in the world’s capital cities like Paris, Hong Kong, Dubai, and New York are seeing lower traffic. At the Times Square mall in Hong Kong’s Causeway Bay neighborhood, employees outnumbered shoppers in the most expensive jewelry stores and fashion boutiques.

The effects are being felt far from China, too. The Chanel and Louis Vuitton flagship stores on London’s Bond Street were empty. February is a big month on the calendar of the world’s fashion capitals—Paris, Milan, New York. About 1,000 Chinese fashion buyers stayed home rather than attend the top fashion shows in Europe. Several Chinese designers canceled shows. Italy is bracing for a big slowdown in exports. Gucci, in an attempt to keep Chinese fashion buyers interested this year, live-streamed its catwalk show. Organizers at Fashion Week in Paris and Milan scrambled to set up live-streaming on Weibo, a popular platform in China.

Luxury fashion brands will also struggle to meet the rest of the world’s demand, since so much of their goods are made in China. Makers of coats, handbags, scarves, shoes, swimsuits, and other products rely on China’s cotton, silk, and other fabrics—not to mention its labor. Ralph Lauren makes a quarter of its products in China.

The tourism industry is also hurting. On January 23, there were 12,814 flights within China. Three weeks later, on February 13, there were just 1,662 flights. On the same two days, the numbers of international departures from China were 2,000 and then just 350. Popular destinations for Chinese travelers are feeling the effects. Fewer tourists are visiting the temples of Kyoto, museums of Europe, and beaches of Thailand.

Chinese consumers represent a fifth of all tourism spending around the world, and many countries have banned travelers from China. Japan, Australia, India, Indonesia, New Zealand, the Philippines, Singapore and Vietnam all have strict bans on Chinese travelers. Popular destinations like America and Europe will be affected, but they have a diverse base of tourists from other places to fall back on. But countries like Malaysia, Singapore, Cambodia, South Korea, and Thailand rely heavily on Chinese visitors for their tourism spending—and tourism is a big part of their economies.

Vietnam is expected to lose $3 billion in tourism spending. Bookings by travel agents in Vietnam were down over 70 percent from the same period a year earlier. Bali, a beach destination in Indonesia, has seen 20,000 hotel bookings canceled—even though Indonesia doesn’t have a confirmed case of the virus.

There is a silver lining for people who keep their heads and assess the risks. China has tens of thousands of confirmed cases of coronavirus and has essentially shut down. But savvy travelers might take advantage of thinner crowds and lower hotel rates at destinations like Vietnam, Thailand, and Indonesia, where there are many fewer cases of the virus.

I just confirmed a flight to Europe in May, but if I hadn’t done that, I would be tempted to visit some countries in Southeast Asia, like Indonesia or Thailand. I bet you can get some good hotel prices right about now.