Story : James Goyder
...............................................................

A luxury good is a good for which demand increases more than proportionally as income rises, in contrast to a necessity good for which demand will increase less than proportionally as income rises. Another market characteristic of luxury goods is their very high sensitivity to economic upturns and downturns so demand for them could, in a sense, be seen as a barometer to a countries economic well being.

Consequently the luxury segment has been the last to recover from a tough economic and political situation in Thailand. However as we approach the half way mark in 2008 there are signs of an upturn.

Increased Demand

BMW Thailand, one of the world’s most prestigious car manufacturers, expects double-digit growth this year and at the recently held Bangkok International Motor Show, the company received 339 bookings for new cars. Tilli Antonelli founder and President of Pershing yachts are also enthusiastically delivering luxury yachts to the Thai market and in particular to ‘playground’ islands such as Phuket. “My impression from my first visit is that it (Phuket) can be the centre of Asian yachting…I don’t see any other place in the world like it.”

Meanwhile luxury watch retailers are still sufficiently confident about high-end sales to be hosting an exhibition next month. The event, at the Gaysorn Mall in Bangkok will showcase more than 100 watches worth THB 500 million with 30 art works worth THB 200 million. According to Gaysorn chairman, Charn Srivikorn, quoted in the Bangkok Post, ‘Thailand still offers a high potential as a high end watch market that can grow further.’ Interestingly, Thailand ranks globally as the 13th largest importer of Swiss watches.

The Glitz

Bangkok recently played host to ‘The Glitz’ a self-styled luxury lifestyle week and the brainchild of Sermkhun Kunawong, CEO of the CMO Group. Aimed at celebrities, politicians, businessman and royalty The Glitz aims to create a luxury marketplace for the Thai & ASEAN Rich & Famous Society.

The fair featured luxury goods such as yachts, jewellery and automobiles. The SEC Group, an importer of luxury cars, also displayed 30 cars with values ranging from USD 150,000 to 5,000,000. Among the brands on display were Spada, Ferrari 430 Scuderia, Ferrari Challenge, Mercedes Benz SLR and Maserati Gran Turismo.

Trendy Thailand

As well as the growing demand in Thailand for luxury imports there is also an increasing global demand for luxury goods produced in Thailand. This phenomenon recently came to the attention of Time Magazine who commented that, ‘rising incomes and increasing exposure to international trends have built up a critical mass of Thai consumers with a taste for fashion and money to spend.’ According to them Thai designers are increasingly finding their way into department stores all around the world.

Stylish Property

It would be impossible to talk about the demand for luxury goods in Thailand without mentioning property.  Demand for luxury properties in Thailand continues to grow, despite the credit crunch which has adversely affected property prices in many of the world’s economies.

Thailand has remained resilient largely due to the lack of a mortgage market here. Buyers in the luxury property market are typically cash rich and when purchasing luxury properties less than 20% of them seek loans.

Aliwassa Pathnadabutr, Managing Director of CB Richard Ellis Thailand, feels that demand for luxury homes has picked up over the last year. She wrote in The Nation.

“A number of home buyers in the luxury market delayed their decision last year because they were concerned about the country’s political uncertainty. But now almost all of them believe that politics this year will be better than last year, so demand for luxury residences will recover this year.”

However there are others who have reservations, Nigel Cornick is Chief Executive Officer of Raimon Land, a luxury international property developer. He believes that, regulations which currently limit foreign freehold to 49% of the saleable area in a condominium are severely restricting the growth potential in the industry. According to a recent article by him in the Bangkok Post, “Last year, Raimon Land sold four billion baht worth of resort real estate, but it could have sold almost double that if there were no restrictions.”

Proof of the demand for quality goods in Bangkok can be found in the fact that Hugo Boss, Chanel, Christian Dior, Calvin Klein, Dolce & Gabbana, Giorgio Armani, Gucci, Prada and Versace, all brands synonymous with luxury, have stores in the countries capital. Indeed, what better way to furnish these stylish abodes than with furnishings from Armani/Casa who launched their Bangkok store last September. Giorgio Armani who has built one of the leading luxury goods brands in the world today stated, “I have to say that I am really confident in good results. I believe that Thai people have a great culture and sensitivity when it comes to art and manufacturing…All over the world there are people who like the Armani/Casa aesthetic and these are the people who become my customers.”

The Wealth Gap

Furthermore only last year a Bangkok restaurant hosted a lavish dinner that cost a staggering USD 25,000 a plate. Guests from all over the world were treated to a ten course feast prepared by top French, Italian and German chefs. Unsurprisingly the dinner courted some controversy amongst the media and politicians who felt that hosting such an extravagant event in a country where poverty is still prevalent in many regions was inappropriate.

The demand and availability of luxury goods in Bangkok appears to be steadily increasing. However Thailand clearly still has to resolve some of its sociopolitical issues before it can be considered on a par with its more illustrious neighbours, Hong Kong and Singapore, as a genuinely luxurious destination.