Chinese tourist dollars driving CBD retail: Savills research

Chinese tourists spent a record $8.3 billion during their stay in Australia in the year to December, according to Tourism Australia, a 45 per cent jump over the previous period and a key factor in revitalising the country's retail sector.

And with four Chinese airlines – China Southern, Air China, China Eastern, and Sichuan Airlines - delivering travellers to Melbourne’s Tullamarine Airport on 33 direct-to-Melbourne flights each week, Melbourne is reaping the benefits, according to new research by Savills.

Savills Australia’s Victorian Retail Service director Michael Di Carlo said the Chinese spend had contributed to reviving Melbourne’s CBD retail market which has shown a steady decline in vacancy over the last five years, according to Savills research.

"Chinese tourists are a very significant market for Melbourne retailers. They have strong links with Melbourne through a well-established Chinese residential and business community as well as a large Chinese student population," said Di Carlo.

"Australia’s lower dollar has also meant a much more favourable exchange rate in recent years and that has, perhaps more than anything else, driven what is a remarkable increase in the total tourist spend.’’ 

He said the recent influx of international fashion brands to Australia’s fashion capital had also been an important factor.

"Wealthier Chinese are keen buyers of luxury items and not averse to travelling abroad to take advantage of relatively inexpensive purchases,’’ he said.

According to a report by Shanghai-based consultants Fortune Character Institute, Chinese consumers are expected to remain the biggest spenders in the global market this year, accounting for 46 per cent of worldwide sales of luxury goods with 78 per cent of the purchases made overseas.

Estimations by the Chinese Ministry of Commerce put the average price of luxury goods in China at 45 per cent higher than Hong Kong, 51 per cent higher than the United States, and 72 per cent higher than France.

Savills Retail Services executive Jock Thomson said a boom in the pharmaceutical and health products trade in Melbourne’s CBD had also been driven by Chinese buyers on the back of concerns about the safety and reliability of those products produced in China.

He said the number of pharmaceutical and health product shops in Melbourne’s CBD had risen 46 per cent over past five years, according to Savills research.

"This is an extraordinary rise which cannot be explained by typical market trends, rather it is driven by issues that Chinese consumers have with home grown health products forcing them to look elsewhere for those products,’’ Thomson said.

He said recent leasing deals in the Melbourne CBD included Redhill Health at 117 Swanston Street and Great Earth, which has three stores in the Melbourne CBD, alongside the plethora of pharmacies along Elizabeth Street.

"Enquiry has increased markedly over the last 12 months particularly with prospective tenants looking to capitalise on what is a booming market. Walk into any of those pharmacies, and one will see Chinese tourists with baskets full of Australian vitamins and health-based products,’’ he said.

Thomson said the rise in Australian health products maker Blackmore’s nearly ten-fold share price to to $217.98 on December 21, 2015 from $20.51 on December 20, 2013 had apparently much to do with the lucrative Chinese market, which makes up more than a third of Blackmores’ sales.