It’s the last Saturday at Munich’s Oktoberfest and the atmosphere in the Herzkasperl beer tent is buoyant. The tent’s hundred or so tables are filled with ruddy-faced Bavarians and one-litre jugs of foaming beer. But compared to the chaos on display elsewhere at the world’s largest folk festival, the situation is downright civilised. The Herzkasperl tent was opened five years ago as an alternative to the raucous main tents, attracting a more mellow crowd of families and older couples and highlighting another recent change to the Oktoberfest landscape: a renewed focus on traditional and often high-priced fashion.

The vast majority of visitors to the tent are dressed in tracht, as Bavaria’s traditional costume is known. It consists mainly of lederhosen – short leather trousers usually worn with braces – and farmer-style dresses called dirndls. Many visitors have poured hundreds of euros into personalising their outfits. Kristian Greite, a 38-year-old facility manager, spent about €1,000 on his unconventional look, which he assembled from different regional items. “There are the trachten-Nazis who want to keep everything the way it is,” he says. “But I think it’s more important to have fun.”

The Oktoberfest, or Wiesn as it’s more commonly known here, pumps approximately €1bn into Munich’s economy every year. About a quarter of that comes from food, transport and shopping, of which trachten is a large part. In response to a proliferation of cheap, foreign-made lederhosen and low-cut dirndls – the latter are on sale for as little as €29 near the tents – a growing number of Oktoberfest visitors have turned to upscale versions of the clothing in recent years, spurring the growth of an expanding luxury trachten market.

“People are spending real money on it now,” says Alexander Junker, the head of men’s trachten at Lodenfrey, a 150-year-old upscale clothing company and shop in central Munich. “It’s got to the point that grandfathers are paying €1,000 for their grandchild’s lederhosen.”

Lodenfrey focuses on the upper end of Oktoberfest fashion. On a recent Friday, Usain Bolt, the Jamaican Olympic gold medalist, was shepherded through the trachten department by a saleswoman as he talked on his mobile phone. Customers can easily spend more than €5,000 on an outfit here. A dirndl – such as an esoteric piece by Stajan with an image of Archduke John of Austria stitched onto the back – can cost as much as €2,400. “The style has overall become more traditional but combined with a more contemporary fashion fit,” says Johann Maurer, a seller in the lederhosen department. He adds that blue stitching, a colour once reserved for royalty, has been especially popular in recent years.

Many would argue that this combination of tradition and conspicuous consumption is typical of Bavaria, the state that is home to Munich. The politically conservative and historically Catholic state has long enjoyed a greater level of independence, visibility and affluence than the rest of Germany – a status that has drawn a mixture of resentment and jealousy from Hamburgers and Berliners. In other parts of Germany, few people could justify spending thousands of euros on an outfit that is worn only once a year. “We are on an island of the blessed,” says Gabriele Hammerschick, the head of Lodenfrey’s women’s trachten department.

Tracht in its current form was popularised not by farmers but by the Bavarian court. The royal family largely assembled it in the 19th century as a way of bolstering Bavarian national identity. In the following decades, it gradually filtered down to the city dwellers. The fondness for trachten among residents has ebbed and flowed over the years, dipping in the 1990s before returning forcefully in the past decade. This is likely to be the result of savvy marketing on behalf of low-end trachten manufacturers and, as many Wiesn visitors seem to think, the growth of global “hype” around Oktoberfest.

Bavaria has also been far more skilled at marketing itself to the outside world than any other German state; there’s a reason that most international stereotypes of Germany in fact come from Bavarian culture. Tracht plays a large role in that Bavarian brand. Many of the state’s politicians and public figures dress in lederhosen when they travel abroad, as do players for FC Bayern Munich, one of the world’s top football teams.

Oktoberfest’s international fame is now such that the majority of Lodenfrey’s customers are non-locals: their top foreign buyers are, in descending order, from Switzerland, the US, Italy and Australia. For Americans with German heritage it can be an opportunity to celebrate their origins. For others it can simply be an attempt to fit in. “Some of the Russian customers will leave their purchase in their hotel rooms when they depart,” says Maurer at Lodenfrey.

Many trachten garments are handmade and their creation feeds a small army of designers and manufacturers in the area. In recent years a number of these Munich designers have taken their own experimental approaches to the form. Some newer arrivals on the scene, such as Julia Trentini and Astrid Söll, have capitalised on a desire among younger Oktoberfest attendees to adopt a more individualised look – a change that Hammerschick at Lodenfrey ascribes to a growing individual-oriented zeitgeist. Trentini, whose shop is in Munich’s hip Glockenbachviertel district, combines traditional forms with more contemporary fabrics and colours.

Martin Jonas, the 37-year-old manager of the Herzkasperl tent, also takes a highly personal approach to his tracht. He works with a tailor to create unique pieces from unconventional fabrics, such as lederhosen made from cotton. Dressing up allows people to feel like they belong to Bavarian culture, he says, but that doesn’t mean it shouldn’t be taken too seriously.

“It’s important to remember that tracht always changes,” he says. “After all, it’s just an invention.”