Luxury Outlet Villages: Massive Investments Ahead

They continue to attract more tourists from all over the world. Today, shopping destinations are not just cities to explore, but entire villages, purpose-built for high-end brands. This booming tourist trend particularly focuses on these new-gen outlet villages, located in pleasant places to visit. Often outside major cities, built on sites with strong identities, they are now far from what anthropologist Marc Augè defined as "non-places."

Shopping tourism is thriving. Just look at the figures from a study conducted by the WTTC and Hospitality & Tourism Research of Hong Kong Polytechnic University, in collaboration with The Bicester Collection. In 2019, it generated a revenue of $178 billion, accounting for 6% of the total value of the travel industry. Among the big names in the luxury outlet sector is The Bicester Collection, founded by Value Retail. With eleven destinations, including the first one opened near London in Bicester in 1995, it is a heavyweight in the industry. In fact, to grasp its significance, the Bicester Village outlet is the second most visited location by Chinese tourists, after Buckingham Palace. While private, Value Retail does not disclose its financial figures. Still, according to a recent article in Arabian Gulf Business Insight, John Durnin, the CEO, confirmed double-digit revenue growth every year for the last 27 years, except during the Covid period. He anticipates the same for the next three years. In 2022, The Bicester Collection's total gross sales increased by 22% compared to 2021. Other "villages," the preferred term for Value Retail's outlets, are in Italy near Milan, Fidenza, Munich, Dublin, Barcelona, Paris, Madrid, Brussels, Frankfurt, and in China in Shanghai and Suzhou. Discounts of up to 70% off the catalog price can be found in exclusive boutiques selling clothing from the previous season. According to founder Scott Malkin, it is essential to develop a cultural dimension alongside the commercial aspect, where each customer is considered primarily as a guest. The next opening is scheduled for 2024 in New York in Belmont Park Village, a $2 billion investment. It will be the centerpiece of the Belmont Park campus, designed for entertainment, sports, music, dining, and shopping, including the historic Belmont Park racetrack and the UBS Arena.

The other major player in the luxury retail of brands, especially in property, development, and management of stores in Europe, also present in Canada, is McArthurGlen. Founded in Europe by Kaempfer Partners in 1993, McArthurGlen became a joint venture between Kaempfer Partners and Simon Property Group Co. (NYSE SPG), a global leader in top-tier shopping, dining, and entertainment destinations, in 2013. Luxury and premium brands occupy 685,000 square meters across 25 Designer Outlets in 8 countries: Austria, Canada, France, Germany, Italy, Netherlands, Spain, and the UK, visited by over 100 million people annually. While McArthurGlen builds and owns the single-brand boutiques dedicated to each brand, no information about the prices of discounted products purchased from the houses is disclosed (Read our section on the business of outlets). Last November, McArthurGlen announced that the total revenue of its portfolio had increased by 14% since the beginning of the year compared to 2022 figures, with an 11% increase in foot traffic and a 3% increase in average spending per visitor. The group was confident in achieving annual sales of approximately €5.5 billion in 2023.

The largest in the group is located in Italy, in Serravalle, with over 51,000 square meters and 230 brands, a sort of pilot project for the group that has announced a significant investment plan for the 2024-2025 biennial period of €20 million. Matteo Migani, CEO of Serravalle Designer Outlet, details the project in an interview.

What has been the profitability of Serravalle Designer Outlet in 2023?

The forecasts anticipate a return to pre-pandemic levels, with an influx of 6 million visitors and a double-digit revenue growth forecast compared to 2019. That's why we decided to invest in values aligned with the group, enhance the visitor experience, and further reduce Serravalle's environmental impact, focusing on sustainability issues.

Can you provide more details on the investments?