Interview: Heathrow Airport plans Terminal 5 luxury tenders as it tackles space and productivity challenges

UK. Heathrow Airport Retail Director Fraser Brown has revealed plans to tender key luxury outlets in Terminal 5 as the company tackles the twin challenges of space and productivity.

Speaking to The Moodie Davitt Report in Cannes last week, Brown said that tenders for a series of luxury units in T5 will go to market by the end of October/early November, with the process running into the new year. Chosen partners are expected to gain access to their sites by September 2025 and open by Q2 2026.

In a related development, The Macallan Boutique that moved to a temporary location in the World Duty Free store recently will reopen within the T5 luxury zone. This, said Brown, underscores how luxury brands across categories from fashion to spirits can sit adjacently and work well commercially.

Brown told The Moodie Davitt Report: “Some luxury brands adapted and reacted to the change in the VAT circumstances better than others [a reference to the abolition of tax-free shopping airside for overseas visitors by the previous UK government -Ed] and are responding with excellent consumer focus, product innovation, personalisation, activations and service. Those that are doing those things well, and are performing, will stay. Those that are not will leave.

“Because of Heathrow’s attractive passenger demographics, and in spite of the tax-free situation, we are still hopeful that we will get interesting brands and exciting propositions for our customers.

“It has been quite a long time since Heathrow has put sites out to tender in T5. It is the biggest terminal in Europe, home to British Airways and regularly voted by Skytrax as best terminal in the world. It is 16 years old now and we are incredibly proud of it.

“So with Heathrow putting our best retail foot forward, and brands and retailers coming with their best offers, there is no better place in Europe for them to show what they can do in the luxury space.”

Brown said that Heathrow’s productivity challenge has become acute against the backdrop of rising passenger traffic and upgrades to security that have required some cuts to retail and dining space around the edges of key terminals.

“We have reminded brands and retailers at TFWA World Exhibition in Cannes – and are pleased to support TFWA through its 40-year journey – about the positives of our wonderful audiences and that Heathrow was again recently named the most connected airport in the world by OAG.

“But we have challenges too. We are adding 146 new security lanes and making an investment that is valued at close to £1 billion, all of which will improve the experience once in place. In T5 we have closed some retail and food & beverage due to the upgrades to security.

“Our message to partners is that we have a productivity squeeze – our passenger numbers are rising but our spend is rising at a slower rate. At Heathrow we have two-fold challenge: one is the slower spend in the industry, but at Heathrow we also need spend on a per square metre basis to increase.

“So we say to brands, we must lift the level of engagement to travellers. Being laser-focused on consumers and doing the basics well is one element. We must have the right product and be innovative. Do we have the right value proposition, not just on price but on offering products that represent value in its widest?

“That’s especially important at Heathrow. When the British government removed tax-free shopping, one of the reasons it stated was that it didn’t believe the industry was passing on the price advantage.

“The industry has to be incredibly careful in the UK and around the world that the UK is not a template for other governments.”

He added: “For example, we are very clear on liquor & tobacco – we expect the brands and the retailer to pass the advantage of tax and duty-free alcohol onto the consumer, where the product is exactly the same product as on the local market.

“Brands and retailers globally should look at the UK and reflect carefully to make sure that for products that are domestically available and comparable, that we offer pricing that represents value. For products that are not comparable value could be the things we often talk about: personalisation, customisation, uniqueness.”

Brown said that brands, not least via their offers in Cannes, are responding to these points well, and said engagement must be a sharp focus for the industry today.

“Before the pandemic we relied a lot on healthy tailwinds with rising traffic, Chinese spending or macro benefits in other words. The industry responded well but did not cause those macro benefits.

“Then post-pandemic revenue spend was driven by consumer sentiment, another macroeconomic tailwind. Now we have to work harder on ourselves – to be better on product, innovation, activation and ensuring great service through our colleagues.”

Maximising these performance-boosting elements also ensures stronger commercial returns, while maintaining Heathrow’s drive to be ‘an extraordinary airport for the future’.

Brown said: “We can only be that extraordinary airport if the retail and F&B is world beating, and travellers rate it as such. So any of the brands that are not doing what I said about product, innovation, personalisation, activation and people – they are not supporting our vision to be the best in the world. They will fail the financial test by not making money and they will also fail our service test.”

Outlining examples of how Heathrow has reacted to changes in productivity, Brown cited the example of long-standing partner Harrods, which struggled to successfully manage the business at its multi-brand stores after the loss of tax-free shopping.

“We both amicably agreed that the format of the store in T3 in particular was not working. We closed a large proportion of that store, taking it back to shell and core. We took it to market as two distinct standalone luxury boutiques, and we put two brands in there. It is now a more productive space.”

Similarly in F&B, café brand EL&N London closed and was replaced after a difficult period in T3. On how the future might look both in F&B and retail as Heathrow strives for greater productivity, Brown said: “With brands now we are looking at how they perform and remain relevant throughout the day.

“F&B travel group OTG did this with its flexible outlet model in the USA, which is interesting for us.

“We can do this in food but we need to flex the offer more in travel retail too. We can do even better on destination targeting, we can range to different demographics and so on.

“A key question is: How do you change the store to reflect different times of day, different flights but also different moods?”

Avolta recently reworked space in its T5 main beauty store, including more new, fast-emerging brands alongside long-time favourite ‘hero’ names. Now the retailer, alongside the airport, is turning its attention to the offer in T2.

“With Avolta and the brands we will see more change in beauty as we improve productivity,” said Brown. “You need to have the right brands. You need to have the right physical fixtures and fittings that allow you to deliver great service, trial and experiences. We expect to be doing more of that in T2 just as we have in T5.”

Summing up the most exciting initiatives that will influence retail at Heathrow in 2025, Brown said: “It starts with people. We have had some changes at Heathrow but we continue to develop the retail team. We had three colleagues shortlisted in the Rising Star of the Year category at the DFNI-Frontier awards, and one of those colleagues, Rory Ford, won. That is credit to him, but it’s also credit to the whole retail team at Heathrow and the brands and the partners that we work with.

“I’m also excited about bringing some of the innovations we see at Cannes this year to Heathrow, from confectionery to beauty.

“In T5, some of the luxury respacing will be very interesting, plus we have lots of newness coming in T2 beauty. Beyond that we are also thinking ahead about how we lay out T4, which we need to do as we introduce the new security lanes. That’s a big opportunity for brands and retailers to create a fantastic environment.

“It’s not our largest terminal, but it has our highest spend per head, driven by the airlines and destinations served. And because it is our smallest terminal, it actually has the benefit of being a very shoppable space.”

He added: “I am looking forward to the Labour government engaging in tax free. We have to respect and give the government time to deal with the many things on their agenda. But at the same time, government needs to understand that the loss of tax-free shopping is a big problem and it’s not going away.

“Also, importantly, I’m excited about having a proper plan with the brands, where we know month by month what we are doing to engage the traveller, and that plan is aligned with Heathrow, retailers and brands.

“Our job as leaders in the industry is to take the great backing of brand and retailer shareholders for the industry that we see in Cannes, deliver the great products we can offer our travellers through the great people who represent us on the shop floor, and take our sector to new heights of engagement and excitement.”

*We featured an on-location interview with Fraser Brown at Heathrow T5 in our blockbuster October edition, released last week. Click here for the digital edition of that publication and turn to page 232. ✈