Harrods checks into hotels as it awaits return of Chinese shoppers

Harrods

• London department store opens branded luxury suite in Beijing hotel
• Gulf customers ‘incredibly important’ to Qatar-owned retailer, says MD
• But it isn’t planning a full store in GCC: ‘There can only be one Harrods’

Harrods, the London department store owned by Qatar, has opened its first branded hotel project, diversifying into hospitality overseas as the retail sector faces challenges at home. 

In late March it launched the Harrods Residence Suite, a two-storey luxury suite in Swire Hotels’ Beijing property the Opposite House.

The retailer also has a hospitality outpost in Shanghai: it has opened the Harrods Tea Rooms & Piano Bar alongside its private shopping space for super-wealthy consumers.

Michael Ward, the company’s managing director, told AGBI the China openings are part of plans to expand hospitality offerings and grow “as an F&B brand as we deepen our relationship with customers outside of Knightsbridge”.

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The Gulf provides its second biggest international customer group, he added. “The region is incredibly important to us and we have invested in growing our brand awareness and consideration with the GCC customer,” said Ward.

Harrods operates a tea room and two retail spaces in Qatar’s Hamad International Airport. Last year it opened a branch of Harrods Tea Rooms in Doha’s Msheireb district.

Pictures: Swire Hotels

It has no plans to open a department store in the Gulf, however. “In terms of a full store, our terracotta palace in Knightsbridge is such a unique and special place that there can only be one Harrods,” said Ward. 

Ward said GCC shoppers represented 16 percent of trade across all Harrods’ channels in 2022.

“This is slightly down from before the pandemic as a percentage of total customer population,” he added.

“However, during 2020 and 2021, we successfully invested in attracting new local customers and we have retained these customers in 2022, in addition to welcoming back our international shoppers.”

Harrods/Ed Reeve

Ward declined to disclose footfall for the London department store. Figures compiled by the Knightsbridge Partnership, a business lobby group for the upmarket shopping district, said local footfall in the week beginning December 26, 2022 (a key shopping date in the UK), was 45 percent up on the previous year. It was also just 1 percentage point below the figure for 2019.

Before the pandemic, it was estimated that Harrods attracted around 15 million shoppers each year.

Chinese shopper numbers are yet to recover fully. Those customers used to represent about 25 percent of sales pre-pandemic; it’s now closer to 11 percent. 

Tax-free shopping: ‘It is clear the government needs to U-turn’

Ward is a vocal critic of the UK government’s decision to axe VAT-free shopping for tourists in 2021, pointing out that London is falling behind Paris and Milan’s luxury retail markets as a result.

“It is very clear that the government needs to U-turn on this decision and the data has been readily available to support this,” said Ward.

He pointed to research by Oxford Economics that found reinstating tax-free shopping would provide a net tax gain of about £350 million ($432 million) a year – contrary to government estimates that scrapping the perk raises tax income by £2 billion a year.

“There’s a benefit to the UK economy to reinstate it and the sooner the better. This needs to happen before international tourist habits are changed irrevocably, which, if allowed to happen, would prove a travesty for multiple sectors in the UK,” he said.

Ward has been at the helm of Harrods since 2005 – five years before it was bought by Qatar Holding, a subsidiary of the Qatar Investment Authority. The QIA is the world’s 10th largest sovereign wealth fund with assets of $475 billion, according to the SWF Institute.

Doha announced a reorganisation of the QIA in May. A month earlier, Qatar’s prime minister, Sheikh Mohammed bin Abdulrahman Al Thani, had said he wanted it to become one of the world’s top five wealth funds.

UK stocks currently make up 17 percent of the QIA’s equity portfolio, valued at $8.8 billion. The UK is the third-largest destination for the fund’s investments. Germany is the biggest with 29 percent at a value of $15 billion. Qatar itself is second with nearly 19 percent valued at $9.6 billion.