Financial Times FT.com

BAA paves Terminal 5 with retail gold

By Tom Braithwaite

Published: December 12 2007 02:00 | Last updated: December 12 2007 02:00

An upmarket London shopping development with a litany of luxury labels is due to open in the new year, giving its site the largest number of stores in the country. It even boasts an airport.

Heathrow's Terminal 5, slated to open at 4am on March 27, is pitching its retail-and-restaurant offer high and hopes to win over the "cynical" frequent-fliers - some of whom have complained vociferously about the airport's standard of service.

Passengers should flow through security in just five minutes before the maître d' shows them to their booked table at a Gordon Ramsay restaurant and they empty the rest of their wallets via a personal shopper at Harrods.

Nick Ziebland, retail strategy director of BAA, the airport operator now owned by Ferrovial, says the guiding message to passengers will be: "Come early; tell your friends. I think we need to bring back some of the glamour of travel and make it almost a destination its own right."

As this is Heathrow there are bound to be problems. Even with the shops shut, trials have shown some passengers missing their flight; this is not representative and will be fixed, stresses BAA.

There is also going to be no capacity increase from the gleaming Richard Rogers-designed Terminal 5: as soon as it opens, other areas will be closed for much-needed refurbishment.

The "bazaar atmosphere" that Sir Terence Conran has identified at the existing Heathrow terminals gets better and worse. There will be more space - but many more shops, some 112 in total compared with 237 in the existing four terminals.

Overall, Heathrow will have more shops - though much less retail square footage - than purpose-built out-of-town sites such as MetroCentre, Lakeside and Bluewater.

Retailers complain privately that dealing with BAA was laborious, bureaucratic and expensive. And BAA itself acknowledges that keeping its vital retail revenue stream - worth more than £600m a year - flowing strongly is going to be difficult when older terminals have stores out of action during the refurbishment

"We've got quite a tough time keeping our retail partners happy and keeping them profitable," said Mr Ziebland as he strolls around the gigantic complex.

"In classic BAA style it was very organised and very professional - and very long-winded," said one retailer.

"There's no high street landlord who would get away with charging certain percentages of turnover as rent," said another.

Nonetheless, they have come - enticed by the selling and branding opportunities of 30m annual passengers.

BAA has actively wooed some brands, offering much more generous leases and concession terms while others have had to fight it out in a competitive tender. "We didn't always take the best financial offer," said Mr Ziebland.

For example, in contrast to some of the retailers who grumble about BAA taking a double-digit percentage cut of their sales, Gordon Ramsay is happy. "We have a deal that makes us smile," said Chris Hutcheson of Gordon Ramsay Holdings.

When Paul Smith, the designer, turned up in person to pitch his plan, BAA leapt at the chance, telling World Duty Free, its own chain, that it would have to do without the space.

"I want to be the first airport to sell a sofa," said Mr Ziebland, dodging shopfitters at the Paul Smith store, which is waiting for doors from a French chateau.

There are practical shops alongside the luxury brands, but fewer than passengers might expect. "We're not going to have a Primark . . . not everyday socks and underwear," said Mr Ziebland, who is using each day until opening hour to test the terminal: work out how to move beer barrels, for example.

"If we . . .didn't have any beer because no-one had thought of that detail they'd think we're idiots."

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