(Bloomberg) -- DFS Group, the travel retail arm of luxury conglomerate LVMH, plans to build a major shopping and entertainment complex on China’s tax-free Hainan island in a bid to capture a growing tourism market that’s shown resilience to slowdowns.
DFS is making “an unprecedented investment” in the 128,000-square meter project, which will open by 2026 and feature over 1,000 luxury brands including those from LVMH Moet Hennessy Louis Vuitton SE, the firm said in a statement. The complex, expected to pull in 16 million visitors a year by 2030, will also include accommodation, dining and entertainment, the company said.
The project marks DFS’s first physical branch in mainland China — the company currently has 12 stores in Hong Kong and Macau, according to the company’s website. It’s part of a series of commitments the company is making in the country, DFS China President Nancy Liu said in the statement.
The expansion highlights global brands’ increasing understanding that China’s wealthy consumers are shifting to purchasing luxury goods — and traveling — more often domestically in Covid’s wake. Hainan, which has emerged as a domestic hub for high-end duty-free shopping, has continued to see a sales boom even after Beijing dropped the strict Covid Zero restrictions that made international travel easier again.
Read more: Chinese Prefer Luxury Shopping at Home, Not Abroad, After Covid
Still, a post-pandemic economic slowdown and slumping youth jobs market has rattled the country — and some consumers’ confidence. While LVMH’s expansion shows longer-term optimism for China’s luxury market, it’s fighting an economy that only recently began showing signs of recovery, and triggered a rout on European luxury stocks amid softening demand.
Domestic tourism has defied the slowdown, becoming a rare consumer bright spot, as Chinese residents seek instant gratification amid an uncertain economic outlook. With the addition of the DFS complex, Hainan could become an even stronger competitor to existing shopping hubs like Hong Kong, which has already seen a decline in regional relevance for international luxury brands.
Read more: LVMH Is Shifting Out of Hong Kong as Chinese Shoppers Stay Home
The new complex is “the clearest commitment we can make to the long-term development” of China’s tourism market, DFS Chairman and Chief Executive Officer Benjamin Vuchot said, “with Hainan on course to become one of the world’s largest luxury retail markets in the next five years.”
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