Wang Fang is buying a giant leg of top-quality cured serrano ham near the China help desk at the El Corte Inglés department store in northern Madrid. It’s not clear how she is going to carry it; she is already loaded with shopping bags filled with clothes from upmarket Spanish brands including Loewe and Puig.

Most tourists are drawn to Spain for a cheap holiday and abundant sunshine. But Ms Wang has come from China, at least in part, for the high-end shopping, making her part of a recent boom in the country’s luxury market. “I have come here to explore Spain, which is very beautiful,” she said. “But also for the shopping.”

For decades Spain has been the master of everything low-cost. It pioneered budget tourism in the 1960s and fast-fashion in the 1990s. It’s the world’s largest exporter of wine, but it sells five times more cheaply than French wine per litre. Spain produces nearly half the world’s olive oil, but much is sold in bulk to be bottled in Italy.

But this is starting to change. A report released by Bain & Co and Spanish luxury industry group Circulo Fortuny last week showed the Spanish luxury market was worth €9.2bn last year, three times smaller than France or Italy, but growing a twice the global average rate. The market grew 9.2 per cent in 2017, and is expected to more than double to roughly €20bn by 2025.

This is set to benefit Spanish luxury brands, such as Loewe, Puig, Tous and San Patrick, which are looking to capitalise on this growth while also, say analysts, encouraging foreign groups to expand their luxury offering in Spain.

“The Spanish luxury market is still quite small, but it is growing fast,” said Claudia D’Arpizio, a partner at Bain and lead author of the report, speaking days ahead of the World Retail Congress in Madrid this week where luxury is to be a key theme. “It is a big opportunity for companies in this sector.”

The growth comes as Spain exits its decade-long financial crisis and has since 2014 turned into one of Europe’s fastest-growing economies. At the same time, flight links with Asia have improved, helping to encourage higher-end tourism, says Ms D’Arpizio.

Much of the growth in luxury is set to be in hospitality and restaurants, according to Bain, with the €1.8bn sector expected to grow by 10 per cent a year in the coming years. Over the next five years 15 five-star hotels are due to open in Madrid. The first Four Seasons and The Peninsula hotels are opening in Spain next year.

“Spain used to be a low-cost tourist destination, but that is changing,” said Alejandro Bataller, vice-president of Sha Wellness Clinic, a luxury health resort in the south of Spain. “We have been able to improve our brand position as a country.”

Higher-end tourism is also driving sales of luxury goods, as shown by people like Ms Wang. Tourists account for 80-85 per cent of luxury sales in the country, according to Bain. Of this, the Asian market has seen particular growth, with a 20 per cent rise in Chinese tax-free spending in 2017.

LVMH says Spanish luxury brand Loewe is making ‘good progress’ © Bloomberg

El Corte Inglés, the largest department store chain in Europe by sales, is one of the companies making a particular effort to capture tourist spending, opening dedicated international and China help desks six years ago. As of this month, customers can use the Chinese mobile payments system Alipay to pay in its shops.

In February, the department store held a party for Chinese new year attended by Chinese “influencer” Anny Fan, who has 45,000 followers on Instagram. “We have been working for the past six years on an international marketing campaign to turn Spain into a purchasing destination,” said a spokesperson for the group.

Spanish luxury brands are a long way from the size, reputation and success or their French or Italian counterparts such as Gucci, Hermés and Louis Vuitton. But the past few years they have seen improving performances in an expanding domestic market, as well as stronger growth internationally. Bain said sales of personal luxury goods rose 12 per cent last year to €5.1bn.

Puig, a Barcelona-based fashion and fragrance company that owns the Paco Rabanne and Jean Paul Gaultier brands, last week reported a 47 per cent increase in annual profits for 2017, thanks to strong growth at home and abroad. Jewellery brand Tous saw sales rise 10 per cent last year, while LVMH said its Spanish brand Loewe, was making “good progress”.

Ten years ago Inditex, the world’s largest fashion retailer by sales and owner of Zara, launched Uterqüe, an upmarket offering focused on accessories, leatherwear and clothing. Sales were up 17 per cent last year, according to the company, and the brand will enter China for the first time later this year.

Carlos Falcó, chairman of Circulo Fortuny and the pan-European association the ECCIA, says there are still factors holding back Spanish luxury. Slow processing of visas is one issue, while there is still work to do, he said, to shift international perceptions of Spain as a place for low-cost tourism with low-cost producers.

“Spain’s luxury market is still small, but we are becoming a real player,” he said. “The market is growing at twice the speed as the rest of the world, so we are catching up.”

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