On the right track for growth
With a 17-year industry pedigree, Sky Connection may have lost out to DFS in the 2012 HKIA reshuffle but has continued to streamline its land border and seaport business, maximizing operational efficiency and driving revenue.
Two of the busiest land border points fall under its remit, with concession dominance at the high volume Lok Ma Chau and Lo Wu rail terminuses since 2007/8, and both the China Hong Kong City and Shun Tak Ferry Terminals.
Lo Wu recorded 97 million passengers in 2013, a marginal dip on 2012, and Lok Ma Chau, which offers a much bigger and more relaxed shopping experience, logged 47 million passengers last year: a 12.9% gain on 2012. Add that to passenger volume at the two ferry terminals and total movements exceeded 170 million in 2013.
“Lo Wu was built over 40 years ago and has reached saturation with around 250,000 passengers per day. The new Lok Ma Chau station was opened to compensate for Lo Wu overspill and we see the numbers growing steadily,” says Simon Au, Merchandising & Buying Director for Free Duty (Sky Connection).
At Lok Ma Chau, Sky Connection has two 820-square-metre departure hall locations plus two 500-square-metre stores in arrivals; at overcrowded Lo Wu, they occupy a 950-square-metre departures space and two smaller 200-square-metre sites in arrivals.
“For 2013 we finished better than passenger growth in terms of sales, however, the outlook for 2014 is not as promising, largely due to China’s austerity measures coming into effect,” notes Au.
This has been keenly felt in categories such as high-end spirits, as he explains: “Brands like Louis XIII were hit hard and also white spirits like baijiu, and brands such as Moutai and Wuliangye, reached record highs in good times but sales have now declined substantially.” According to Au, top selling categories at Lo Wu and Lok Ma Chau are tobacco (cigarettes), spirits and wine.
Following an extensive two-month renovation program at Lo Wu, the new-look retail debuted in November 2013. “The objective was to ensure efficiency and to increase the overall image. We also made some location adjustments for certain categories and sacrificed the space of others,” explains Au.
Future plans include ongoing participation in regional airport tenders, but Au flags the high minimum requirements in terms of per head spend as a challenge. The future lies in rail it seems, with the company potential eyeing the new Hong Kong Express Rail Link, due to go live in 2015. Says Au: “We know through our own experience that you have to diversify to stay in the game.”