The MEADFA report: Day one
The rescheduled 16th annual MEADFA Conference finally got underway in Dubai today (January 29, 2018) with almost 500 delegates representing every corner of the travel retail industry gathering to support the event following its November relocation from Beirut.
Taking the stage on familiar territory at the Jumeirah Creekside Hotel, MEADFA President and CEO Jordanian Duty Free Shops, Haitham Al Majali, kicked off what promises to be an intense two days of discussion and knowledge exchange. In his welcome address, he highlighted the Middle East travel retail channel success story with the region now commanding 9% of the total US$63.5 billion global market, and its rise to international prominence as a leader in driving airport connectivity to the Middle East (109.2% in the last decade, according to a 2017 SEI Europe report), off the back of expansion by Gulf carriers.
“In the first half of 2017, according to Generation Retail data, global duty free increased by 4.6%, while growth in the Middle East was more modest at 0.8%,” he noted.
Africa is a more challenging environment with a continent-wide sales decline in H1 2017 of -3.5%. “We know there are barriers to growth but we also know that its potential is enormous,” said Al Majali, who also raised the looming spectre of the implications of the WHO trade protocol on tobacco in the region.
A new reality for Dubai
Dubai Duty Free’s Colm McLoughlin also welcomed MEADFA delegates on behalf of HH Sheikh Ahmed bin Saeed Al Maktoum, before handing the floor to Dubai Duty Free (DDF) COO, Ramesh Cidambi.
With Dubai International Concourse C openings putting DDF on track to revel in a grand total of 3,900 square metres of prime retail space, the debut of a new Bulgari shop in Concourse B in December 2017 and a further 2,000 square metres to come, the overall business picture is rosy, according to Cidambi.
However, DDF has been keeping a close eye on the effect of the 2016 Emirates-imposed hand baggage restrictions, and reports a 50% drop in sales of Nido, a 66% drop for Tang and 25% decline in chocolate sales over the last 14 months (against 2013 figures).
“Our concern is that if someone is constrained by the airline, what else did they not buy?” he remarked.
The double taxation whammy of excise and VAT, implemented in late 2017 and early 2018 respectively, has seen tobacco sales suffer significantly, with Cidambi similarly concerned about the knock-on effect on total basket spend.
“Both taxes undermine the core part of our proposition, and for us as well as Abu Dhabi and Sharjah, we think this is pushing the business to other jurisdictions,” he noted.
On a demographically positive note, 2017 marked the reappearance of Chinese customers (4-5% total passenger volume), which represents around 12% of DDF business, as well as Russian travelers since the strengthening of the ruble.
New kid on the block
Leading into the coffee break, Oman Airport Management Company’s Non-Aeronautical Senior Manager, Faisal Sultan Salim Al Mamari, presented an overview of aviation sector development within the Sultanate, where the new Muscat International Airport is set to grow from 14 million passengers per annum, upon anticipated opening in Q1 2018, to 42 million upon phased completion.
The new ICAO-approved Category 4F facility will be able to accommodate the Airbus A380 while, in the south of Oman the expansion of Salalah airport will have capacity for 2 million passengers while Duqm is expected to open by year-end, servicing 250,000 passengers per annum.
“The retail and commercial space in the new [Muscat] airport is 32,000 sqm, and we are forecasting 100% growth in non-aeronautical revenue. The [duty free] space is 5,320 square meters,” noted Al Mamari. The upgraded location, which will be operated under a new joint venture between Aer Rianta and Oman Air, will be triple the size of the existing site.
Oman Airport Management Company traffic growth forecast Oman Airport Management Company traffic growth forecast
The numbers game
Newly released research from Counter Intelligence Retail saw audience members sit up and take notice as Stephen Hillam, the firm’s Research Director, homed in on the need to better understand the passenger mix in order to target that elusive purchase.
“We are already focusing on a [Middle Eastern] traveler who is slightly more likely to be a millennial, predominantly male and most likely traveling for leisure, and in groups,” he commented, but went on to flag South Korean, Thai, Chinese and Russian passengers as the emerging nationalities “most likely to spend in our airport”.
A slideshow snapshot of nationality differences (ergo, opportunities) followed, with Russians and South Koreans evenly split between male/female; more millennial Thai travelers; and the fact that the Chinese and South Koreans are very much driven by beauty products.
“We need to call out to some of those key differentiating features; we need to make sure they feel at home within our channel within the Middle East,” he urged.
A call for MEADFA to consider South Africa as a future conference destination was voiced by Inati Ntshanga, Aviation Consultant and former CEO, South African Express, who admitted the region was a “late starter” but spoke passionately about the continent’s commitment to opening its skies.
Almost three decades after it was proposed “we are now talking about a Single African Air Transport Market,” he said, following the hot-off-the-press African Union announcement.
Ntshanga noted that fleet growth by Ethiopian Airlines, Kenya Airways investment and recent aircraft deliveries to South African Airways, as well as infrastructure development, is sending out the right signals buoyed by IATA’s 8% growth forecast for the region and strong load factors.
A growing middle class with rising income also bodes well for the future and for the travel retail industry. “I’ve never seen duty free revenue, or any sales or onboard sales on my P&L. We have international airports that don’t’ even have duty free and there’s a huge realisation by airlines that ancillary revenue is critical,” he added.
Power of three
Wrapping up day one action, conference moderators John Rimmer and Dermot Davitt gave three speakers their time in the MEADFA spotlight under the banner of The MEADFA Challenge.
Tarkan Demirbas, Area VP Middle East, Philip Morris International led the way with insight into how the tobacco giant is designing a smoke-free future with US$3 billion of investment and a team of 400 R&D experts helming a portfolio of next generation products including the hi-tech HEET (retailed as IQOS) nicotine delivery system.
“Nearly 4 million consumers have already decided to stop smoking cigarettes and switch to IQOS and by 2025 at least 30% of our globally shipped product will be taken by smoke-free products,” he revealed, also noting that the brand is already in 70 airports worldwide.
Dufry’s Sarah Branquinho, the only female speaker of the day – a fact she made no bones about highlighting to the audience – provided an update on the company’s hugely successful 2017 #YouNeedTo Know campaign, in support of the UN’s 17 Sustainable Development Goals.
“This industry has a heart and a conscience. We are also an industry that works closely with the airport channel, which is the target of every issue to do with climate control, and [the UN mandate] really resonated with us,” she said.
Rolled out to 32 locations in 2017, reaching 54 million passengers, the company has a further 60 locations in the pipeline for 2018, starting with Zurich.
Entrepreneurial tech duo and self-appointed “dreamers”, Wassim Saadé and Amir Abbaszadeh, co-founders of new mobile travel services and retail app, Inflyter, took the audience directly into the digital age in the final mini session. Their retail argument is simple, as Saadé explained: “You retrieve your ticket on Inflyter and that opens up a cash path.”
Set to open their first test site at Beirut airport in a matter of weeks, passengers will be able to pick up duty free purchases ordered through the app from hi-tech fully automated lockers, with the duo banking on airlines being willing to share customer data and turn the online retail opportunity in their favor.