Alook at what the future might hold for airport shopping, the industry’s battle to avoid a ban on tobacco sales at airports and a spectacular Chinese style gala dinner were just some of the highlights of this year’s Airport Business & Trinity Forum.
Delegates also learned that the lack of ‘dwell time’, primarily due to lengthy passenger processing procedures and the airline habit of calling travellers to their gate way before necessary, was costing the industry $35 to $40 billion a year in lost sales.
The event, which seeks to improve dialogue and mutual understanding between airports, concessionaires and brands to the benefit of the passenger, is a joint venture between ACI and The Moodie Report and was hosted by CAM – Macau International Airport Limited.
ACI director general, Angela Gittens, called on airports and their commercial business partners to work closely together to achieve the twin goals of customer service excellence and revenue diversification.
Said Gittens: “Because airports subsidise airline operations to maintain the safety and security of their facilities, they have turned increasingly to expanding revenue from commercial activities. They are vital resources for airport development and our partners in building customer satisfaction and loyalty.”
The surprisingly upbeat tone of the conference, given today’s difficult operating environment for airport retailers, peaked with the presentation of Diageo’s Phil Humphreys, who challenged the industry to embrace the Trinity principles and take travel retail to a new level.
He said that low footfall and penetration figures, such as the fact that only one in ten passengers buy liquor and only 23% go into stores, proved that the industry wasn’t engaging passengers and was possibly costing it $6 billion a year in lost sales.
Humphreys, managing director of Diageo Global Travel & Middle East (GTME), believes that improved co-operation between the different Trinity stakeholders and improved passenger connectivity hold the key to future success.
And he showed delegates a possible glimpse of the future for travel retail – one that embraces digital media and social networking sites like Facebook to ‘connect’ with customers. Humphreys believes the future means providing passengers with their purchases when they want them, such as at the airport of departure or arrival, at the destination hotel or delivered to the door upon arrival back home from a trip.
“Now is the time for Trinity to step up,” said Humphreys. “For airport authorities, for retailers, for suppliers to come together to collaborate like never before. This is our time.”
His challenge to the industry to pursue Trinity principles was backed by an assurance that Diageo GTME would invest heavily with partners who committed themselves to change and to driving footfall. Asia Pacific Travel Retail Association president, Sunil Tuli, warned that the World Health Organization’s campaign to abolish duty free tobacco sales could have a devastating impact on the industry (see the next issue of Airport World).
Tunil claimed that a ban would be unjust as duty free sales only account for 8% of global tobacco sales, but the slice of the market was worth $3 billion per annum to the industry – $753 million of it in the Asia-Pacific region – and it is revenue that airports could not afford to lose.
He also claimed the financial damage to the industry would in reality be much greater than $3 billion, as statistics proved that a high percentage of smokers are impulse buyers who purchase other duty free items when inside the store.
“A tobacco ban could have a devastating impact on our industry, both in terms of lost revenue and jobs,” said Tunil. “There is absolutely no evidence whatsoever to prove that duty free sales contribute to illicit tobacco sales across the world. Airports are possibly the most controlled environment in the world for the sale of tobacco. We need to act, and we need to act now to stop the ban coming into place.”
Nigel Dolby, managing director of Dolby & Holder Consulting, stunned the audience by pointing out how much ‘buying time’ was being lost through the erosion of passenger dwell time, despite the average traveller arriving 137 minutes before their flight departed.
He believes out of their time spent at the airport, 36 minutes is lost during the processing and transition phase and another 65 minutes through queuing, waiting, watching and orientation, leaving only 29 minutes to visit the shops and restaurants after deducting seven minutes for ‘sundries’ such as phone calls, going to the toilet, emails and smoking.
In other news, Suning Liu, executive director of Macau International Airport, revealed how the gateway’s efforts had led to over a 200% increase in concessions revenue over the last five years, with its annual income from retail and F&B activities rising from $15 million in 2003 to $51 million by 2008. Average passenger spend at the airport has jumped from $5 to $16 over the same period.
And DFS Group’s senior vice president of business development, Christian Strang, told delegates that the industry needed to encourage innovation and urged retailers to “push back the boundaries” and create something new instead of “more of the same”.
“Where some see a crisis, I see opportunity and, to a certain extent, the future is in our hands if the retail offer is right,” said Strang. “This is a $40 billion a year industry that provides food, homes and work for thousands of people across the globe and it can only get bigger as more people fly.”
Although the current state of the global economy ensured that delegate numbers were significantly down on previous years, few of the 180 delegates to attend this year’s event would have left Macau disappointed at the quality of the conference or about future growth potential of the travel retail sector.
Airport World 2009 - Issue 5