Sunil Tuli, president of the Asia Pacific Travel Retail Association (APTRA) and group chief executive of King Power Group (Hong Kong) shares an industry perspective on the COVID-19 pandemic.
As air travel virtually ground to a halt across Asia-Pacific in the wake of the coronavirus pandemic, so too did an essential lifeline of over $36 billion in non-aeronautical income, a critical contributor to the aviation industry in the region.
This normally vibrant industry in APAC is effectively paralysed while flights are grounded, and borders closed. No passengers equals no shoppers, and no vital retail contribution to airport balance sheets.
Duty free and travel retail is estimated to support over 320,000 jobs in Asia-Pacific alone.
The travel retail and duty-free sector is intrinsically linked with the aviation ecosystem. We cannot function without airports and airlines and they, in return, cannot deliver a viable business without the essential contribution of non-aeronautical revenue delivered by airport and inflight retail.
Airport retail and commercial services, including food and beverage, constitute a crucial business sector, providing up to 60% of vital commercial income for airport owners, outpacing aeronautical revenue streams. As such, our industry is also the most significant direct contributor to the investment in Asia-Pacific’s aviation infrastructure and the on-going development of world-class national gateways, the region’s hubs to the world.
As a member of the Duty Free World Council, we continue to engage on the impact of the pandemic as a global industry group of associations.
At APTRA – the not for profit trade association representing brands, retailers, airports, F&B operators and trade associations in travel retail and duty-free in Asia-Pacific – we have intensified our advocacy focus, campaigning alongside the Duty Free World Council, to governments and industry bodies, such as ICAO, to recognise the unique dynamics of the travel retail industry, that are wholly different to domestic retail, and to include it in rescue and stimulus packages for the aviation sector.
Travel retail also plays an important role in terminal operational efficiencies. Built as an integrated part of airport terminal infrastructure capacity – these stores are not standalone retail operations. Larger duty free outlets operate very differently to high street retailers.
Most importantly, in this context, walk-through duty and tax-free stores do not usually have designated entry and exit points. Their surface area is an integral part of the general passenger flow through an airport.
We are pleased that in its CART (Council Aviation Recovery Taskforce) Report, launched in early June 2020, ICAO did, formally, recognise the important role of non-aeronautical income, giving its support for retail and F&B to open up at airports as soon as flights resume.
This important and very welcome report is founded on 10 key principles, including ‘work as one aviation team and show solidarity’, and I know I speak on behalf of everyone in travel retail in thanking ICAO for its inclusive and broad thinking approach to recovery strategies.
APTRA is now supporting our members with guidance on the implementation of in-store changes to meet ICAO’s recommendations, prioritising the health and safety of passengers and staff, alongside achieving a much-needed bounce-back in revenue.
Several airports, of all sizes from across the region, are active members of APTRA and we always welcome more participation from the sector.
We are starting to see the first green shoots of recovery. Key international routes are slowly opening up, albeit with severe restrictions on passenger eligibility, border closures and quarantine requirements.
Discussions on bilateral travel corridors continue among those countries that have shown strong control of COVID-19 and, if successful, could encourage multilateral agreements.
Domestic travel is strengthening in China, transit passengers are back at the bigger hubs and governments are starting to work proactively with industry associations, such as APTRA, on stimulus strategies. The cautious pace reflects a continuing and unprecedented threat, but progress reflects a region ready to take-off again.
The vital signs for retail are good. Consumer appetite for airport shopping in Asia-Pacific is the strongest in the world. Pre-pandemic, ACI figures (2018) show average spend rates in APAC duty free concessions 76% higher than the global average.
Amongst Chinese travellers it is even more extraordinary; Horizon reports their rate of spend is five times higher than any other nationality, representing 42% global travel retail.
The region is home to the long-term trend of 90% global growth in middle classes, driving the desire to travel abroad for the first time. As part of their travels, these consumers are eagerly looking for great retail experiences and to discover new brands.
Duty free and travel retail is an important shop window for brands wanting to reach and engage with new consumers. All positive imperatives for strong and sustained growth.
Right now, although it may be hard to imagine just how the next 15 years will pan out, APTRA is confident that once the current challenge has passed there are many substantial reasons underpinning our belief that we are following a solid roadmap to recovery, despite the bumps in the road.
When airports are fully functioning again they will need the commercial operators of retailers, brands, food and beverage to be ready and open for trading, so we are doing everything we can to leverage every opportunity to enable the recovery of our sector.
The last 15 years have brought incredible growth of business and innovations that have changed our lives in many ways. This year has stunned everyone, but we are determined to help drive the industry back onto its rightful path to growth.
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