Aer Rianta International’s CEO, Jack MacGowan, has told TRBusiness that the availability of good quality data from Auckland Airport meant that the travel retailer was able to confidently bid for the recently tendered duty free business, while mitigating risks for its shareholders.

In an interview conducted during the unveiling of a major retail revamp in Dublin yesterday, he told TRBusiness: “The data is key for us. When you don’t have data, you take blind risks…I mean we would have been guilty of this 10 years ago. But one of the things about Auckland, which actually convinced us to invest in the bid – if you add it all up it’s not short of $400,000 in investment – was the quality of data that was provided by the airport. We were able to use that, not to remove the risk completely, but at least to understand and calculate the risks.”

 

As previously reported, LS Travel Retail Pacific and Aer Rianta International were both selected as the two new competing retailers to operate duty free arrivals and departures shop business, at Auckland International Airport.

 

At the time, JR/Duty Free – one of the incumbents – told TRBusiness that it pulled out of the final stages of negotiation early due to what it termed ‘the high level of uncertainty and a very onerous contract, which together took the level of risk too high’. [Comments were provided by the company’s Chairman, Garry Stock].

 TRBusiness asked MacGowan if he believed that the contract was worth the perceived risk: “My view on the tender, as an international company with 20-odd airports around the world, is that we have reasonably good data to calculate and mitigate the risks and that allows us to be confident and educated in that bid. So that’s where I would say we came from. I can’t speak for Garry, he’s a great guy and I know him quite well, but we didn’t see any controversy from our point of view.

 

“There are people out there who blindly bid and we’re not one of them. We’re very different from them in that and we don’t bid in cases like Incheon. We do the background prep to understand what that airport wants and what sort of things it wants from an operator. We ask, ‘can we deliver for both of those stakeholders, better than Dufry, China Duty Free Group, or whoever’ and in the case of Incheon we didn’t want the business.”

 

MacGowan also revealed that this was the case for the high-profile Sydney tender. MacGowan said ARI was reluctant to get involved because the airport authority is ‘financially-driven with poor data’. “We have a clear idea about what airports we like and which ones we want to work with. Because it’s not about being the biggest, it’s about being the best,” he added. McGowan also revealed that ARI would not be getting involved in the Luxembourg Airport tender.

 

ARI Global Director Marketing Nicola Wells told TRBusiness that the bid was ‘a really competitive process’ and one of the longest ARI had undertaken. Wells highlighted the fact that Richard Barker, Auckland Airport’s General Manager of Retail and Commercial, had publicly commended ARI on its bid and pointed out that what set it apart from others was ARI’s ‘deep consumer understanding; the concepts that it presented, as well as a sense of innovation’.

 

“So I think he’s spoken for us really in saying ‘this is why we won the bid’, because we were bringing something different.” Wells added that there was also an ‘excellent cultural fit between the two organisations’.

 

Moving on to the topic of other potential airport business MacGowan said he feared that their chances of operating in Houston, had been dashed.

 

TRBusiness reported on 10 March that Houston Airports System (HAS) had recommended the World Duty Free Group and ATU Americas for its two new ten-year duty free contracts, when existing contracts expire in July 2015.

 

“Houston may be over; we don’t know yet. They were a little early in coming out saying that they’d won and maybe that will backfire.”

 

Regarding ARI’s Middle East business, TRBusiness asked how confident ARI was in providing Abu Dhabi with something really spectacular for the airport’s new Midfield Terminal Building (MTB).

 

He said: “With Abu Dhabi, as long as we’re fairly sure and we work closely with the airport, getting to know the passenger mix, the transit destination and sources, and the dwell times, we’ll be very capable of selling to them and also flexible when things change.

 

“It’s been a fantastic bid to be a part of because you’re really just thinking huge and outside the box and everything needs to be different. The scale just allows much more latitude to try different things.”

 

Remaining in the Middle East, TRBusiness also inquired about the Muscat Duty Free operation at Seeb Airport in Oman – a business held by ARIME for many years, which is expected to go to tender early next year.

 

“The timing isn’t public yet, but we’ve been working very very closely with them, going back a long time now. We’ve got a relationship with them, not just on the retail side, but across the airport. We have a very close relationship with them and have done for the last 10 years and successfully grown their business. I think we’ve been there 10 years (at the end of this year) and in nine of those, we’ve exceeded in what we set out to do.”

 

McGowan says the company’s primary focus is to open Auckland well. “We have a very strong business in Delhi. It’s going to probably double in the next two years and we have a very strong partnership with GMR. Auckland is the next step in terms of setting out a professional retail operation and we want to make sure that we exceed the airport’s expectations.”

 

 

ARI has really been able to focus on its successful Delhi Duty Free business, the Middle East as well as new tenders – such as Auckland – following its retreat from Russia once it sold its Domodedovo and Vnukovo interests to Duty Free Holding Group, back in 2011. At the time, ARI could not have predicted just how insightful the move had been. TRBusiness asked MacGowan if the company was able to escape the impacts of the Russia/Ukraine conflict at its other travel retail locations.

 

“I mean obviously because we are not in Russia, the percentage of our passengers that earn in Roubles is much lower, than say Heinemann and some of the others.

 

“And the Russians are still travelling, but they’re just not spending as much. So let’s look at Ireland or Cyprus as an example. The average spend of a Russian is reducing there, but on the other hand we have very good British customers who have a stronger currency right now and so it’s checks and balances, swings and roundabouts.”

 

 

Last year, Ermes Department Stores Plc., the retail operating arm of the Shacolas Group, agreed to sell its 50% stake in the airports shops operator CTC-ARI Holdings to its joint venture partner ARI for €55.7m. ARI considers the location will deliver a long-term ROI.

 

“Well it’s a 25-year contract of which there are roughly 17 or 18 years left. There are about 7m tourists there and about an hour and a half flight north of there, out of Turkey, there are 25m tourists. So if Cyprus can’t grab two or three million of those I will be really, really gobsmacked.

 

“And the reason for the huge disparity is the historic links between Germany, Russia and Turkey. But it’s opening up and we’re seeing many more Turks coming into Cyprus through the northern-occupied territories and I absolutely think that the island of Cyprus is going to be a phenomenal tourist attraction in 10 or 15 years.

 

“I really think it’s great. I think they’re a fantastic airport to work with, obviously we are a shareholder ourselves. We think we have a great investment and it’s over delivered on our investment in the first year, so we’re doing well there.”

 

See a future issue of TRBusiness for the full interview with Jack MacGowan and Nicola Wells.