Airports ‘not the bad guys’ within travel retail trinity

By Andrew Pentol |

Lucy Thomas, Head of Retail, Auckland International Airport.

Moving towards a scenario where airports run duty free businesses themselves was among the possibilities discussed at the second Asia Pacific Travel Retail Association (APTRA) Exchange forum, held virtually last week.

The panel discussion, entitled The Trinity Through a Crisis, was moderated by Kevin Zajax, CEO, Ground Control Global and took place during the Moodie Davitt Virtual Expo event last week.

The speakers were outgoing Delhi Duty Free Services CEO Philip Eckles, Julia Bauer, Regional Manager, APAC, Imperial Brands, Lucy Thomas, Head of Retail, Auckland International Airport and Erin Lillis, Travel Retail Director, Asia Pacific, Lacoste. Sunil Tuli, President, APTRA, delivered a brief introduction.

On the prospect of further airports running duty free businesses directly, Eckles said: “I think we may see a move towards airports actually beginning to operate [duty free and travel retail] themselves.

“This is because they’ve been so fed up with the operators and can control the model better themselves.”

Whether this shift towards airports running DF&TR businesses independently is realistic remains to be seen, according to Eckles. “When you mention these kinds of things to airports they turn around and say, ‘we’re airport operators and don’t know anything about retail.’ This is despite the fact they keep building retail malls.”

RIGID MODEL?

The current model, however, is unlikely to change in the foreseeable future. “If we get through this [Covid-19] situation, it’ll be business as usual, but the structure of some of the minimum annual guarantees definitely needs addressing.

“I’m not saying minimum guarantees shouldn’t be there, but being tied into one in a situation like this is quite clearly not workable.”

The second APTRA Exchange discussion featured a strong speaker line-up.

Auckland Airport’s Thomas believes airport retail businesses operated under joint ventures may be the answer in some instances, but suggests there is a temptation to think the airport is the ‘bad guy’. “We’re not [the bad guys]. We’re part of an ecosystem and think retailers and brands can do some things differently.”

The current state of the DF&TR commercial model has long been debated, but what is the way forward from a brand perspective? Lillis, who believes conversations between all parties should be more transparent said: “At the end of the day, if minimum annual guarantees remain and increase, all that will happen is that that the operator will squeeze the brand for more points of margin.

“If we can have some kind of transparency and open table, whereby all parties make a fair profit, everyone will be happy.

“Consumers will then obviously be happy, because they will receive the right price versus online and all other platforms.”

The session was co-moderated by Kevin Zajax, CEO, Ground Control Global (bottom row — middle) and Dermot Davitt, President and Co-Owner, The Moodie Davitt Report (top row — middle).

Her words are echoed by Imperial Brands’ Bauer, who describes the concession model as the holy grail. “I can only echo what Erin says. I understand there are discussions between airports and retailers and that information is not shared with us and vice versa. It is important to understand that everyone has a role and that the concession model is something which must be discussed together.”

Speaking of togetherness, Delhi Duty Free’s Eckles says there has been little evidence of the trinity coming together during the coronavirus (Covid-19) pandemic. “There’s certainly been a lot of bilateral activity going on [between operators and airport landlords and operators and brand partners]. There’s a huge amount of activity going on in order to find solutions to the problems we are facing, but this is not on a trinity basis.

“I’m not saying there aren’t examples of the trinity working in unison, but they are probably few and far between.”

BILATERAL ACTIVITY

During the pandemic, Delhi Duty Free Services has worked closely with airport operator Delhi International Airport Limited to try and lessen its impact. Difficult conversations have taken place regarding minimum annual guarantee reductions and similar conversations are no doubt ongoing across the region.

Erin Lillis, Travel Retail Director, Asia Pacific, Lacoste.

“What concerns me is that a lot of solutions tend to be short-term, until the end of this [calendar] year or to the end of the financial year in April 2021. Passenger numbers on a global basis are not going to return to 2019 levels until somewhere in 2024, but they could return earlier here in Asia Pacific.

“Either way, when these current short-term fixes come to an end, we’re going to be looking for additional relief and solutions.

“Nevertheless, the airports here are certainly talking and making the right noises. On the other bilateral side, our brand and vendor partners have been fantastic.”

Offering a brand perspective, Bauer says her ‘number one go-to point’ is the retailers at the specific airports. “It’s seldom that I sit down with airports. It is not common on a virtual or real table that you see the airport, operator, brand and maybe even the airline all come together.”

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