The explosion in Chinese free independent travellers (FITs) to the Philippines is having a marked effect on the sales concentration at Duty Free Philippines’ (DFP) Luxe Duty Free store in Manila.

In an exclusive interview with TRBusiness, Jose Maria ‘Chim’ Esteban III, Chairman of Regent Asia Group and Landmark Management Services says sales to Chinese FITs now accounts for 75% of the Luxe Duty Free business [click below video].

“The Philippines is essentially at stage one of its Chinese business,” he observes. “Group tours are beginning with the infrastructure already being developed on the ground by travel operators and we’re already in pilot operations with a few major travel groups.”

FASHION AREAS DUE TO COMPLETE

Esteban says the burgeoning cruise ship industry in the Philippines is accelerating via regular stopover routes from China to Manila and Boracay, with Regent Asia Group looking to open a new travel retail door in Boracay Island in the coming 20 months to cater to rampant demand.

“That is the natural process of development for Philippine tourism – it’s just a matter of getting the infrastructure in place [such as] hotels, airports etc.,” says Esteban.

“In a couple of years, we will probably at least double our numbers for Chinese tourism,” continues Esteban, who notes the number of Chinese travellers to the country has grown from next to nothing to around 1.7m in the past five years.

“There is a great relationship [between China and the Philippines] and we think the Philippines is a great destination for tier two or tier three countries.”

Regent Asia, which operates under the Regent Travel Retail Group umbrella, operates a range of brand boutiques as the merchandise supply and management concessionaire for perfumes & cosmetics and luxury and fashion goods at Luxe Duty Free. These two categories account for the majority of the space at Luxe.

As reported, the luxury shopping destination at the SM Mall of Asia entertainment and leisure complex in Pasay City, Manila launched in November following a soft-opening the month prior.

It boasts 3,000sq m of retail space over two floors, including 2,000sq m on the ground level focusing on fashion and luxury goods (Bally, Longchamp, Coach, Michael Kors, Samsonite, Swarovski, Tumi, Paul & Shark, Furla and others); liquor, tobacco and confectionery; and a 1,000sq m mezzanine featuring a large assortment of international perfume and cosmetic brands (Bobbi Brown, Bulgari, Calvin Klein, Clarins, Clinique, Dior, Estée Lauder, Giorgio Armani, Givenchy, Jo Malone, La Prairie, La Mer, Shiseido, MAC and others).

The layout is targeted specifically to meet growing demand from aforementioned free independent travellers (FITs), group tours, cruise passengers, in addition to those in the MICE (meetings, incentives, conferences and exhibitions) industry.

Luxe is regarded by DFP as the dawn of a new era in the Philippines duty free sector, which has up until recently relied largely on domestic overseas and outbound consumers to generate revenue.

The fashion areas at Luxe Duty Free remain in development and expect to complete by the end of the year, confirms Esteban.

RECRUITMENT CHALLENGE

At the time of the soft opening, Regent Asia had forecast $30m in P&C and fashion goods sales at Luxe in the first year of operation.

Asked whether that target remains on track in the context of a seemingly weakening peso, Esteban responds: “I think we’re on track; the beauty piece is tracking above our expectation, fashion is a little bit slower because of the lead times with construction and negotiations on the mix, but we’re happy with the movement on it as long as we have continuing PRC movement.

“The peso has stabilised somewhat and our bigger problem is hiring enough people to work in our stores. We see next year as being really significant for Luxe and our overall business is growing. We’re up 25% in beauty on last year.”

For the latest on Duty Free Philippines Corporation, including its operations at Ninoy Aquino Terminal’s 1, 2 and 3 and Fiesta downtown mall,  click here.

To read earlier reports on DFP and Regent Asia Group, see the February 2018 issue of TRBusiness.