Malaysia Airports Holdings Berhad (MAHB) has attributed a +30% year-on-year growth in duty free sales at Kuala Lumpur International Airport and KLIA2 (KUL) last year to various external factors including the weaker Ringgit and influx of Chinese tourists.

Duty Free growth at KUL was also driven by an 11% growth in passengers and 12% surge in sales per pax. Away from KUL, sales at Kota Kinabalu, Penang, Kuching and Langkawi International Airports registered combined duty free sales growth of +47% year-on-year on the back of +5% pax growth. Sales per pax grew +17%.

MAHB currently runs 39 airports/stolports (airports with short take-off and landing operations) across Malaysia of which five are international. Last year, 25.9m international tourists visited Malaysia (Source: Tourism Malaysia) of which 2,281,66m were Chinese.

Senior General Manager Commercial Services Mohammad Nazli Abdul Aziz told TRBusiness: “The weaker Ringgit has made vacationing in Malaysia affordable. Hotels in Malaysia are among the cheapest regionally and Malaysia is among the fastest growing international destinations for Chinese tourists.

INCREASING INVESTMENTS

“This is perhaps the result of increasing investments and improved government relations. Airlines are also adding capacity between Kuala Lumpur and other Asian destinations and regions.”

Abdul Aziz, who revealed almost one third of duty free buyers across its Malaysian business are Chinese pax, cited airline route expansion into China and India, increased seat capacities and e-visa initiatives by the Malaysia government as key contributors to pax increases and retail spending.

The Langkawi International Maritime and Aerospace Exhibition (21 March to 25 March 2017) and South East Asian Games (19 August to 30 August 2017) were also factors.

He added: “KLIA saw a +70% increase in timepieces and 50% year-on-year increase in perfumes and cosmetics. Liquor was up +10% and the top spenders were Chinese, Indians, Indonesian and Vietnamese consumers.”

The top three product categories are perfumes and cosmetics, fashion and liquor, according to Abdul Aziz, who highlighted some key internal and external challenges which impacted the business in 2017. “Limited dwell time due to security processing and terminal capacity, luggage limitations of low-cost carriers and duty free Customs allowances were the key challenges,” said Abdul Aziz.

RETAIL TENDERS

MAHB, which recently issues tenders for 14 retail and food and beverage concessions and also launched its annual shopping campaign, has reported a strong start to 2018. Travel retail sales (year-to-date June) grew +2%, while duty free sales (year-to-date June) surged +5% for KUL driven by +4% pax growth.

Combined duty free sales for Kota Kinabalu, Penang, Kuching and Langkawi International Airports (year-to-date June) were up 21% year-on-year on the back of +3% average pax growth.

Outlining the key reasons for growth so far in 2018, Abdul Aziz commented: “Tourism campaigns are bearing fruits and Malaysia is a developing hub from emerging middle classes in the region. The Kuala Lumpur to Singapore route is the busiest in the world and Indonesian pax are choosing Kuala Lumpur, Kota Kinabalu and Penang as airports of arrival.

“Increased bookings from Hong Kong, Shanghai, Guangzhou and Beijing, rising numbers of South Korean pax flying into Kota Kinabalu and Kuala Lumpur from Seoul Incheon, Busan and Jeju and increasing Indian pax due to to extensive routes into Malaysia are some of the factors having an impact.”