Sydney Airport has pinpointed speciality stores as a key driver of the +12.7% rise in retail revenue to A$331m ($247.5m) in 2017.

Growth came from all elements of the retail business at the airport, which handled 14.9m (+7.2%) international passengers in 2017, but pax growth linked to certain leases was also important.

Speaking to TRBusiness during a wide ranging interview, Sydney Airport General Manager Retail Glyn Williams said: “Last year’s retail revenue growth was not necessarily about duty free. Our reliance on duty free revenue has decreased because we have secured greater revenue out of other retail elements.

“Going back a few years, duty free comprised around 62% of all retail revenue in Sydney Airport. Now it is getting closer to 50%.”

REFRESHMENT PLAN

Overall 2017 retail performance was in fact boosted by the International Terminal 1 luxury precinct’s first full year of operations. Tiffany, Burberry, Gucci, Rolex and Hermès are among the 13 global designer brands represented there.

“We had 13 stores there before and have 13 stores now. Turnover in that area is up +171% from where it was three years ago. This is the consequence of creating a product that resonates with passengers.”

Despite such a significant turnover increase, Sydney Airport is refusing to rest on its laurels as far as the luxury precinct is concerned.

“We must consistently refresh and will do that by swapping a few of the brands in the next couple of months,” said Williams.

Reflecting on a positive start to 2018, he continued: “This year we are tracking very nicely. We are 100% leased and if you look at the health of the business we have no rent outstanding with tenants.”

Meanwhile, Sydney Airport is working on a ‘whole series of opportunities’ including the redevelopment of Terminal 2 Pier B, where a further 14 retail outlets will be added.

Williams said: “Terminal 2 Pier B is more about low-cost. It is Jetstar and Tiger Airways along with a regional low-cost carrier called Regional Express Airlines which also departs from that area.”

Redevelopment opportunities are also being considered elsewhere in the airport. “We are looking at what we can do in terms of redeveloping Terminal 2 Pier A which is Virgin Australia and at opportunities moving forward into next year for Terminal 3, which is the Qantas terminal,” he said.

The lease for this terminal was acquired by the airport in September 2015. Williams says most of Qantas’ leases are due to expire on 30 June 2019.

“We have 38 leases out of 54 that will come up which provides us with an amazing opportunity do an entire re-working of that terminal.”

In terms of the relationship with Heinemann, which was awarded the Sydney Airport duty free contract in 2014, which includes the world’s largest standalone airport duty free store spanning 5,751sq m, Williams added: “The relationship we have with Heinemann is so good that last year we jointly created about 20 separate new projects inside the stores.

“Heinemann probably implemented about three quarters of them and bought forward a capital spend planned for 2018/2019 into 2017. This is the way we operate together.”

SENSE OF PLACE QUESTION MARK

While many airports and retailers worldwide work collectively and individually to create a strong ‘sense of place’, Williams says this particular approach is not imperative to success.

“I don’t fully understand the concept of sense of place,” he admitted. “It’s nice to get a feel of where you are arriving into, but I have never done any research on it.

“My feeling is that if you create a beautiful precinct based on a beautiful design it does not matter if you are in Sydney, Helsinki or anywhere else as long as you meet the needs of passengers.”

Sense of place can actually end up being ‘slightly tacky’, according to Williams. “I remember working with Heinemann on the creation of a souvenir area based on a considered sense of place. The plan was to make it out of wood and try and mimic the harbour. Once it was built and we agreed to open, we realised it did not translate with how it looked in the plans.

“In order to deliver a positive experience for customers, Heinemann see fantastic opportunity and are bringing capex spend forward to address.”

He concluded: “Surely it is better to do something that is beautiful, assists the experience of the passenger and sell products.”

See the June issue of TRBusiness for more from our interview with Sydney Airport General Manager Glyn Williams