Munich International Airport (MUC) will transform the commercial spread at Terminal 1 to spotlight around 5,000sq m of new retail and F&B space compared with the 1,000sq m it currently houses, TRBusiness can reveal.

The upgrade of the Bavarian hub’s Terminal 1 includes a plan to connect two existing modules (A and B) to create a single non-Schengen departure zone featuring a huge walkthrough duty free shop of close to 2,000sq m and 16 retail units.

MUC is still fine-tuning the assortment and has made clear to TRBusiness the retail plans are subject to change.

Upgrades feed into the wider extension of the terminal commissioned for 2023, including a new pier and central building complex, with space to accommodate six additional multiple aircraft stands and two more lounges over a total 95,000sq m (including arrival areas in the existing Module B). Capacity is expected to rise to six million passengers per year.

The overall architectural design is based on a three-level structure consisting of a core – containing new retail, central security and passport control facilities – adjoining the existing Terminal 1 and a pier.

CONFIGURATION TBC

The 16 retail units in question could involve a combination of multi-store concepts or standalone directly-operated units depending on tenants’ demands, which the airport will be studying closely.

“Obviously it’s our job to find a good mixture of brands and looking at the quality of pax. It will be a mixture – some believe in the multi-department store concept, but It will be a very strong evolution compared to what we have today,” commented Philipp Ahrens, Vice President Centre Management, Business Division Commercial Activities.

He says the current duty free and convenience offerings remain ‘very limited’ given the space restrictions posed by the current terminal, which was opened in 1992.

“The demands from passengers, especially when you speak about Emirates, Qatar, Turkish, Aeroflot and US carriers, are for more and a wider variety of goods that we cannot currently provide as the space is limited,” he continued.

LEASING DRIVE

It is understood the retail configuration could be based around a centralised marketplace concept and a ‘late gate’ announcement philosophy similar to the airport’s Terminal 2 Satellite.

“We will really dig into the [leasing] in 2020. With the planning and construction ahead, we will have to do it this year, start talking about how and with whom we are going to do it with around Autumn time. TFWA [Cannes] will be an exciting time for us. This is the timeframe you need to have contracts sealed.”

MUC is likely to keep with its traditional approach of offering five-year retail contract terms.

Passenger traffic at MUC increased by 1.7 million (+4%) in 2019 to total 47.9 million, buoyed by traffic flows to Asia and the Americas.

Separately, work is ongoing to refine and enhance the current category mix at the non-Schengen area (level 5) of Terminal 2 and at the Satellite Terminal.

TRBusiness understands that negotiations are at an advanced stage on a series of luxury brand lease extensions plus other new unit openings, although confirmation of those was not immediately available.

Considering the quality of passengers we have at the non-Schengen level, we are offering a good range of luxury and premium brands,” explains Ahrens.

“The non-Schengen level is a bit different to what we would expect on the Schengen side of course and is a different focus. There is a lot of interest in retail space at Munich Airport; the problem is always the limitation on space.

“That brings us to a good position where we try to bring the best for our pax, but we also have long-term partners that we want to continue [trading]. Stability is good, innovation is good, but space is limited and that is the issue.

“Brands know – and we know – that it is getting more difficult to fix rents than [how] we used to do it ten years’ back. You need flexibility but the good news is Munich is increasing passenger numbers and this is a good thing to sell to brands because of the stability. From a planning perspective, and when it comes to a brand’s turnover and the quality of the passengers, we are on a good way. But they [passengers] are selecting more carefully than they were a few years ago.”

On level 5 of the non-Schengen area, incumbent travel retailer Eurotrade reopened its duty free shop under the ‘My Duty Free’ branding in 2018 following a six-month makeover and is trading very well, confirms Ahrens.

“We tried to reflect a bit of the local spirit and I think this is something Eurotrade is doing extremely well too,” he continues. “We want to give the passenger the feeling that it is Munich Airport, which is why we have icons where we try to reflect certain symbols from downtown.

“Octoberfest brings us a lot of additional traffic as the turnover increases with people coming from all over the world. For us it’s a really good time of the year. Every retailer and F&B provider needs to be sharp for that time.”

LUFTHANSA TO LIFT PRESENCE

Meanwhile, turnover at the US$1bn Satellite Terminal [opened to much fanfare in 2016, the facility is a joint venture between the airport and Lufthansa with 7,000sq m of retail and F&B space added to the existing Terminal 2 footprint – Ed] is reportedly increasing, with the facility running at full thrust at 11 million passengers per annum.

“The idea behind the building was to increase quality, not just quantity, and it is working well,” said Ahrens. “We try to provide passengers with the comfort and quality they expect to pay back the turnover, no matter if it is F&B or retail.

“That is reflected in the turnover figures – increasing double-digit – but also with customer satisfaction; we get good mystery shopper results as well. It is a matter of educating pax that you have an additional 7,000sq m of retail & F&B space in the midfield terminal because this is something not that common when you look at other airports.”

This year, the MUC business will receive a further boost with Lufthansa due switch more A380 and A350 long-haul carriers over from Frankfurt Airport. The German flag carrier moved five A380s over in 2017 and is intent on broadening its route links to Asia from Munich.

“At the end of the day it is very attractive for us,” observes Ahrens. “From a shopping perspective, Asian and Middle East passengers are very solvent. They are very organised and are happy to see certain brands and plan ahead. When we discuss with brands it’s not just about having a travel retail assortment, it’s going into more detail to have some extra limited editions at the airport.

“It gives us the chance to grab that business. International traffic is still growing with Lufthansa. We are expecting 3-4% (overall) traffic growth.”

While MUC is not due to release its consolidated financial statements for 2019 until later this year, Ahrens points to ‘moderate’ increases in core tax and duty free revenues for the year in question.

“People are more sensitive to prices, checking whether they can get a good deal,” he added. “Core tax and duty free is still bringing the margin, but it is getting tougher. You have to be innovative to sell your product. This is how we try to position ourselves with Eurotrade: having a sense of place for Munich. This is what we reflect in the My Duty Free Shops.”