Dufry CEO, Julián Diaz, says that he believes low-cost passengers will be significant contributors to the company’s success as they continue to increase in number on a global scale, prompting the company to deliver commercial concepts that better target these travellers.

 

During a press conference call with analysts this afternoon, Diaz was keen to point out on more than one occasion that he does not see the increase of low-cost passengers as a threat to travel retail, but actually the opposite.

 

“We’ve seen a very healthy increase in passengers,” he said. “In the places we are operating it was around 9%. This was driven by an increase in the low-cost passengers and British passengers.

 

“The low-cost passenger is a very good passenger…I have read in many locations that low-cost passengers are a threat to travel retail…it’s completely the opposite.

 

“Low-cost has seen a significant increase in passengers, so we need to really deliver what these passengers are expecting. We have different commercial concepts that will accelerate sales based on low-cost passengers. Maybe the average spend per passenger will drop but…we believe these passengers will be big contributors to the company’s sales.”

 

Click to enlarge graphs

 

 

 

BRITS ABROAD

Unfortunately, British passengers – which Diaz cites as one of the company’s most important customer groups – were not able to bolster revenue for the company’s Spanish operations in Q1 2018, as the devalued pound continued to put off travellers purchasing in the comparatively strong Euro.

 

“A significant percentage of the passengers to Spain are British and what we’ve seen recently is a devaluation of the pound. This is important because in Spain we nominate the prices in Euros and as a consequence British passengers are not contributing to the growth in Spain. But in any case performance in Spain for the first quarter was positive.”

 

Supporting the company’s continued turnover growth has been its aggressive expansion – which has been gargantuan in recent years – and in Q1 2018 alone the company opened 4,500sq m of retail space across 57 shops. New contracts were signed in Q1 that will add 13,900sq m to the Dufry portfolio in the remainder of 2018 and 2019.

 

One analyst asked Diaz if the company expected any significant loss to overall square metres with the expiry of any contracts this year.

 

 LONG CONCESSION CONTRACTS

“We are not expecting any significant impact or square metres loss during the second, third and fourth quarters of 2018. We have a concession portfolio with an average duration of 8.5 years…so this is supporting the growth in terms of square metres.

 

 

“The second one is the renegotiation of different contracts. We have renegotiated two contracts last year that started to impact in the second half of the year.”

 

“I commented last year on a couple of contracts; one in Australia and one in America…we started to pay the new rent in January when the new shops were open with the new configuration and renovation in the second and third quarter.

 

“As a consequence, as the year goes on what we will see is that the savings we have seen in the first quarter will be mitigated. By year-end, the result will be an increase in concession fees by around 20 basis points.”