EXCLUSIVE: Hernan on levering ‘global scale’ for ARI

By Luke Barras-hill |

ARI-lead-Hernan

Ray Hernan (left) talked inflight retail, the sustainability of the concession model, and ARI’s strategic path in first travel retail media video interview.

Aer Rianta International (ARI) CEO Ray Hernan says the travel retailer’s flourishing business model in the Middle East can be the blueprint for wider growth.

“As an organisation while we have global reach, we don’t really have global scale compared to some of the very big competitors,” Hernan told TRBusiness in his first travel retail media video interview recorded during the TFWA World Exhibition & Conference [click below].

“In the Middle East, we are actually the largest multi-location operator and I suppose we are trying to leverage that. We have been there for many years and our success has been built on the partnership approach we have; a very long-standing one [in Bahrain] with Abdulla Buhindi and his family.”

For the uninitiated, ARI commands a sizeable presence in the Middle East, with airport concessions in Muscat, Bahrain [due to open its new terminal in Q1 2020 – Ed], Beirut, Riyadh and – perhaps lesser known – a liquor distribution operation in Qatar. Meanwhile, the wait to begin one of two concessions at Abu Dhabi International Airport’s Midfield Terminal Building continues.

AIR-TO-GROUND ‘SWEETSPOT’

ARI’s successful track record in the region, particularly at the new Muscat Airport where the retail operator commenced its concessions last November and in Bahrain where it has renewed terms for another 10 years, was elucidated by Hernan in a presentation at this week’s MEADFA Conference.

During his address to around 400 DF&TR executives, he pointed to the ‘agility’ and ‘flexibility’ of the organisation – ranked tenth according to the TRBusiness Top 10 International Operators 2019 report – as being the cornerstones of its success in a market it defines around joint ventures.

In an interesting exchange as part of an extended interview, TRBusiness asked Hernan for his take on the current inflight retail climate.

Having held leadership positions in both the airline and domestic retail industries, Hernan is well placed to share his insight on the market.

He acknowledges that the current model of having physical products onboard airlines puts pressure on costs due to weight and fuel burn, while delivering higher levels of customer service onboard can prove challenging when airlines carry a narrower product selection, which consequently has a knock-on effect on the ability of inflight staff to sell.

Despite a wave of carriers moving to either reconfigure their inflight services or doing away with them altogether in recent times, Hernan is measured in his assessment of the sector’s future and maintains that ancillaries remain an important component for all airlines.

“I don’t think airlines will be taking away inflight, they will be looking at the model to leverage technologies, WiFi etc. It is a model that we are conscious is there in the background, and [it is about] ‘how do we engage with airlines more’?

“One of the experiences I’ve got having worked in high street retail is we don’t engage with the customer particularly well pre-travel, as we don’t know who is going to turn up. If we want to drive penetration in our in terms of converting passengers to customers, we need to come up with mechanisms to engage with them.

“There is maybe a sweet spot between airlines and travel retailers on the ground where we can complement each other in terms of access to brands, fulfilment of orders on the ground, while we [as the retailer] get access to that customer. Going forward, for travel retail in general, we need to understand our customer better and that means getting access to the data.”

SHARPENED AMBITIONS

In a broad discussion touching on topics such as the often-maligned airport concession model, Hernan reflected on his foray into travel retail and admitted it has been ‘a bit of a whirlwind’ since he took the reins in 2018 at a company with a decorated duty free history.

As many will know, that dates back to the establishment of the first duty free shop at Shannon Airport in 1947 under the auspices of duty free’s founding father, Dr Brendan O’Regan.

Beirut-DF-ARI

ARI has forged a strong partnership with Phoenicia Trading at Beirut–Rafic Hariri International Airport, where the business has faced some challenges related to terminal congestion and elevated concession fees after ARI retained the contract.

“We are business that is always looking forward at the next opportunity, we have a history, but also an innovative streak that is critical for our success going forward,” added Hernan.

“It’s great to have the heritage that we’ve got and we’ve been very successful for many years, but the industry is changing and we need to make sure we are at the forefront in the innovation stakes, both in terms of better customer experience, leveraging technology and embracing change.”

Last month, ARI unveiled its reconfigured beauty and confectionery offer at The Loop Duty Free at Dublin Airport Terminal 2. For an extensive report and photo gallery, click here.

For an in-depth analysis of the mechanics of the ARI business and its 2018 performance, including an interview with ARI Chief Commercial Officer Anthony Kenny, see the Top 10 International Operators 2019 report.

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