Fraport’s retail hit by lower spending pax & congestion

By Charlotte Turner |

FraportVarious factors including an increase in lower-spending passengers and the devaluation of numerous currencies (against the euro), impacted retail revenue registered by Frankfurt Airport operator, Fraport AG in 2018.

Retail revenue increased nominally by +€0.8m and net retail revenue per passenger plunged by 7.4% to €3.12, down from €3.37 in 2017. In contrast, the airport posted higher parking revenue (+€8.3m).

“Influences on retail revenue included in particular the above-average growth in passenger numbers on European routes, where passengers tend to spend less, as well as capacity bottlenecks at the terminals,” says Fraport AG. “In addition, the devaluation of various currencies compared to the euro led to a loss of purchasing power.”

Retail & Real Estate revenue as a whole declined by -2.8% in 2018 to €507.2m, due to significantly lower proceeds from sales of land (2018: €1.9m compared to 2017: €22.9m).

The group’s US arm, Fraport USA generated revenue of €58.3m in fiscal 2018, a dip of €3.5m compared to the previous year, also due to exchange rate effects and the termination of the retail concession in Boston as of 20 October, 2017. However, the retail concession in New York (+€14.6m), taken over on 1 April, 2018, helped to offset this.

Fraport-AG-2018-annual-report-share-by-segment-tableFRAPORT TO GROW INTERNATIONAL EBIT

Fraport is increasingly active in the US market and holds retail master concession contracts for airports in Baltimore, Pittsburgh, Cleveland in addition for Terminal 5 of JFK Airport in New York, and since February 2019 in Nashville.

Fraport’s international portfolio has “constant growth rates above those of global air traffic,” it says. “To permanently benefit from this growth, Fraport is continually evolving its existing sites through expansion and quality measures. The clear aim is to further increase EBITDA and result from international external business in the next few years.”

Referring to the improvements it intends to continue making in retail and F&B across its airport network, Fraport AG made these comments in its 2018 Annual Report: “Extending and modernising the retail, food and beverage, and service areas in the terminals, in particular on the airside, continue to be central elements for increasing retail revenue.

“In the medium term, the focus is on implementing innovative shopping concepts in suitable existing areas. The development is supported by culture-specific, sales-promoting measures and a more strongly individualised approach to customers, particularly passengers with especially high purchasing power.”

In view of this, Fraport is ‘intensively analysing’ the buying behaviour of passengers and monitoring general trends in the retail sector ‘in order to derive future new business opportunities for the company at any early stage,’ it adds.

Click to enlarge table.

Fraport-AG-Retail-&-Real-Estate-2018-table

ONLINE TRADING PLATFORM

“This also includes the multichannel business field. Working together with its partners, Fraport operates target group-specific, individualised marketing across all relevant channels.

“The online trading platform created a digital platform on which goods and services are offered and sold, supported by additional digital instruments at the airport and on passengers’ mobile devices.”

Through the Frankfurt Airport Rewards Program in particular, Fraport AG intends to build a personal connection to the customer. Customised offers for travellers can be made based on the data collected.

“The aim is to offer a tailored shopping and service offering to the customer along their entire travel chain, thus increasing customer satisfaction,” continues Fraport. “This also includes the continuous testing of digital technologies to develop new products and services and to optimise airport processes.”

Regarding a forecast, the group stated that the Retail & Real Estate segment will benefit from the passenger outlook at the Frankfurt site in 2019, which will ‘primarily provide a slight improvement in revenue in the areas of parking and retail’.

“Exchange rate effects can continue to have both positive and negative effects on the purchasing power of passengers and thus the revenue from retail,” it adds.

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