Travel retail should exploit regional peaks and troughs in low-cost carrier (LCC) travel to unlock higher incremental spending – particularly from Chinese, according to NPD Travel Retail.

In a breakfast seminar entitled ‘Unlocking the Chinese Traveller’ held during last month’s TFWA Asia Pacific Exhibition & Conference, Kathryn Place, Commercial Head at NPD Travel Retail explored how different airlines and the seasonality of passenger travel is affecting LCC usage.

She explained that by diversifying product ranges, pricing strategies and activations the industry can better motivate travellers to open their wallets, particularly in the context of a proliferation in the number of LCCs in Asia Pacific.

BURGEONING ASIA MARKET

Addressing delegates at the event in partnership with ForwardKeys, Place said: “Twenty six airlines (in Asia Pacific) convert 80% of people travelling with a low-cost carrier, whereas in Europe, eight airlines make up 80% of that travelling low-cost volume, predominantly dominated by Ryanair and easyJet.

“They really have that captive audience and those airlines are continuing to put on new routes and new locations.”

Place touched on the seasonality of LCC travel and its peaks and dips dependent on different geographical regions.

In Europe, the high season can begin around April time and tails off around September/October. Interestingly, consistent growth has been witnessed in Asia over the past two years in terms of its share of business and the growth of people travelling with LCCs.

“It’s really about how do you look at your budgets and investment; flex it, be smart and wise with it, to really focus on when those people are travelling,” she made clear. “You don’t need to do it consistently year-round, but invest with Europe during those peak months, then turn it to Americas (and elsewhere) when Europe dips off.”

Place challenged the audience to think more constructively about how the industry can strengthen partnerships with LCCs and capitalise on relevant supply and distribution opportunities.

She highlighted the explosion in Asian LCCs, with many new carriers new to market or in the process of launching.

In the case of China, the likes of Beijing Capital Airlines, Lucky Air and West Air are proving popular options.

Aside considering who the Chinese are flying with, Place asked what this means for travellers’ thought processes during their journeys and how it influences engagement with digital, luggage allowances and duty free allowances.

“Have can you get your brand in there and really start to work early with some of these airlines that are just starting out, as we see in Asia?” she asked.

TRAVEL TRAJECTORIES CHANGING

The trend towards LCC growth appears to be growing consistently double-digit on a monthly basis, she indicated.

Where travellers are coming from and travelling to is important, with South Asia and South East Asia really driving growth and volume, notably China, Indonesia, Thailand, Japan and South Korea.

In a thought-provoking and granular-level analysis, Place set the scene with an overview of total departing passenger traffic in the past 12 months.

Globally, *one in three trips are handled by an LCC, with LCC passenger traffic growing +8.2% to 1.15bn in the 12 months to March, outperforming growth in total passenger traffic at +5.2% to 3.4bn.

This is being supported by double-digit growth in the number of passengers in Asia choosing to take LCC carriers. However, when it comes to purely international passenger traffic, LCCs are also having a marked impact.

While APAC is heavily influenced by the LCC domestic market, this is spurring on performances across the globe.

International passenger traffic registered 1.6bn (+5.3%) during the same period, with International LCC pax at 0.5bn (+8.7%).

APAC international passenger traffic registered 478m (+6%), with APAC international LCC pax at 130m (+1.3%).

Euro international pax totalled 740m (+5.6%), with international Euro LCC pax at 310m (+6.2%).

Delegates’ attentions were drawn to the fact that while at present, APAC LCC volumes are big domestically, the market continues to flourish.

Indeed, Place said the growth figures in APAC are akin to the ones witnessed 10 years or so ago in the now mature and stable European markets.

“We think about LCCs being used very much for domestic travel, but really that is starting to take off from an international perspective as well,” she commented.

“Because people in Asia are really travelling and taking that (LCC) option domestically, we are seeing their behaviour change and they are getting used to that experience. That will continue and help that surge internationally as well.”

Importantly, Place highlighted that 41% of LCC travel globally is still coming from Europe. In Asia (+27%), the Americas (+17%) and MEA (+15%), growth is also being driven across the regions (albeit from a smaller base in the case of these three).

Place warned that ‘we cannot ignore Europe and the amount of travellers we have in that region that we really need to convert (into shoppers)’.

In doing so, she flagged the importance of getting range, pricing and communication methods right to achieve this.

However, the narrative of LCC travel is not just being seen in the numbers. Anecdotally, Place pointed out that we are seeing the LCC conversation appear everyday in the news, with Asian airports handling more of this type of traffic.

One notable example is Jakarta Soekarno-Hatta Terminal 2F, which recently turned itself into a fully dedicated low-cost terminal serving this type of traveller.

“The trend is here to stay and the growth is strong, so we need to think about how we capitalise on that traveller and that shopper when they are in these airports and in those specific terminals,” said Place.

LCC GROWTH ‘SIMILAR TO ECOMMERCE’

In terms of growth, she likened LCCs to the ecommerce business, with regular carriers compared to bricks and mortar retail.

“Who doesn’t have an e-commerce strategy? Who doesn’t have the ecommerce team or plan to really capitalise on that opportunity,” she asked.

“We really need to challenge ourselves as brands and retailers, how we are targeting those low-cost carriers in those airports and terminals with a product range.”

Shanghai and Tianjin in particular are airports driving either the biggest incremental passenger volumes or growth rates for LCC travellers. Equally, some Tier 2 cities are driving growth.

Long -, -medium and short-haul routes are the most popular, particularly Thailand. However, Cambodia and Indonesia are also popular destinations.

Focus then turned to category-specific findings from the NPD Travel Retail Nationality Tracker.

Unsurprisingly, the Chinese remain one of biggest spending groups.

Confectionery and tobacco are quite similar in terms of volume of items bought and spend levels, however, there was a slight dip in average spend and units purchased in liquor and beauty for Chinese LCC passengers.

In beauty, LCC spend totalled €56.6 ($63.4), against spending on a regular carrier of €70.4 ($78.9) – a €13.8 gap. Items bought totalled 2.7 units for a LCC versus 3.2 units for a traditional carrier.

Presenting the findings, Place stressed the importance of thinking about price points and the value proposition, emphasising offers, price-offs and deals using live communication to convert in store.

Delegates heard that the Chinese remain attracted to promotions – their second most popular activity after phone browsing. Incidentally, they tend to use their phones to check for allowances, which becomes really important when it comes to selecting an airline.

Summarising, Place said the industry has to have a plan in place to capitalise on the LCC traveller, emphasising the need to ‘get Europe right first’.

She reiterated that getting smart with investment and staff to direct sales is important, in addition to tailoring a product range with different price points and promotional mechanics, combined with the right activations and POS activities.

*Source: Global passenger figures based on 350 airport locations from NPD Travel Retail – Traveller Statistics. April 2018-March 2019.