Healthy trading start at T4, indicates Heathrow

By Luke Barras-hill |

Terminal 4 reopened on 14 June for the first time in two years. Source: LHR.

London Heathrow Airport (LHR) has reported signs of robust early trading from its retail tenants at Terminal 4, which re-opened last week.

World Duty Free’s (WDF) main shop in the international departure lounge was among a wave of commercial units* to reactivate, joining Jo Malone and Tom Ford (both WDF-operated), two WHSmith outlets, two Boots units and Burberry.

Further retail sites from Boots, WHSmith, Excess Baggage and World Duty Free are now live across landside departures and arrivals.

“Anecdotal feedback from retailers and travellers across the airport is we have kicked off well with delivering a great offering for our first passengers from airlines and this offer continues to improve,” Fraser Brown, Retail & Property Director, Heathrow Airport updated TRBusiness.

INMOTION: ALL LHR STORES OPEN

In addition to the above shops, the re-opening of Terminal 4 marked the completion of WHSmith-owned InMotion’s eight-shop rollout across the Heathrow estate.

InMotion, which as reported unveiled its largest offer globally at Terminal 5 in April, has unveiled two more stores at Terminal 4.

InMotion has opened two further stores at Heathrow inside Terminal 4, concluding the WHSmith-owned airport electronic retailer’s eight-store rollout across the terminals.

A debut pop-up for InMotion at Terminal 2, revealed exclusively by TRBusiness, has now given way to an inline unit, with two shops and a flexible pop-up island (shared with other tenants) situated at Terminal 5.

Meanwhile, a store and pop-up are situated at Terminal 3 and the lineup has now been bolstered with the two additional units at Terminal 4 [around 30 airlines have or are in the process of switching to Terminal 4, including Qatar Airways, Air Astana, Air Malta, Air Mauritius, Air Serbia, Etihad Airways, Gulf Air, ITA Airlines, Kenya Airways, Korean Air, Kuwait Airways, Malaysian Airlines, Omanair, Royal Air Maroc and Saudi Arabia Airlines – Ed].

The launch of the Terminal 5 unit on 28 April marked 12 months since the exit of Dixons Travel.

WHSmith has rolled out new InMotion shops after winning contracts to run 30 stores at UK airports. According to Heathrow, its competitive tender received strong bids.

“We decided that InMotion was the strongest and we’re incredibly pleased with what the team delivered,” Brown relayed to TRBusiness during the opening of the store in April.

“The experiential zone at the front of the store was something that really attracted us in terms of the InMotion bid and the strong relationships with the big brands. We can see the InMotion stores as a great example where they have brought that challenge we’ve given them to life in terms of experiential – how we integrate what they do digitally with what they do physically, how they’ve laid out the store in terms of using space intelligently and working with us on the so-called T3 bookcase and popping up and down in T5.”

Heathrow served 9.7 million passengers in Q1 – an increase of eight million (+474.9%) versus Q1 2021. Source: Heathrow.

After the decision to close the Dixons Travel branches, more than 200 existing staff were subject to the TUPE process (transfer of undertakings).

That transfer brought benefits, TRBusiness learned, with InMotion able to leverage on its trademark customer service expertise honed over many years across its US estate.

“We have secured employment for colleagues in the Dixons’ business – it’s been a tough time for them over the last 12 months but it is great to see the energy that they had being reignited again through the leadership of InMotion and delivering for passengers, which is ultimately what we want,” continued Brown.

Sharing his thoughts with TRBusiness at the time of the InMotion T5 opening, WHSmith Travel Managing Director Andrew Harrison commented: “This is our flagship. Within consumer electricals, we believe it is core and a fundamental essential for people travelling that tech is part of that basic need.

“We had a long-term plan that we would want to create a footprint over a period of time like the 30 stores. A year ago Dixons announced they were leaving the sector and pulling out. That became an opportunity for us to get into this sector and create a brand that would be globally renowned for consumer electricals and technology sales in airports and travel retail.”

Andrew Harrison, Managing Director, WHSmith Travel: “We believe in the long term of travel and Heathrow. We are driving double digit ATV, more than 30% of people coming through Heathrow make a purchase in WHSmith or InMotion stores.”

CONVENIENCE AND ‘KEEN’ PRICING

Media reports depicting queues and delays at UK airports in recent months linked to flight cancellations and staff shortages reflects an aviation sector grappling with a ramping-up in passenger demand.

The healthy uptick in traffic is linked to an increased appetite for travel in the outbound leisure segment after the UK government dropped remaining international travel restrictions on 18 March 2022.

That played through in Heathrow’s three-month results, with the airport welcoming 9.7 million passengers – an increase of eight million (+474.9%) versus Q1 2021.

Total retail revenue was up 274.1% to £101 million/$132 million for the period, of which revenue from retail concessions accounted for £35m – up 483.3% year-on-year –driven by higher passenger volumes and the availability of retail shops.

“We believe in the long term of travel and Heathrow,” commented Harrison.”It is difficult for them to predict exactly what next year is going to look like [in pax terms]. They have a shape and profile – it could come back faster, it could come back slower.

“We are prepared for that and believe in the long term of Heathrow. We have already made significant investments right across all the terminals, even during Covid, because of that belief.

“We are driving double-digit ATV, more than 30% of people coming through Heathrow make a purchase in WHSmith or InMotion stores. That’s not just a third of people coming into shops, that is one third of people buying. If we can drive ATV, give customers more choice, range and convenience then that’s what we will do.”

While being ‘keen’ on pricing, InMotion – unlike Dixons Travel – is not adopting a discounting strategy, rather, coaxing spending from travellers looking for convenient and essential travel tech items blended with innovation, in audio for example, from an array of big label and own-brand names.

“It is trying not to perpetuate a Dixons model and trying to create an InMotion model that is more experiential with different brands and finding things that can make your life easier that you never knew existed,” stated Harrison.

L-R: Spencer Sheen, Business Development Director, WHSmith and Fraser Brown, Retail & Property Director, Heathrow Airport, spoke to TRBusiness during the April opening of InMotion at Terminal 5.

VAT RULING ‘PUTS PRESSURE ON TECH’

Heathrow’s Brown says the UK government’s decision to abolish the airside tax free concession ‘puts particular pressure on tech’, typically a high volume, low-margin business.

“Dixons benefitted from the tax (relief),” he said. “Clearly, InMotion will find trading harder directly as a result of what the government has chosen to do. What we’ve done with InMotion is recognise that in the forecasts for sales they’ve put through.

“This is another example of a commercial reality for the airport as a result of the decision. Technology will not be as profitable in the short term for us as it was before, in the same way I’ve spoken about the luxury sector. That is a reality directly caused by the governments decision on VAT and the competitive disadvantage to travel retail due to the tourism tax.”

While less concerned about lower price point travel tech items, such as accessories where sales will be bolstered by the ‘great digital – experience – space offer’, Brown struck a note of caution around higher priced goods and ‘aspirational tech’.

“On the positive side, InMotion’s relationships with the brands like Samsung and Apple will ensure we get the right products and availability,” he qualified. “While the price point with the High Street won’t be there, I think if you combine the right product, great [InMotion] colleagues and their excellent training, it will go a long way to mitigating some of the risks.

“Be in no doubt – there is still a negative impact because of the government’s decision. That is an impact for us as the landlord, but equally for the InMotion business. If they had the VAT-free regime as before, they would sell more. We both know that.

“InMotion are a competitive retailer. They may well see some benefits in Europe as a result of this as they open stores. As a UK business I am frustrated as the UK is missing an opportunity which it claimed Brexit was – to make us more competitive.”

Brown reinforced that his commercial team continues to work closely with business partners to ensure retail outlets and restaurants can respond to increasing pax demand, with strong purchasing being witnessed in categories such as travel essentials and F&B.

While that is positive for the business, it represents a challenge – from handling and transporting goods airside to partners managing their own resources.

While encouraged by the signs, Brown sounded a vigilant note in the context of the current macroeconomic turbulence, the Russia-Ukraine conflict and the pandemic.

“We are not forecasting a consistent [passenger] ramp up,” he warned. “Once we get passed that summer period, particularly the back end of September when the Mediterranean and the short-haul markets’ summer is essentially gone, that is something we are a little worried about.

“A lot of this demand at the moment is being driven by outbound tourism and visiting friends and family and while our own government has removed travel restrictions ­– and we applaud them for it – a lot of governments around the world haven’t, and some markets are effectively still shut, in Asia for example.

“The four pillars of Heathrow’s retail strategy set out before the pandemic – we have reaffirmed through it: getting digital right, getting experience right, using the space intelligently and having a really clear offer for passengers. It is as important now as it was pre-Covid.”

For more on Heathrow, watch out for the TRBusiness Top 10 Airports report available in the forthcoming June/July e-zine.

*(Excluding retail) landside departures: Caffè Nero, Covid testing areas (2), Eurest, vending; international departures lounge: Travelex Desk, Pret A Manger, Costa, Caviar House Seafood Bar, Caviar House Store, The Commission, Prince of Wales, Qatar Airways Lounge, Spelthorne Suite, vending; landside arrivals: Costa, Travelex, WeKnowLondon, car rental desks, vending.

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