Colm McLoughlin, Executive Vice Chairman & CEO, Dubai Duty Free confirms that the retailer is forecasting US$1.82 billion in 2023. However, supply disruption of ‘A’ brands will continue to restrict the retailer from making further gains.
McLoughlin shared his views in the TRBusiness Global Industry Survey 2023*, including his assessment of the travel retail industry in 2022.
“After a patchy start to the year, we gradually saw travel demand grow and take shape as restrictions lifted across a large part of the world, all of which was positive for travel retail,” said McLoughlin.
“The high demand for travel in the summer resulted in congestion and flight cancellations in the UK and other European countries, which was not necessarily good for business.
“More importantly, the economic outlook was positive at the beginning of the year and economies were growing strongly.
“However, the rise in interest rates and a strong dollar has had a major impact on western economies, particularly the UK and Europe and the talk of recession is very much on the table. So overall, we have seen the industry rebound, but there are things to look out for in the year ahead.”
Read on for McLoughlin’s answers to our top questions…
Question: What are your expectations for your business in travel retail in 2023 and what are the major challenges you anticipate?
Answer from Colm McLoughlin, Executive Vice Chairman & CEO, Dubai Duty Free: 2023 will see a continuation of people returning to travel in greater numbers, with greater confidence, and a willingness to shop in duty free. DXB is forecasting passenger traffic of 77.8 million in 2023, which is great news. We are budgeting for sales of US$1.82 billion.
We are confident that the investment made over the past couple of years, with the opening of high-end fashion boutiques such as Louis Vuitton, Cartier and Dior, we have an even more appealing retail offer for these increased passenger numbers. At the same time, we continue to work closely with our suppliers to ensure we offer a great product range and our growing team of staff continue to provide excellent customer service.
At this moment in time, we are not budgeting for the return of the Chinese passenger, but things are changing fast, and restrictions have been lifted, so it will be interesting to see what happens when the Chinese start to travel again.
“Despite the lack of sales from Chinese consumers (currently around 1.72% vs 17.56% in 2019), other customers are spending more and the spend per head is consistently higher than 2019.” Colm McLoughlin, Dubai Duty Free
There are obviously still concerns about supply chain issues and these are not going to go away any time soon. The shortage of key products from brands such as Apple, for example, have resulted in a decline in sales in this key category and Apple has dropped from our No. 1 product to No. 2, as we are unable to get a consistent supply. There is also a shortage of key components, mainly glass, which will continue to cause supply shortages.
The looming global recession continues, especially in Europe, and will definitely impact our business with energy prices increasing everywhere. The ongoing crisis in Ukraine will continue to impact many economies and we have to hope there will be some solution to the conflict in the coming year.
How has the shift in passenger demographics as a result of the pandemic/travel restrictions affected your product portfolio and growth plans?
The lack of travellers from Asia Pacific, and China especially, has led to a shift in shopping habits at Dubai Duty Free with sales of skin care and cosmetics reducing while luxury and fashion brands, as a result of new openings, are taking a bigger share.
The demand remains high for perfumes and liquor specially for travel retail and/or Dubai Duty Free exclusives. We have seen improved sales from the Middle East, Americas and Indian sub-continent sectors, in addition to the strong UK and European markets.
Despite the lack of sales from Chinese consumers (currently around 1.72% vs 17.56% in 2019), other customers are spending more and the sale per head is consistently higher than 2019. At one point, spend per head increased from US$32 to US$50 and is currently around US$47.
CLICK HERE: To read the Global Industry Survey 2023 in full.
*The Global Industry Survey was conducted during November 2022 up until the second week of January 2023. Some of the views expressed are representative of individuals rather than their entire organisations. Some of the comments were also shared prior to China’s announced easing of travel restrictions from 8 January.