The Middle East and Africa Duty Free Association (MEADFA) webinar on 28 June discussed the role and contribution of the travel retail sector to tourism in the African and Middle Eastern regions.

The webinar, moderated by Antoine Clement from Hume Brophy, attracted over 170 participants to hear speakers share their perspectives on the topic, with MEADFA President Sherif Toulan setting the scene for an informative session.

First to present was Basmah Al Mayman, Regional Director of the Middle East, United Nations World Tourism Organisation (UNWTO) – and the 15th most powerful businesswoman in MENA in 2022 according to Forbes Middle East – who highlighted the crucial role the organisation is playing in the restart of international travel and tourism.

“The world is still facing and recovering from an unprecedented global health emergency,” said Al Mayman.

“We are still recovering from the impact that has been witnessed on our societies and our livelihoods. Travel and tourism is one of the most affected sectors by this crisis and still requires urgent support for the millions of jobs at risk.”

She spoke of the initiatives and recommendations that UNWTO has to help those in the industry to overcome the impact of the pandemic and ensure a swift and durable recovery.

“The duty free and travel retail industry is looking forward to closing the year with an upward curve but challenges such as border restrictions and consumer confidence still remain a threat to the travel industry’s viability with all the changes we are witnessing,” said Al Mayman. “We’re still in a very unstable situation. From the start of the pandemic, UNWTO has provided trusted data to help make informed decisions.”

UNWTO data showed that global tourism experienced a slight 4% upturn in 2021 with 15 million more international tourist arrivals compared to 2020 but that levels remain 72% below the pre-pandemic year of 2019.

The economic contribution of tourism GDP is estimated at US$1.9 trillion in 2021 above the US 1.6 trillion in 2020, but still below the pre pandemic vale of US$3.5 trillion.

“The pandemic has led to an accumulated loss of US$3.5 trillion in direct tourism GDP for the period 2020-2021,” said Al Mayman. “In the Middle East region, arrivals declined 24% in 2021 compared to 2022 and where the arrivals were 79% below where it was in 2019 though with the clear improvement from September onwards.

“While international tourism bounces back, domestic tourism continues to drive the recovery of this sector in an increasing number of destinations. Domestic travel is fuelled by demand for destinations which are closer to home and have low population density. Tourists look for open-air activities, nature-based products and rural tourism.”

She went on to discuss how, in the Middle East region over the past few decades, tourism has experienced continued growth and increased diversification to become one of the ‘fastest developing economic sectors in the world’.

Al Mayman also highlighted how tourism represents a high percentage of the GDP of many countries and thus has a significant economic impact.

“This is a case in many countries in the Middle East where we believe that the duty free industry is a very prolific business parallel to tourism,” she said.

“The travel retail market, which is one of the strongest performing industries in the Middle East, has recorded a sharp drop in revenues in 2022 due to the covid-19 pandemic with around a US$2.8 billion revenue plunge during 2020 to 2021.”

She went on to reveal that revenues showed a slight pick-up in Q1 2022 and that it’s hoped that 2019 levels will be observed in due course.

“For the restart, duty free businesses have to position themselves differently to attract more customers,” said Al Mayman.

She cited a number of influencing factors for this, including the rise of low cost airlines and passengers with limited income, travelling on a budget.

‘With the tourism restarting, we are optimistic,” she said. “We believe that duty free and travel retail in the region is on the recovery path.”

To finish, Al Mayman invited MEADFA to become an affiliate member of UNWTO to aid collaboration and explore opportunities to restart travel and tourism and its related sectors.

THE DUBAI DUTY FREE PERSPECTIVE

Ramesh Cidambi, Chief Operating Officer at Dubai Duty Free was next to present. He described what the company has experienced over the past six months, as well as expectations for the summer and the rest of the year.

“In 2020 we suffered a drop of nearly 65% in sales revenue and we recovered last year and this year. We expect to finish the year just over US$1.5 billion (US$1,549 billion). As compared to last year when we finished just under $US1 billion (US$976 million).”

Cidambi revealed how total online channel sales doubled in 2020 versus 2019, experiencing 109% growth to deliver AED163,115,003 which he referred to as a by-product of the crisis.

In terms of passenger statistics, Cidambi said reports had been strong since January onwards, highlighting how around 70% of pax (4.94 million) had been recovered in June of this year compared to 2019.

The forecast for July, August and September is on an upward curve, expecting 65-70% of pax received in 2019.

“The [DDF] penetration rate has been consistently higher than in 2019 and we expect that to continue and the spend per passenger has also been higher,’ said Cidambi.

He cites the busier airport, increased travel certainty and stocking issues promoting passengers to pick up more of their favourite products while they can, as contributing factors.

Dubai Duty Free is seeing a strong recovery from all regions with the exception of the Far East.

Looking at categories, a change to note is how fashion now contributes 13% of revenue compared to 6% in 2019 (January to June).

He echoed Al Mayman’s comments on tourism recovery, relaying how the UAE had witnessed 197% (6.17 million) more tourists YTD in May 2022 than in 2021, with India, Oman and Saudi Arabia the top three source markets, according to Dubai Tourism and Commerce Marketing.

To back up the tourism rebound data, an analysis of credit card spend in Dubai Duty Free showed that in 2019 67% of card transactions were issued internationally, dipping to 56% in 2021 and now returning to 65% in 2022.

Dubai Duty Free estimates about 60 million (60,438,211) pax for 2022.

“We are expecting a strong summer,” summarised Cidambi. “The indication for the first six months of the year are very strong in terms of our business and passenger growth and recovery compared to 2019. We think that the fourth quarter will be fantastic with the FIFA World Cup, the great weather in Dubai during the winter and the increase in tourism that we are seeing already and the initiatives from Dubai Tourism to encourage people to come to Dubai. Plus, any further relaxation in the Far East will help the east west flows to get stronger and get the transit passengers through.

“Even for a professional worrier like me,” he joked, “the outlook is very good for the next six months and we will see what happens in 2023.”