Average spend per passenger rises in Americas DF&TR despite lower sales

By Andrew Pentol |

René Riedi, CEO for Division Central and South America, Dufry Group.

Industry executives from across the Americas outlined the challenges and opportunities facing the DF&TR industry in the region in a webinar organised by the International Association of Airport Duty Free Shops (IAADFS) which took place yesterday (3 December 2020).

The 1.5-hour session entitled Managing Through Covid: From Crisis to Recovery, featured presentations and insights from Michael Payne, President and CEO, IAADFS, René Riedi, CEO for Division Central and South America, Dufry Group, Jackie McDonagh, General Manager, ARI North America, Erasmo Orillac, CEO, Motta Internacional and Matthew Greenbaum, Vice President, International Shoppes.

In addition to the presentations, the interactive online forum included a series of polls to further drive discussion.

Kicking things off was Riedi, who discussed positive recent developments regarding the roll-out of Coronavirus (Covid-19) vaccines.

The IAADFS Chairman said: “Mid-December, we will be able to start with a vaccination for the population. Obviously, at the beginning though, this will only be available to frontline workers, nurses, doctors and the elderly.

“The bad news is that there will be limited access to the vaccine in the near future and travel restrictions will not be lifted immediately. It could be well into 2021 before we can move back to pre Covid-19 routines.”

DOMESTIC TRAFFIC RECOVERY

Next to offer an assessment of the current situation was Payne, who stated that although domestic traffic is increasing in some locations, ‘the international component is still severely limited’.

A strong line-up of speakers took part in the recent IAADFS webinar.

He said: “Since last March, we have been trying to raise industry awareness and to tell our story. We were the first hit by some of the restrictions on international travel and most likely will be among the last to come out of that.

“We have been trying to educate decision makers and lawmakers throughout the region, providing as much information as possible about the value of DF&TR. The whole airport ecosystem is suffering. There are plenty of airports in dire financial straits.”

At the end of June, IAADFS revealed it had formed a coalition with the Airport Restaurant & Retail Association, National Parking Association, American Car Rental Association and Airport Minority Advisory Council and co-authored a letter to lawmakers in Capitol Hill.

The letter requested dedicated support for businesses running retail and duty free shops, restaurants and car rental and parking operations via a combination of grants and loans to help concessionaires avoid bankruptcy, begin rehiring staff and gradually resume operations.

“It makes things a bit easier when you join together,” he remarked.

During the pandemic, IAADFS has worked extensively with other organisations and coalitions, along with sister organisations in the DF&TR industry. Information and success stories have been shared which make a case for urgent assistance.

Michael Payne, President and CEO, International Association of Airport Duty Free Shops says preparations on track for next year’s virtual Summit of the Americas.

Payne commented: “Part of the help we have been asking for, at least in a US-centric capacity has been relief from congress. We have been advocating for as much as $13.5 billion. Part of the money would be earmarked for airport concessionaires.

“Whether we are successful in getting that remains to be seen. The story changes every day.”

Looking ahead to next year’s IAADFS and Asociación Sudamericana de Tiendas Libres Summit of the Americas, which will take place virtually from 5-8 April, Payne said: “We are working on the content and educational part of the programme and in the process of finalising speakers and panellists. It will be a successful and rewarding event.”

Next to speak was Aer Rianta International’s Jackie McDonagh, who revealed stores across the retailer’s North American business closed on 24 March as they were not deemed essential retail.

STORE RE-OPENINGS

We re-opened The Loop international store at Montréal-Trudeau International Airport on 14 July, which is probably doing about 13% or 14% of normal sales.

“In addition, we have re-opened the trans-border store at the airport for some flights going to Florida.”

She added: “While sales are low compared to what they were, passengers spend more when they make an effort to come into the stores. This is kind of reassuring.

“We have had a to put a big focus on customer service. Previously, you would greet a passenger with a smile. Now, we are all wearing masks which means we must be a lot more variable and ask a lot more questions to understand customers’ needs.”

The Loop international store at Montréal- Trudeau International Airport re-opened on 14 July 2020.

Looking to the future, the industry must focus on seven key components, according to McDonagh. The first is customer service and how the retailer talks to customers compared to previously.

“We need to be flexible and adaptable. There will possibly be more of a focus on self-service, so we need to be more diverse in our communication.”

The second component is convenience, which will be mainly technology driven. She said: “People want cashless transactions and maybe virtual sales assistance and hands-free shopping.”

Next is value added. “Promotions, offers and competitive pricing will be key factors in the recovery and a focus for consumers.”

The fourth component is quality, followed by range, safety and sustainability.

International Shoppes’ Greenbaum then summarised the impact of the pandemic on his own business, which celebrates its 70th anniversary in spring.

Matthew Greenbaum, Vice President, International Shoppes has welcomed support with rent and operating hours from airport landlords.

“Most stores we had were closed for a while, but most returned to service by the summer. Our airport operations have been impacted differently and the recovery in each location has been very different.

“At JFK, for example, where we operate in terminals 1, 5, and 8, the story in one terminal has been different from another. It has been interesting to observe.”

Greenbaum welcomed support with rent and operating hours from the company’s airport landlords. “As a result, we have come up with some interesting staffing plans to ensure resources are not wasted and that we can continue servicing all our international flights.”

E-COMMERCE PLATFORM EXPANSION

The company has also expanded its e-commerce platform, which was already ‘quite robust’ pre-Covid-19. “We have put more resources into that and brought more suppliers to be featured on there. Although it is encouraging what is happening with our e-commerce platform the in-store experience is still critical. We must ensure that focus on in-store experience doesn’t slip.”

As far as governmental support is concerned, Greenbaum is disappointed that the Coronavirus Aid, Relief and Economic Security Act did not provide any ‘explicit support’ for airports. “I know IAADFS has been working hard to ensure there is language included in the next round of support.”

Speaking of language, this might well  be needed to address concerns over airport concession agreements. “Language is going to needed so we can be flexible if and when a crisis of this magnitude happens again.

“When crisis hit, we were just not sure what our obligations would be.”

International Shoppes has expanded its e-commerce platform to include more suppliers, according to Vice President Matthew Greenbaum.

His words were echoed by Motta’s Orillac. “Airport concession contracts must be extended until we reach 2019 levels. We need wording in order as a crisis like this could happen again,” he remarked.

In an informative and thorough speech, Orillac presented a number of statistics relating to the region and his company.

“During the week beginning 20 September, Latin American flights were 67% lower than the same week the previous year. All airlines will have record losses in 2020.”

Overall Latin American flights numbers were 83% below the same levels in September 2019, according to Orillac.

AVERAGE MONTHLY PAX DECREASES

Motta Internacional runs a number of airport stores in countries such as Salvador, Panama, Guatemala, Ecuador and Colombia.

As expected, average monthly passenger numbers have significantly decreased compared to last year, while on the flip side, sales per passenger appear to have increased. Liquor and perfumes and cosmetics are the dominant product categories.

“In Panama, for example, average monthly passenger numbers before Covid-19 reached 1.4 million. Now, they are around 155,000 which represents an 89% reduction. Daily flights have also decreased from 316 to 71.

“Average spend per ticket, however, is 8% higher compared to before the crisis.”

On the importance of promotions and managing inventory in the best way possible, Orillac commented: “We are reducing some skus which are not performing and need a supply chain that is more efficient. We want to avoid having to throw away products like chocolate.

Erasmo Orillac, CEO, Motta Internacional presented a number of key statistics during his presentation.

“The sales process is different and we engage all staff on this. The aim is to make customers feel secure and we have a clean protocol every time a tester is used.”

Riedi concluded: “Latin America, Central America and the Caribbean are kind of a highlight on a global scale. International traffic has not really resumed in Asia, although there is domestic traffic in parts.

“Europe, is going through a second wave and that is mixing up with the flu season. Most countries in Europe have imposed partial or complete lockdowns, which does not look promising for the holiday season.

“In the US, there is a relatively solid domestic business and international flights have resumed, albeit not to a big scale. Latin America and Caribbean are showing some promising results in comparison with previous weeks and months. This cannot be said for Europe and Asia.”

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