ACI execs on making airports more user-friendly & commercially important

By Faye Bartle |

SOA Day 1 session 2.

Left to right: Rene Riedi, Kevin Burke and Rafael Echevarne.

The second and final conference session on day one of the Summit of the Americas delivered a ‘tale of two cities’ as leading executives from Airports Council International (ACI) discussed the importance of duty free and travel retail (DF&TR) to overall airport revenues, including the different dynamics at play in North America compared to Latin America and the Caribbean.

In the session, titled Airports – Critical Partners for the Duty Free and Travel Retail, Kevin Burke, President, ACI – North America and Rafael Echevarne, Director General, ACI – Latin America and the Caribbean took to the stage (marking the first time the duo had shared a conference platform together) to discuss how airports are essential to a ‘vibrant, profitable and user-friendly travel retail business sector’.

The discussion was moderated by Rene Riedi, IAADFS Chairman, who in turn stressed the crucial role DF&TR plays in the success and growth of airports around the world.

Said Riedi: “With up to 44% of airports’ revenue coming from non-aeronautical sources, and retail concessions contributing 30% of this figure, who better than two of the region’s most influential leaders to share an insight into the powerful dynamics and ever-changing developments facing airports across North America, Mexico, Central and South America and the Caribbean.”

The far-ranging session covered everything from navigating infrastructure demands to streamlining security processes to maximise dwell time for shoppers.

Burke pointed out how North America and Latin America and the Caribbean were the two ACI regions that have “recovered the best” since the pandemic.

“So we are a good example of how airports are doing, at least in this part of the world,” he said.

“The role of duty free concessions in airports is essential as part of our business model,” he added.

“The relationships we have with our concessionaires and retailers is enormously important and has been challenged during the past few years due to the shift in travel.

“On 20 April 2020, there were 87,467 people travelling through TSA checkpoints that day throughout the entire United States. That is usually between 2.2 and 2.3 million a day so we were essentially shut down. Fast forward to today and we have almost recovered.”

Echevarne concurred that the recovery in Latin America and the Caribbean has been “spectacular”.

“We are the region that has recovered most in the world,” he said. “We closed last year at 7% below 2019 figures. The most outstanding [destination] has probably been Mexico where most of the airports are run by the private sector – these airports are 25% above 2019 levels right now, which is quite spectacular. Not the whole region is like that, but things are going very well.”

SOA Day 1 session 2.

The discussion was moderated by Rene Riedi, IAADFS Chairman, who stressed how the crucial role DF&TR plays in the success and growth of airports around the world.

Echevarne highlighted the “very impressive potential” for duty free and travel retail in Latin America.

“We are still at levels that are below the world average, in terms of sales per passenger and penetration,” he said. “So I think there is a huge potential for duty free and travel retail in Latin America.”

Echevarne credited the region’s strong traffic performance due to it being somewhat unaffected by some global trends, such as the downturn in the number of passengers from Asia during the pandemic.

Burke added that North America traffic is 9% below where it was in 2019, affected by international traffic taking a big hit, including the lack of travellers from Asia over the past few years.

“But we are seeing a total recovery by 2024,” he said.

SOA Day 1 session 2.

Echevarne (far right) highlighted the “very impressive potential” for duty free and travel retail Latin America.

On the average contribution that retail concessions make to overall airport revenues, the ACI executives provided a zoomed in view of the figures.

“In Latin America only 28% of airport revenue comes from non-aeronautical activates, mainly from retail,” said Echevarne. “That’s why I say very firmly that there is big potential in Latin America to increase non-aeronautical activities. Duty free, out of all non-aeronautical revenue, is about 50%, so the bottom line of the airport operators in Latin America depends absolutely on the performance of retail.”

He pointed out how Latin America has the highest proportion of private sector run airports in the world.

“That is actually very important as they are very much aware of the importance of the bottom line and of retail,” he stressed.

Burke said North America is practically the opposite, with the majority of airports are owned by city or state government authorities.

“But revenue is a key component to any success of any business,” he said, revealing how, in North America, non-aeronautical and commercial revenue is about 25% of total airport revenues. Within that, retail concessions generate 5%.

SOA Day 1 session 2.

The session marked the first time Burke (middle) and Echevarne (right) had shared a stage. 

The two discussed the reasons for the sizeable difference in the share, from North America’s big box retailers vying for people’s attention to the time it takes to get through security, as well as cultural differences all playing a role.

Burke pointed out that passengers commonly reference long security lines as the biggest barrier to shopping, but how new baggage scanning technology that means hand baggage no longer needs to be unpacked, is set to help to streamline the process significantly and, in turn, free up time for shopping.

Burke also outlined how, when it comes to North America’s larger airports, there are lots of great 20th century airports but very few good 21st century airports, meaning that the infrastructure footprint is not yet widely modernised and how this is one of the key challenges for boosting the revenue contribution of DF&TR moving forward.

One influencing factor for this, he said, is how the region’s hubs are “lagging behind in terms of privatisation”, compared to globally, and having the finance in place for upgrades needed, including delivering a more forward-looking retail offer.

Echevarne once again stressed the “huge potential” to grow revenue from DF&TR by making it as “easy as possible” for passengers to take advantage of shopping opportunities.

He added: “We strongly believe that if traffic in Latin America were to be liberalised, the opportunity for growth would be fantastic.”

Middle East

MEADFA Conference 2024 ‘heading to Abu Dhabi on 17-19 November’

This year’s Middle East & Africa Duty Free Association (MEADFA) Conference will take...

International

DFWC Q1 2024 KPI Monitor indicates rise in duty free impulse purchases

Impulse purchasing within global duty free is on the rise, according to the latest Duty Free...

Asia & Pacific

Avolta details “bold and ambitious” goals to grow its APAC business

With a number of key developments coming to fruition, including its operations at Wuhan Tianhe...

image description

In the Magazine

TRBusiness Magazine is free to access. Read the latest issue now.

E-mail this link to a friend