As passenger spend per head declined during the first quarter of 2022, the head of the Tax Free World Association (TFWA) warned the ability to react to changing circumstances will ‘separate the winners from the losers’ in global travel retail (GTR).
Today (3 October) marks the first day of the annual TFWA World Exhibition and Conference in Cannes, France.
Speaking during the opening address, TFWA president Erik Juul-Mortensen said: “Despite recovering traffic, delays and cancellations are negatively impacting duty free and travel retail sales.
“Preliminary figures from the European Travel Retail Confederation’s helpful index show that, after a positive year in 2021 when sales increases easily outpaced passenger growth, spend per head went into decline in the first quarter of this year, dropping by over a third.
“This summer’s difficulties will almost certainly add to that decline. It is the ability to react to changed circumstances, like a sudden upswing in passenger traffic, that will separate the winners from the losers in this new world.”
Juul-Mortensen also noted the changes that have swept the global travel retail (GTR) sector since the start of the Covid-19 pandemic. He described the period as two years that “threatened duty free and travel retail’s existence”.
He added: “Traveller expectations have evolved rapidly from pre-Covid times. We are seeing a new desire among travellers to engage with brands, especially those that share our values and focus on sustainability, as well as a heightened interest in immersive activations.
“The nationality mix is changing too, with almost no outbound Chinese passengers yet, and fewer Asian travellers in general, although numbers are starting to increase. Meanwhile, India is experiencing a surge in connectivity as new routes open up.
“Travelling shoppers are getting younger, with the proportion of Generation Z and Millennials who purchase in duty free and travel retail rising from 19% in the period before Covid to 30% in 2021-22, according to a recent study by travel research specialist M1nd-set.”
Holistic approach to sustainability
Further highlights from Juul-Mortensen included the need for GTR to focus on sustainability. However, he noted that this should not just mean from an environmental perspective, but that the sector should take a more holistic approach.
“Sustainability is not just about products, it’s about our society,” he said. “Our industry serves customers from all nationalities, backgrounds, beliefs, but do our management teams include members from a broad range of cultural backgrounds and regions?
“Are there enough women in senior roles within our companies? In short, does the duty free and travel retail industry today reflect the people we sell to?”
Furthermore, Juul-Mortensen stressed the GTR industry must do more to capitalise on digital services and experiences.
‘Reluctance’ to share data
He also flagged the “industry’s reluctance” to share information about the GTR channel.
“Access to accurate, timely traveller data is essential to make informed decisions, not least in volatile times like these,” he noted. “Preventing wider use of this data means we are limiting our own ability to grow, and limiting our ability to engage with politicians and others to defend and advocate for our industry.”
The president closed his speech with the following statement: “The world has changed fundamentally since 2019, and our own ability to adapt will dictate whether duty free and travel retail embraces change and prospers, or fades into irrelevance for tomorrow’s travellers. Let us choose the first of those two outcomes.”