There is plenty of positivity in the duty-free and travel-retail industry, but the market is still not back to 2019 levels, TFWA President Erik Juul-Mortensen told the audience at the opening conference of the TFWA World Exhibition & Conference in Cannes this morning.
Citing figures from IATA, Juul-Mortensen said that global passenger numbers for the first six months of 2023 are around 10% behind pre-Covid levels, although the gap narrowed to 5.8% for June.
“The recovery is, however, patchy, with some airports in Europe much closer to pre-pandemic levels. Traffic in Asia is taking longer to return, with the region’s airline passengers in June at three-quarters of their 2019 level, but China’s recent expansion of authorized destinations for group travel will help.”
ACI World predicts global air passenger traffic of 8.6 billion this year, 94% of the pre-pandemic level.
However, Juul-Mortensen highlighted that there are some concerns that rising airfares and the increased cost of living could dampen the demand for travel.
In addition, the surge in air traffic has created staffing problems, with 43% of airport workers worldwide having left the sector during the pandemic, according to the Air Transport Action Group.
The need for change
Juul-Mortensen outlined that since Covid the market has changed. Average transaction values have risen, but footfall and conversion statistics sometimes fall short of pre-pandemic levels.
In a report the TFWA conducted with Kearney it found that price perception of travel retail is negative when compared to the domestic market and that the offer needs to change from one-size-fits-all to a more customized proposition with a focus on experience.
He added that the industry needs to change and said that despite the current optimism, the market needs to ask itself if it runs the risk of living in a bubble self-congratulation.
He urged the industry to make some major step-changes. Firstly, these changes need to come in the area of sustainability.
“In stores we see isolated displays showcasing products that are labelled as ‘sustainable’. What does that say to our customers? That 1% of our offer is sustainable and the rest is not? No, we need to be more ambitious, setting ourselves key targets for sustainability in our product assortment and communicate those targets and milestones more boldly to our customers.”
The second issue to be addressed is the need for stakeholders to protect the travel-retail industry.
“Nobody else is going to protect our industry – it’s up to us. And we can do it. The first requirement is data to communicate the size and economic benefits of our industry. I cannot think of any other sector that doesn’t have reliable data.”
He added: “I know this is a concession-based business, and it’s competitive, but surely we should all be able to agree some parameters for sharing industry data at global and regional levels. If it can’t be this year’s data because of competition concerns, then let’s agree to provide data at region, channel and category level with a three-year lag. We could start with 2019, pre-pandemic, as a baseline. It needs the leadership of the CEOs in this room to commit to that.”
Also on the theme of change, Juul-Mortensen said that the idea of the trinity in travel retail is outdated and needs to go beyond airports, retailers and brands, to include media and digital companies.
The battle against illicit trade
Juul-Mortensen reiterated TFWA’s commitment to the Duty Free: Trusted, Transparent, Secure campaign: “[We] need to stand firm in the face of allegations made about our industry by the World Health Organisation as part of their protocol to eliminate illicit trade in tobacco products. Let me be clear. The WHO’s misplaced efforts to link duty free and travel retail with illicit trade are a real threat to an important part of our industry.”
Juul-Mortensen said that the industry’s supply chain is one of the most secure in the world, and the percentage of notified seizures of genuine duty and tax free cigarettes is extremely low and is confined to a small number of isolated instances.